MINUTES  SENATE FINANCE COMMITTEE  9 March, 1998  9:15 a.m.    TAPES  SFC 98 # 69, Side A (000-591) Side B (591-267) CALL TO ORDER  Senator Drue Pearce, Co-Chair, convened the meeting at approximately 9:15 a.m. PRESENT  In addition to Co-Chair Pearce, Senators Sharp, Donley, Torgerson, Adams and Parnell and were present when the meeting was convened. Also Attending: ANNALEE MCCONNELL, Director, Office of Management and Budget, Office of the Governor; CHRIS CHRISTENSEN, Staff Council, Alaska Court System; MARYLOU BURTON, University of Alaska; BOB BARTHOLOMEW, Deputy Director, Division of Income and Excise Audit, Department of Revenue; JOHN BITTNEY, Alaska Housing Finance Corporation, DOR; MARGARET PUGH, Commissioner, Department of Corrections; DWAYNE PEEPLES, Director, Division of Administrative Services, DOC; MARGO KNUTH, Department of Law; MIKE IRWIN, Commissioner, Department of Community and Regional Affairs; KIM METCALF-HELMAR, Special Assistant, Office of the Commissioner, DCRA; JANET CLARKE, Director, Division of Administrative Services, Department of Health and Social Services; NANCY SLAGLE, Director, Division of Administrative Services, Department of Transportation and Public Facilities; TOM BRIGHAM, Director, Statewide Planning, DOT; NICO BUS, Administrative Services Manager, Division of Support Services, Department of Natural Resources; SHARON BARTON, Director, Division of Administrative Services, Department of Administration; DWIGHT PERKINS, Special Assistant, Office of the Commissioner, Department of Labor; KEVIN BROOKS, Director, Division of Administration, Department of Fish and Game; MARY PETE, Director, Division of Subsistence, ADF&G; MIKE GREANY, Director, Division of Legislative Finance; SUSAN TAYLOR and DAVE TONKOVICH, Fiscal Analysts; and aides to committee members and other members of the Legislature.     SUMMARY INFORMATION  SENATE BILL NO. 292 "An Act making supplemental appropriations; making, amending, and repealing capital or other appropriations; making appropriations to capitalize funds; and providing for an effective date." Co-Chair Pearce started the meeting announcing the committee's intention to address SB 292 and try to get through Section One and the Department of Corrections Cleary Order Compliance portions of the supplemental budget packet this morning. Then at 10:30 start deliberations on SB 36. She anticipated the committee would be returning at 4:30 to continue if necessary. She pointed out the several handouts provided as backup for SB 292. There was a House Bill version of the same supplemental - CS HB 461 (FIN) that the committee would be using as a vehicle in the processing of SB 292. There was also an additional supplemental CS HB 370 (FIN), that requested relief for the 1997 economic disaster in Bristol Bay and on the Kuskokwim River. This was included in the Governor's original version of the bill and the House decided to separate the two. Susan Taylor, Fiscal Analyst for Legislative Finance, provided a sectional for HB 461 that showed the dollar amounts. The House Bill version totaled $56 million with $29.9 million federal funds, $4.87 million General Funds and $22.250 other funds. She suggested starting with the Cleary Order section of the bill first. Because the commissioner of Department of Corrections had not yet arrived, it was decided to hold off of that portion of the presentation until later. Co-Chair Pearce invited ANNALEE MCCONNELL to address the committee on Section One-A, ALASKA HOUSING FINANCE CORPORATION, LEASE PAYMENTS. Ms. McConnell spoke of the purchase last year of the Bank of America Building. She informed the committee that due to the high level of activity at the end of last session, there was a need to now make some technical adjustments to ensure proper lease payments processing and operations maintenance costs. JOHN BITTNEY joined the committee and addressed the specifics of the needed adjustments. He told the committee that AHFC did not receive any authorization to use the receipts of the private lease tenants in the building. This was a request for that authorization to use those receipts to pay for this fiscal year's operations and maintenance. He explained a lease arrangement with the Department of Administration and AHFC's intent to make the receipts available to DOA who was responsible for the building's day to day operation. Senator Donley impressed that last year he opposed this purchase with one of the reasons being the parking situation. He felt there was not adequate access to the building, and therefore state offices, by the public. This would create an isolated office that nobody could get to due to there being no place to park. At that time he was told a detailed parking plan to address these concerns would be developed and he would be provided a copy. He had not received this yet and announced that, until he did, he would not be supportive of any budget revisions to facilitate this project. Without some clear plan on how the public would access the state offices, the tendency would be that the bureaucracy was building a wall between them and the public, he stated. Co-Chair Pearce asked Mr. Bittney for a response. He told the committee the AHFC did not administer the day to day functions of the building. He said there were still a number of private tenants in the building, which may be a factor. Department of Labor, Child Support Enforcement offices were in the building, but he didn't think any other state offices had moved into the building yet. He suggested asking the DOA for assistance on the turnover schedule. Co- Chair Pearce directed Ms. McConnell to have the DOA respond to Senator Donley's concerns and make copies available to all committee members. Co-Chair Pearce proceeded to Section One-B, Community and Regional Affairs, BRISTOL BAY ECONOMIC DISASTER RELIEF. MIKE IRWIN was invited to speak to the committee on this portion of the supplemental. He gave a brief update on the purpose of this appropriation. Last year in the Magnasson- Stevens reauthorization there was a new section 3-12 added, whereby the US Commerce Secretary could declare an economic disaster area for situations like was found last summer in the Kuskokwim River drainages and Bristol Bay. The US Department of Commerce Commissioner declared a disaster area for Alaska under this provision and Congress appropriated $7 million. Mr. Irwin explained that the State of Alaska was required to come up with a $2.3 million match in order to receive the federal funds. The supplemental before the committee today requested $1.875 million to go towards the necessary $2.3 million. The remaining balance of the match would come mainly from the local level. Co-Chair Pearce asked why the process took so long in going back and forth with the federal government. Mr. Irwin said that most of the delays had to do with the funding question. This was a new federal statute and the Commerce Commissioner felt he needed to take extra measures to ensure that all the criteria for the disaster declaration had been met. Mr. Irwin speculated that the Commissioner also wanted to make sure there would be adequate federal appropriations to match the declaration. Senator Adams referred to the $1.8 million and asked if those monies would come from the General Fund or from program receipts from fish taxes. Mr. Irwin said they had originally requested General Funds from the House of Representatives. The House Finance Committee, when it deliberated on CS HB 370, decided to incorporate $ 400,000 from the fisheries business tax along with about $1.5 million from the General Fund. Ms. McConnell clarified the source of the fisheries tax as the Commercial Fisheries Loan Fund. She said that in a sense, this was like sharing back some of the fish taxes although technically it was General Funds. Senator Donley asked if the committee member's packets contained more detail on this project. Co-Chair Pearce assured him there was quite a bit of back up material, including a large memorandum from the commissioner and the actual disaster declaration. Senator Sharp wanted clarification of the process that the department went through to secure the disaster declaration. As he understood it, FEMA originally turned it down as a disaster area, but they now had funding through the US Department of Commerce. He interpreted the wording of the supplemental request to say the DCRA anticipated funding under the MSA and the USDC had, or may make funds available. He wanted to know which was it, and how much. Mr. Irwin answered that $7 million had been made available. His department did apply to FEMA for a declaration of a natural disaster. In addition, they applied to USDC for a declaration of economic disaster. The main reason for applying for a natural disaster, he explained, was to try to obtain relief under the Disaster Unemployment Assistance Program. This was for people who were ineligible for regular UI benefits, which included most of Alaska's fishermen and crew. The only way to make this program available was through a presidential declaration of disaster under the Stafford Act. Mr. Irwin said the department felt it would be worthwhile to try to convince the federal government to approve both types of declarations - one at the FEMA level and one at the Commerce Secretary level. They were successful in the latter, but were unable to show the science to tie the failure to a single catastrophic incident. This was a requirement for obtaining the FEMA declaration. Senator Sharp asked if the disposition of the funds was detailed in the backup and if it consisted of sending money to the communities, making individual loans or awarding grants. Mr. Irwin said that generally speaking, about 20% of the $9.3 million would be going into a loan program. Most of the remainder would be sent directly to the affected communities in the form of grants for infrastructure and economic development. Mr. Irwin pointed out another item in the Governor's supplemental packet, a $3 million request to the Department of Labor. This would be the state's version of the federal DUA. He went on to describe how other states had found the DUA to be the best use of funds for recovery from fisheries- type disasters. Since Alaska was unable to get those federal funds, the Governor would like to provide this assistance on the state level. This was a separate request from the one before the committee now. Senator Donley referred to the area of unemployment insurance. He said that because these people were not paying any unemployment insurance this program really could not be called such. He suggested it was a government substitute for insurance. Mr. Irwin replied the program was to compensate for lost wages or earnings, conceptually modeled after the federal version of the program. He thought it depended upon what one considered the perimeters of an unemployment insurance program. Senator Donley said he was also interested in the federal program. He speculated that the fisheries industry was one where management had kept the government from imposing an unemployment insurance program through strong lobbying efforts. Now there was a disaster and a strong need for the benefits yet there was no program in place. As a result the government gave them money. The problem as he saw it was created because there have been pressures to keep out the unemployment system in the fisheries industry. Mr. Irwin gave the Miller's Reach fire as example for his rebuttal. The federal program benefits normally went to business people who didn't have an unemployment insurance eligibility and through no fault of their own, were unable to make their normal livelihood. In the Bristol Bay, Kuskokwim River situation, the fishermen were the business people. He summed up saying the issue depended on how it was looked at conceptually. Senator Donley assured that he would support this funding request because he feels it was the right thing to do. However he said, "we shouldn't question why we were in these situations every time they happen." He spoke of other safeguards like Business Interruption Insurance which fishermen may not have access to. He said efforts should be made to look at why they didn't have access to that type of insurance and why they couldn't protect themselves instead of the government always being the solution. Working together, that type of capability should be developed. Although it was a worthy expenditure to help these people in need, the underlying problem shouldn't be ignored, he said. Mr. Irwin said he appreciated that perspective and shared that department was learning a lot as they went along. This was the first time they've had a program like this and they were making a list of things to explore on this issue. Senator Donley's concerns would be on that list. Senator Donley surmised there was probably a good reason the federal government didn't want to implement this program in these types of situations. If they did, they would be subject to similar unemployment insurance program exemption requests from all types of industries. In this case the Legislature needs to take care of Alaskans, but shouldn't ignore the fact that the federal government turned it down. Ms. McConnell interjected telling the committee that the federal government intended this program to deal with a specific catastrophic natural disaster such as the poor fishing season in western Alaska. The federal government had plans for providing assistance in those cases. This was also a reason why the Salmon cabinet was established to deal with many of the underlying issues in the salmon industry so more could be done to strengthen the industry in areas of marketing, product quality, etc. She stated that while El Nino can't be controlled, there were other factors that could be addressed. That was part of the Knowles Administration's overall response to this issue: look at a number of areas to see what can be done for the future that if didn't prevent - at least minimized the impact, she stressed. Senator Torgerson asked if the state also forgave or extended loans through efforts of the commercial fisheries division or any other division. Mr. Irwin said that was some of the first work that was completed within the first six weeks following the fisheries collapse. He detailed how staff went to the affected areas and addressed the area. This was common practice for the division when something like this happened and they were able to do that in this case, according to Mr. Irwin. Senator Torgerson requested a breakdown of those costs. Mr. Irwin said he didn't have that information at this time and would need to get it later for the committee. Senator Torgerson said he would like to see the total package of relief the state provided. He noted the involvement of different agencies all giving various services and loan packages. Mr. Irwin compared this case with other instances where loans were renegotiated in order to provide relief for the borrower. He admitted that in the end, it meant more money to the State because of deferred payments and interest accrual. He believed there would be a "net positive." Senator Donley shared Senator Torgerson's concerns. He said information he had been getting indicated that many of these loans had serious problems already. He wanted to know if there were written guidelines on how to prevent this from being used as an excuse to extend loans that were problematic anyhow. He felt this extension could be an excuse to bail out overextended loans that were not justified. He had been told this was a very serious problem and understood the opportunity for extensions under this program should be granted on loans that legitimately could be re-paid. Mr. Irwin responded saying that he would get as much written information from the Division of Investments as possible speaking to the committee members' concerns. He admitted he had not heard either anecdotally or formally that there was anything about the overall portfolio that showed it out of balance with other similar portfolios. He had no knowledge of there being a lot of people with the loans, who were in trouble and would use this extension grant as an excuse, but that he would research the matter. Senator Donley added he would like to see a copy of any written policy the division had that addresses this issue. He would like to know what were the standards the division followed in making their determinations. Ms. McConnell wanted to reiterate that this was not excusing the loans, just restructuring them. The loan obligation remained. Senator Donley countered that this was done already and in some cases, the loan was never getting paid. He pointed out language in the supplemental request that showed the State Of Alaska essentially provided a match to federal receipts. What happened if the federal funds weren't allocated, would the state still be obligated to its portion? Would the division still plan to spend the $1.875 million General Funds? Mr. Irwin responded that there was never a question on allocation of the federal funds. The appropriation was signed by President Clinton in the first week of December. Senator Donley requested a copy of the federal law that laid out the required State-funding match. Mr. Irwin told him the ratio was one dollar of state funds for every three dollars of federal funds. This concluded the discussion on the Bristol Bay area relief programs. Co-Chair Pearce noted the arrival of MARGARET PUGH, Commissioner of the Department of Corrections. She invited Ms. Pugh and DWAYNE PEEPLES, Director of Administrative Services, to come to the table to speak to CRC BEDS. Mr. Peeples told the committee that when the supplemental was been originally submitted to the committee, the department had expected to need $886,000. That amount had been subsequently reduced due to delayed startup of new CRC beds with that money being transferred to this request. Another reason for the reduced need was due to the availability of $64,000 General Funds that came about due to under-utilization during the months of November, December and January in the CRC per diem beds. These funds were now available to use towards the supplemental request. Co-Chair Pearce clarified the adjusted amount of funding was $804,000. Co-Chair Pearce asked what was included in the supplemental request. Mr. Peeples responded, telling how the department put out a bid to purchase 470 CRC beds with the expiration of contracts for the fall of 1997. The bids came in far exceeding what had been projected, averaging 20% more. This had increased the budgeted costs. Ms. Pugh added that the CRC contracts were out to bid for continuation of services. This supplemental request was for the amount of the contracts in excess of the budgeted funds. Co-Chair Pearce wanted to know if the bids were equally higher for facilities across the state. Ms. McConnell said they were, but not at an even rate. There were different degrees to which the bids were higher than the existing contracts. When the budget was passed last May, there was no way to anticipate what those new figures would be, she said. She continued saying that obviously, the state had no interest in putting more money into the budget than what was included in the current contracts to anticipate higher bids. This would take all the competition out of the process, she speculated. Senator Sharp wanted clarification that the increased cost was not for any new beds, but just an increase in the cost of the additional beds. Ms. Pugh affirmed that was what this increment represented. Senator Sharp asked if each "call for bids" had at least two respondents, or if there were some areas of the state that received only one response. Ms. Pugh said the department did not receive at least two for every area, and in fact in several areas where a call was issued, they only received one response. Senator Sharp asked for a calculation of how many beds received only one bid response. Mr. Peeples estimated that three-quarters of the 470 beds up for bid had only one response. Senator Sharp asked if it was a "sole- source limited provider situation," which Ms. Pugh confirmed. She said the market was limited as far as the availability of providers, but the department issued a "request for proposals" to allow others to place a bid. Senator Sharp wanted to know if the department had analyzed the increases to determine if the costs of operation (i.e., heating, labor) actually increased, or if the increase reflected a "what the market would bear" response. Ms. Pugh responded that he raised a good point. In fact, she said, in almost every case, the bids originally came in much higher than the amounts shown here and the department was successful at negotiating and bringing the bids down somewhat. She attributed the high requests to the fact that the contracts ran on a three-year basis and many of the providers felt they were due an increase. Senator Sharp speculated that the providers probably knew they were the only provider in the area and that the court was coming down hard on the state to continue the program. Mr. Pugh said that in a market where there was limited competition, that could certainly happen. Ms. McConnell added that was the reason OMB worked with DOC to help negotiate with the providers to lower the prices. OMB found the original bids unacceptable and Ms. McConnell agreed with Senator Sharp's observation of the difficult situation with the limited number of providers. She stressed that this did not mean, that the state would simply write out a check based on what the private market dictated. Senator Sharp had a final question, wanting to know the percentage of occupancy of the 470 beds during the term of the last contract. In other words, how many beds were the state paying for, on average, that were not actually occupied. Ms. Pugh responded that under each contract the department had successfully negotiated a "15% per diem," meaning that 15% of the beds were paid only if occupied. The remainder of the contract was intact, and was paid in any event. The department well exceeded the base contracts and had about a 98% occupancy rate during the time period of the last contract. The unfilled beds were not paid for by the state. Senator Sharp clarified that the department filled the guaranteed limit, which Ms. Pugh affirmed. She said there was some fluctuations based on seasonal changes that accounted for the changes in occupation rates. She added that they never overcrowd the residential centers, and because of this, some people may be released and the bed not refilled until the next morning, which plays to the state's advantage. Senator Torgerson wanted to know the average cost per bed, understanding that the costs varied. Mr. Peeples didn't have an exact figure but estimated the amount to be in the high fifties. This was a statewide figure, he said answering Co-Chair Pearce's question. Ms. Pugh stipulated that each contract was different. Senator Torgerson stressed that he was still hung-up over the 20% cost increase, although he realized the contract was for three years. He asked if the large increase was an attempt to make up for losses incurred in the last three years by the providers. Mr. Peeples said he wouldn't classify the situation as that. His reason was because the original bids came in dramatically higher, and after lengthily negotiations the department settled on the amount requested here. Senator Torgerson asked if this was the beginning of another three-year contract. Mr. Peeples told him yes, it was. Mr. Pugh corrected Mr. Peeples and said that not every provider was at the end of a three-year contract. Ms. McConnell offered to provide the committee with a chart that would show the improved utilization of CRC beds and the cost per bed. She felt that would show the impact of the changes and how well the department was using the program and also the effects of using the "per diem" system for some of the beds. Co-Chair Pearce commented that this was an area where the Legislature thought the department was doing a good job and suggested there might be other areas the department could spend its efforts at convincing the Legislature to support. She directed the committee to the next DOC item, the CLEARY ORDER COMPLIANCE. She pointed to the location in the House Bill (Section One-L) where this was listed and noted that it was not in the original supplemental request. MARGO KNUTH, came to the table to speak to this item. She introduced herself as an Assistant Attorney General on loan to the DOC. She told the committee that Judge Karen Hunt in the Cleary lawsuit had ordered the state to bring its institutional populations under the emergency capacities that had been set in the Cleary Case. Ms. Knuth said the state had until May 1 when the actions must be done. Today was the day the department must submit a plan as to how it would be done. She warned that if the department failed to comply, there were a variety of actions that the judge could take, not of which were any better than compliance. In the long run, she stressed, the facilities would be almost 20% over the emergency capacities for institutions statewide, even if the Cleary Case didn't exist. That applied to where prisoners slept and whether there was enough sewer capacity or air exchange to accommodate more people, in terms of fundamental physics of the institutions. The DOC had come up with a three-part plan, according to Ms. Knuth. One part was to increase the number of halfway house beds being utilized. She explained that a portion of the requested amount included in the supplemental would complete the purchase of 72 new CRC beds. The amount that was needed to do that was $40,000 General Funds and $25,700 Federal Funds received under the Violent Offender Incarceration Act Grants Program. This amount was only the difference between what the funds department already had and what was needed to make up the difference. The $65,700 was by no means the total cost for FY98 for these beds, she emphasized. Part two of the proposed solution, which required the most money, would be to send more long-term felons out of the state. Currently, Ms. Knuth informed, the DOC was sending 256 more prisoners to Arizona. The cost of doing this for the rest of FY98 would be $1,136,250 million, which represented a slight break over the contract price. This was the result of a kind of "buy one - get the second at a discount" arrangement, she explained. The price went down from $57.50 per day/per prisoner, to $55.50 per day/per prisoner for the group of 256 new transfers. It would not affect the rate charged for the existing prisoners already at the Arizona facility. In addition to the flat contract rate amount, Ms. Knuth went on, there was also about $70,000 in costs associated with shipping the prisoners to the new facility. She said this wasn't for transportation costs, which the DOC had funds to cover, but in part, to pay inmates $1.85 per day for work they performed. The total of those wages would be $30,000. Other funds needed in this request would cover the costs of items such as food carts that were not covered by the contract and would amount to about $20,000. Ms. Knuth said that because of the large number of inmates housed out of state, DOC would need $20,000 to get staff on location who would process grievances and also work on probation and parole plans for the inmates. That amount made up the remainder of the $70,000 request. The last part of the plan the department intended to use to come into compliance with the Cleary Order was to create alternative housing for up to 125 inmates, Ms. Knuth told the committee. This housing would take two different forms, one would be erecting 25-person tents at the Southeast Alaska institutions of Lemon Creek and Ketchikan and two tents at Palmer. The second form of alternative housing, would turn a room in the Fairbanks Correctional Institution into a temporary dorm. The costs of the necessary supplies, equipment and extra staff would be $405,000, she conveyed. Ms. Knuth summarized by saying this brought the total to $1.6 million. Co-Chair Pearce asked if all 256 additional out-of-state beds located at the same facility that the present prisoners were being housed. Ms. Knuth responded that they were for the remainder of FY98. She continued saying, that for FY99 the DOC has a Request for Proposal (RFP) issued nation-wide. She surmised that with the high number of prisoners, it was unlikely that all inmates would be housed at the same institution because of the better rates other facilities might offer. Senator Sharp noted a point of interest on sending the prisoners Outside and asked if there was any type of screening process the courts required. He wanted to know if that process had already been started to select the 256 so they would be ready to be moved when the funds became available. He noted the short time frame. Ms. Pugh affirmed. Senator Sharp asked if the department anticipated whether those prisoners would be ready to be moved by May 1. Ms. Knuth said that was their projection. She alluded to some cost savings if there did happen to be any delay. Ms. Pugh said Senator Sharp was correct in viewing this as an aggressive plan, the DOC had already started its planning because the screening process was time-consuming and labor intensive. She said the department and Ms. Knuth had been working with the court-appointed monitor to expedite the process, which was how they would be able to accomplish this by May 1. Co-Chair Pearce asked if the RFP was issued for the 256 beds, or for a larger number to accommodate FY99. Ms. Pugh said the 256 had been added to the existing contract for FY98. The RFP was already on track for re-issuance because the department was nearing the end of the three-year contract with the Arizona facility. Co-Chair Pearce wanted the number of prisoners already housed Outside. Ms. Knuth said there had been originally 250, but the number was increasing by 120 before the 256 would be added. The RFP was for 600-1000 prisoners. Co-Chair Pearce had questions on the referred-to 120. Ms. Knuth said those were in the process of transfer right now. Fifty more went out this past week and depending on the availability of marshaled flights, more would be going soon. This was something that cannot be planned, the department usually only has one day's notice. Co-Chair Pearce referred to the alternative housing in tents. She wanted to know if it was the department's expectation to continue using this housing into FY99. Ms. Pugh said this request did not reflect that, and that the tents would be used just through the summer months because of the weather. She noted that other northern states have used tents in the winter, but these tents were not designed for inclement weather. Ms. Knuth added that the plan submitted to the courts would indicate two or two and one- half months of tent usage in FY99. Co-Chair Pearce asked when the department and Legislature would know whether or not the judge accepted the proposal. Ms. Knuth guessed the judge would let them know very quickly, and that by the end of the week the department would know. Senator Sharp wanted to know if the tents would be used to relieve some of the crowding felt due to short-term prisoners such as those serving DWI sentences. He wondered if there would be 150 prisoners needing housing when fall arrived. Ms. Knuth told the Senator he was correct in saying the alternative housing would be used to accommodate the increased population of short-term prisoners. She added that this population might also include inmates slated for transfer to Arizona still awaiting transportation arrangements. Co-Chair Pearce asked what class of prisoners could be sent to Arizona and were there any requirements/restrictions used to select those prisoners. Ms. Knuth answered that there were requirements and restrictions. She listed some of them, saying only medium-security prisoners and no maximum- security prisoners could be sent and that inmates nearing the end of their sentences would not be sent. Also, she said, no females, no one with disabilities and no one with special medical needs would be sent to the Outside facilities. Co-Chair Pearce asked if the DOC's new RFP had the same restrictions, or if they had added a provision to accept women. Ms. Pugh responded that due to other efforts the department had taken this year, including the change of mission of the Highland Mountain Correctional Institution to a designated female institution, she did not believe there would be the need to find additional housing for female prisoners. She also stated another criteria the department followed screened Alaska Natives. They would not send to Arizona, those prisoners who had a predominately rural lifestyle or a language barrier. This concluded the discussion with DOC. The committee then heard testimony on the Department of Health and Social Services' request for MATERNAL CHILD AND FAMILY HEALTH SPECIALTY CLINICS (listed as Section 1D in SB 292.) Co-Chair Pearce invited Janet Clarke to come before the committee. Ms. Clarke outlined the request for $100,000 General Fund program receipts to increase the number of specialty clinics offered by the Maternal Child and Family Health Programs for FY98. The specialized clinics included cleft lip and palette, cardiology, neurodevelopment, and genetics and birth defects, she said. The department looked for experts outside of Alaska since there were very few specialists in these fields practicing in the state. The experts were then brought to various locations throughout the state where the department then offered these clinics. She listed the communities where the clinics were held: Anchorage, Barrow, Bethel, Dillingham, Fairbanks, Juneau, Ketchikan, Kotzebue and Sitka. Ms. Clarke pointed out a schedule listing all the clinics scheduled to be held in FY98. She observed that this program had been a very cost- effective way of identifying problems and allowing people who did not have adequate insurance to see the specialists and receive counseling and assessments of these very traumatic conditions. Co-Chair Pearce noted that the department's request would receive money from the state General Fund, but the House of Representatives version of the bill, changed the funding source to Federal Receipts. She asked what federal receipts were identified that would apply to this program. Ms. Clarke responded that to her understanding, the House had identified federal receipts the department was receiving from school-based administrative claims through the Medicare program that the Governor had identified for another supplemental section in his original bill. She anticipated further discussion on this matter. Senator Parnell said he thought he heard Ms. Clarke say this supplemental request was to be used to increase the number of clinics held this year. His question was if the amount originally funded was adequate to fund the clinics the department had planned last year. Ms. Clarke shared an incident at the beginning of the fiscal year where the program directors felt proud of the amount of program receipts they were generating. When they made their clinic schedule, they counted on using those third-party revenues generated from patient's insurance payments and scheduled more clinics than the department had planned. She said changes to the program receipt laws and the way they would be distributed resulted in less money being funneled back to the clinics. Senator Parnell agreed that the specialized clinics were a good program, but said that the overall supplemental budget request seemed to contain many increases and the Legislature needed to try to limit additional funds to what had been originally planned. He asked how many more children would benefit from additional clinics held this year. Ms. Clarke responded the clinics served an average of 600 clients per year under this program. This request would increase the number of clinics offered to 58, up from the current planned 50 clinics contained in the original Governor's budget in FY99. Senator Parnell clarified that this amount went above what the Governor proposed, which Ms. Clarke confirmed. Senator Parnell asked why this request was more time- sensitive than other requests. Ms. Clarke replied there were a number of clinics scheduled for March, April and May, and if the supplemental was not approved, the department wanted time to readjust the schedule. There were no further comments and the committee moved to the next request in Section 1E for the Department of Military and Veterans Affairs and the University of Alaska. This request was for $20 million federal RSA to upgrade and modernize the POKER FLATS RESEARCH RANGE. MARYLOU BURTON testified on this request. She said the appropriation would give the DMVA the authority to receive and expend up to $20 million from the federal government. Those funds would be RSA to the University, she said. She was unsure why the two state departments involved were required the to work it that way, except that the federal agency, US Army Big Prow program was set up to deal through the National Guard. She assured the committee the two departments would try to reduce as much administrative burden as possible. The immediate project that was due to begin as soon as possible called for construction of a new road and an optical laboratory facility as well as upgraded specialized equipment, Ms. Burton explained. The reason the request was included in the supplemental bill rather than the capital bill was because this two-year project relied on federal funding, which had a tight time frame. In fact, she stressed; the federal money was available immediately, as soon as the Legislature granted approval. Co-Chair Pearce asked if the entire $20 million would be RSA with the expectation be to not take an administrative fee to do the fund transfer. Ms. Burton said she hoped there would be no administrative fees involved. C0-Chair Pearce wanted to know what on-going operating costs the University would have after the project was completed. Ms. Burton assured her that the operating costs would be handled entirely through program receipts and federal dollars. The Poker Flats facility was almost entirely funded through the federal government now and they did not expect that to change, she stressed. Co-Chair Pearce asked what the entire budget for Poker Flats was. Ms. Burton responded the budget last year was about one million, but varied from year to year depending on the projects. Those funds all came from NASA, she said. The committee then addressed Section 1F, GLENNALLEN TO TOK RESURFACING AND REHAB for the Department of Transportation and Public Facilities. NANCY SLAGLE testified on behalf of this request. Ms. Slagle said the request was for $8.5 million in federal receipts and expenditure authority to rehabilitation and resurfacing of mile 0 to mile 124 of the Glennallen to Tok interstate highway. She told the committee this project was listed in a previous STIP as four separate projects that were due to be constructed from 2000 to 2004. Due to weather conditions during this past summer, the road had deteriorated further and the department felt the repairs could not wait. She said the road suffered from sloughing, linear cracks, potholes and other problems because of frost heaves. In September, when DOT&PF asked for public comments on the "Needs List," the comments heard regarding this particular stretch of road convinced the department to evaluate the need for a major one-time project for this road. The adjusted STIP request eliminated the four separate projects and consolidated them into one large project. Ms. Slagle said the department had received approval on February 26 from the federal highway agency for this particular project. This supplemental request was a result of that change. Co-Chair Sharp wanted to know if the approval received on February 26 was approval of the entire 1998-2000 STIP. Ms. Slagle replied that was correct. He asked for clarification that this particular project was advanced to the FY98 construction season ahead of other projects already planned in the 1998-2000 STIP. According to Ms. Slagle, the department believed that because of the critical nature of dealing with this road, they would be working extensively to fixing the problems. They planned to go out for bid in April with the work being completed by August. That was why the department needed spending authority for this money instead of waiting until July 1, she explained. Co-Chair Sharp asked if the remaining projects in the 1998- 2000 STIP would be approved in the FY99 budget. Ms. Slagle answered yes. Would this project remain on the FY99 budget request, he asked. TOM BRIGHAM, answered that it would not and would be added to the FY98 budget in the form of the supplemental budget request. There were nine other projects that would remain in the FY99 budget, he said. Senator Torgerson wanted to know if there were any other projects that would be moved forward to this year. Mr. Brigham said there were no others because the department was assuming a larger program in 1998 and 1999 so they had not moved anything out to accommodate the Tok Cutoff project. Senator Torgerson asked if DOT&PF intended to bump any other projects if supplemental request was not approved for this project. Mr. Brigham responded that if they received a smaller amount than requested here, the department would have to move other projects out. He stressed that they did not anticipate that would happen because the news from Washington DC was positive. They had not contemplated making those decisions as to which projects would be affected, he said. Senator Torgerson said he did not hear DOT&PF give an adequate reason why this project needed to be included in this supplemental rather than normal capital budget. Mr. Brigham attempted to convey the reasons, saying the department wanted to build this summer. He said the project would re-surface portions of the road rather than do a complete rehab of the road. This was a lot of miles of re- surfacing and if they did not start at the beginning of the construction season they did not expect to be able to complete the project this summer. In order to do that they need to go to bid this spring, he said. If the funding were to wait until the regular FY99 distribution, the work could not begin until July 1 and the project would not be completed this summer. That was the reason for coming to the committee with this request now. There was further discussion between Senator Torgerson and Mr. Brigham about the number of projects planned for the 1999 construction season, and other ICE TEA federal projects and the direction of funding. Senator Torgerson asked how many other projects did DOT&PF receive public comments requesting expedited repairs that the department in fact moved up on its schedule. Mr. Brigham responded that he did not have figures on that, but this was the only project included in the supplemental. He said there was no question there were other areas the department received public comments asking for repairs. He submitted that the Tok highway system was beyond compare as to its poor condition. Senator Donley said he was curious how the expedited funding worked and wanted to know of other projects from the 1998- 2000 STIP that were moved forward with plans to work on earlier. Mr. Brigham said there were only two projects, the Tok project and another for the intersection of Minnesota Avenue and International Airport Road. Co-Chair Sharp wanted to know if portions of the Tok repairs had been approved by the Legislature under a previous STIP. If so, why would the Legislature not be de-authorizing them in favor of this proposal, he asked. Mr. Brigham was not aware of any other approved rehabilitation projects. He said his office would be willing to double check that. The projects had been planned further out in the program so he said he would be surprised to find out if there had been any Legislative authorization. He referred to the 1995 and 1997 STIPs and said they included projects to attempt to repair permafrost damage along the Tok Cutoff. The result of these requests was planned projects for every year up to 2004. However, the department decided that would not be adequate to repair all the damage and therefore made this request listed in the supplemental, he said. Co-Chair Sharp requested Mr. Brigham to double-check that there was no prior authorization on any of the Tok projects. He said there were many projects with requests, and if there was a possibility that a portion of this request already had funding it would have a better chance of going ahead. Mr. Brigham said he would do that. Co-Chair Pearce said she understood that if the Legislature approved the funding, the project would include milepost 30 to 38 reconstruction at $10.2 million and that design was already completed. Did that mean the department planned to resurface some of that portion of the road this year and tear it out next year for the reconstruction, she wondered. Mr. Brigham assured her that would not happen. In fact, he stated, any work was done between miles 30 and 38 would only be because there had been a wicked frost heave, the department would plane and smooth it out. Because they would plan to reconstruct in the next year, any work done would be minimal. Senator Donley referred to the modified STIP, saying it included $250,000 and approximately $1 million for work on the intersections of Airport Heights and Glenn Highway, and Otis and Tudor. Would those projects benefit at all from being moved into the supplemental, he asked. He felt work could begin on them sooner. Mr. Brigham responded by telling him the design projects were approved for funding in a group. The Tok project did not require a specific authorization in 1998. Senator Torgerson noted the request did not show a General Fund match. Was there a reason for that, he asked. He speculated the project couldn't all be supported with federal money. Mr. Brigham told the senator he was correct. He said they might need a separate discussion on the "match" system, which was fairly complicated. However, he explained the department estimated they would not need additional funds for the remainder of this fiscal year. After July 1 the department could use some of next year's General Funds. Senator Torgerson said he would like to have the discussion on the federal match process at a later date. He speculated that the department would require General Funds from FY99 to meet the federal match - which was about 10%. This would amount to approximately $850,000 that would be added onto the $9 million project, he estimated. Mr. Brigham responded that option was what the department planned to do. They would use some of the match for next fiscal year, which would be available after July 1, to complete this year's program. The department would then expect to return to the Legislature next spring with a supplemental request. They figured that would be the safest way to secure the federal funding since they did not have the federal money in hand yet and it did not seem wise to ask for the additional state money now. Co-Chair Pearce said the committee would stop hearing departmental testimony on the supplemental for this meeting and would move on to SB 36. She announced the committee would reconvene at 4:30 to complete testimony on Section 1 and the Sitka Herring Roe and Child Support Enforcement issues, from the House Bill version of the supplemental. Note: Minutes pertaining to SB36 have been written separately. ADJOURNMENT  Co-Chair Pearce recessed that portion of the meeting at approximately 10:35 a.m.