MINUTES SENATE FINANCE COMMITTEE May 15, 1999 9:42 AM TAPES SFC-99 # 141, Side A and Side B CALL TO ORDER Co-Chair John Torgerson convened the meeting at approximately 9:42 AM. PRESENT Co-Chair John Torgerson, Co-Chair Sean Parnell, Senator Pete Kelly, Senator Randy Phillips, Senator Dave Donley, Senator Gary Wilken and Senator Al Adams were present when the meeting convened. Senator Loren Leman arrived shortly thereafter. Also Attending: Representative NORM ROKEBERG; ROB BOSWORTH, Deputy Commissioner, Department of Fish and Game; ELMER LINDSTROM, Special Assistant, Office of the Commissioner, Department of Health and Social Services; DENNIS POSHARD, Legislative Liaison, Office of the Commissioner, Department of Transportation and Public Facilities; KEVIN JARDELL, staff to Representative Joe Green; ALEXIS GRUNDMAN, Guest Assistant Co-Chair, nine-year old daughter of Debbie Grundman, staff to Co-Chair Sean Parnell. SUMMARY INFORMATION HB 96-DEPOSITS TO THE PERMANENT FUND The Committee heard testimony from the sponsor, adopted an amendment and reported the bill out. HB 131-ANCHORAGE COASTAL WILDLIFE REFUGE The Committee heard testimony from the sponsor, the Department of Fish and Game and the Department of Transportation and Public Utilities. The bill was held. HB 187-CERTIFICATES OF NEED FOR HEALTH FACILITY Senator Gary Wilken testified on behalf of the bill. The Committee heard from the Department of Health and Social Services and reported the bill out. COMMITTEE SUBSTITUTE FOR SPONSOR SUBSTITUTE FOR HOUSE BILL NO. 96(FIN) "An Act relating to deposits to the Alaska permanent fund from mineral lease rentals, royalties, royalty sale proceeds, net profit shares under AS 38.05.180(f) and (g), federal mineral revenue sharing payments received by the state from mineral leases, and bonuses received by the state from mineral leases, and limiting deposits from those sources to the 25 percent required under art. IX, sec. 15, Constitution of the State of Alaska; and providing for an effective date." This was the first hearing for this bill in the Senate Finance Committee. Representative Norm Rokeberg, sponsor, testified that this is straightforward legislation "that returns the statutory deposits for new fields after December 15, 1979 and bonus bid incomes from February 1, 1980 from the statutory limit of 50-percent deposits to the base limit in the constitution of 25-percent." He indicated that Article 9 Section 15 of the Alaska Constitution states that at least 25-percent of all mineral lease rental, royalties, royalty sale proceeds, federal mineral revenue sharing payments and bonuses received by the state shall be placed in a permanent fund. Representative Norm Rokeberg shared with the Committee that he had been looking at this matter for about three years. He stressed that he feels the timing is overdue, given the decline in production of the Prudoe Bay field and the potential production and revenue increases for the State Of Alaska in other North Slope oil fields. Because of declining revenue in the Prudoe Bay field, he believed that the ratio of new revenues deposited into the permanent fund versus deposits to the general fund should be returned to a 25%-75% respective balance. Representative Norm Rokeberg noted that the House of Representatives had adopted the provisions in this legislation as part of its long-range fiscal plan. He pointed out specific impacts on the spreadsheets attached to his sponsor statement. (Copy on file.) The first spreadsheet he referred to is titled "Short Stack", which he said was prepared by the Department of Revenue and is based on oil price projections of $13 per barrel. He showed where the spreadsheet projects that this legislation would infuse $10.96 million additional revenues to the general fund in fiscal year 2000 and an average impact of $16 million per year over the next 15-20 years using a sensitivity matrix. However, he pointed out those projections were made prior to the recent decline in oil prices. His personal calculations indicated that for each dollar increase in the Alaska North Slope (ANS) Market, there would be an approximate $1.25 million impact to the general fund. Representative Norm Rokeberg commented that the spreadsheet does not include the additional funds received from mineral revenues. He had requested that information from the Department of Natural Resources, and said the amount could vary from a couple hundred thousand dollars up to approximately $1 million each year. He believed the actual amounts are on the lower end of the scale. Representative Norm Rokeberg further noted that the Department of Revenue's spreadsheet does not include any bonuses. He stressed that any bonus money would be in addition to the projected revenue. He gave as an example the first North Slope area-wide lease sale in June 1998 in which the state received $53.5 million in bonuses. He said this amount was the forth-highest lease sale in the state's history. Were this legislation in place, he stated, the general fund would have had an additional $12.5 million available for appropriations. Representative Norm Rokeberg next referred to the "Permanent Fund Contribution rates for North Slope Oil Fields - Alaska Department of Revenue Spring 1999" spreadsheet also attached to his sponsor statement. (Copy on file.) He pointed out that the spreadsheet shows how most oil fields are contributing more than 25-percent to the permanent fund. He qualified that the fifty-percent figure quoted for the NPRA field is inaccurate due to other legislation. Representative Norm Rokeberg summarized by saying this legislation has a negligible impact on the dividend and that he had requested further information from the Permanent Fund Corporation to quantify this. The letters and statements he had thus received from the corporation assures there will be no impact on the 1999 dividend and future impacts as low as $1.70 on future dividends. Senator Gary Wilken asked why the fiscal note is zero. Representative Norm Rokeberg could not answer this and felt there should actually be a positive fiscal note. Senator Pete Kelly had thought the general fund increases would be larger and asked for clarification. Representative Norm Rokeberg responded that the projections were based on $13 per barrel and future expansions as predicted in the Fall Forecast. He explained that this legislation would reduce the percentage of contributions to the permanent fund only for leases entered-into after December 15, 1979 and bonus bids received after February 1980. He stated that a significant number of lease deals have been made since those dates. As an example of lease deals made after the aforementioned dates, he gave Milne Point with a 37.59-percent contribution to the permanent fund. He said only Prudoe Bay and Kuparak were deals made before the ratio increase and that only 25-percent of the state's revenues from those fields are deposited into the permanent fund. Because these two fields make up such a large portion of the revenues, he explained that the proposed ratio changes on the newer fields would not result in the high figures Senator Pete Kelly may have anticipated. He stressed that this legislation is necessary for the state to receive maximum benefits from future oil field developments. Senator Loren Leman asked why subparagraph 2 of AS 37.13.010(a), which refers to net profit shares, is being deleted from existing statute. Representative Norm Rokeberg responded the "net profit" language was just taken from existing statute and was used in lieu of "royalty." He assured that it still represents the allocation to the permanent fund or the general fund. Amendment #1: This amendment adds two new bill sections. Section 1. AS 37.05.530(g) is amended to read: (g) Amounts received by the state under 42 U.S.C. 6508 and not appropriated for grants to municipalities under (d) of this section lapse at the end of each fiscal year as follows: (1) 25 [50] percent to the principal of the Alaska permanent fund; (2) .5 percent to the public school trust fund (AS 37.14.110); and (3) the remainder to the general fund for use by the state for the following facilities and services: (A) planning; (B) construction, maintenance, and operation of essential public facilities; and (C) other necessary public services. Sec. 2. AS 37.05.550(b) is amended to read: (b) The legislature may appropriate to the fund money received by the state as Alaska marine highway system program receipts or from a settlement or final judicial determination of the Dinkum Sands case (United States v. Alaska) and the North Slope royalty case (State v. Amerada Hess, et al.) and not deposited into the Alaska permanent fund under AS 37.13.010(a)(1) [AS 37.13.010(a)(1) or (2)] or into the public school trust fund under AS 37.14.150." Co-Chair Sean Parnell moved for adoption. Co-Chair John Torgerson explained that this amendment applies to federal lease sales and lowers the percentages of those revenues deposited into the permanent fund to 25-percent as well. He told Representative Norm Rokeberg that this amendment is similar to one provided by the bill sponsor and the only difference is the addition of section two, which is technical and inserted at the recommendation of the bill drafter. Senator Al Adams noted he had a similar amendment that addresses section one and he had no objection to this amendment. Representative Norm Rokeberg stated that he did not have any objection to the addition of section two. Without objection Amendment #1 was ADOPTED. There was no further discussion on the bill. Co-Chair Sean Parnell offered a motion to report from Committee, SCS SS HB 96(FIN). There was no objection and the bill was REPORTED OUT with individual recommendations and the accompanying Department of Revenue zero fiscal note. The committee took a brief at ease. HOUSE BILL NO. 131 "An Act relating to public rights-of-way and easements for surface transportation across the Anchorage Coastal Wildlife Refuge." This was the first hearing for this bill in the Senate Finance Committee. Co-Chair John Torgerson said he would allow the sponsor to put a statement on the record and then would hold the bill until the next day for public testimony. He pointed out that there were many individuals who wanted to testify but were prevented at this meeting due to teleconference difficulties. KEVIN JARDELL, staff to Representative Joe Green, shared that in 1998, the legislature created the Anchorage Wildlife Coastal Refuge for the protection of the area. He noted that within the enabling legislation, the legislature granted the authority to issue permits to develop the area or create any structures in the area to the Department of Natural Resources and the Department of Fish and Game. In the recent past, Kevin Jardell stated, there have been developmental pressures on the refuge that are contrary to position papers put out by the Department of Fish and Game, which has caused some concerns for Representative Green. Therefore, Kevin Jardell told the Committee, the sponsor introduced this current legislation that will give additional protection to the state's assets by requiring any development within the area to come before the legislature for approval. Senator Randy Phillips asked for a history of the conflict behind the bill. He stressed that he has been receiving many phone calls on the matter. Kevin Jardell responded that the issue lay in a proposed bike trail extension of the Coastal Trail, a proposed extension of the railroad through the refuge and the proposed expansion of the Seward Highway. He noted that these projects could result in development of a significant portion of the refuge. He stressed that the refuge is the only saltwater marsh left in the Anchorage bowl and is shelter for wildlife species not found anywhere else in the area. He added that the Department of Fish and Game released briefings stating that the "coastal route" is not compatible with the goals of the coastal wildlife refuge as it was established. Kevin Jardell suggested that political concerns were interfering with the process of making value judgements over the use of the refuge. He used Bristol Bay as an example of an area where, before any surface development is approved, the developers must come before the legislature and demonstrate that there will be no impact on the fisheries. This legislation is similar, he said, in that it does not prohibit development in the refuse but only requires a public process before the legislature on a state-owned asset. Senator Randy Phillips asked if this bill would impose another procedure that must be followed before a bike path extension can be make though a wildlife refuge. Kevin Jardell replied this legislation offers an added protection for the wildlife refuge to keep it from being destroyed or significantly impaired from the purpose for which it was created. He continued saying that current law does not prohibit development if the Department of Fish and Game and the Department of Natural Resources issues a permit. While no permit has yet been issued, he stressed that the sponsor has concerns that the trail extension is being viewed as a local matter, when he believes it is really a state matter. The sponsor disagreed with the statement made to him that the legislature has no business with this state-owned asset, according to Kevin Jardell. Senator Randy Phillips did not understand why this bill was necessary since the project is subject to approval from the Department of Fish and Game. Kevin Jardell qualified that in theory, the department issues permits based on consistency with the refuge goals. He noted that the department issued a statement claiming that the trial location alternatives within the Anchorage Coastal Wildlife Refuge between Spy Glass Circle and the Rabbit Creek Rifle Range is considered unsuitable by both the Division of Wildlife Conservation and the Division of Habitat and Restoration. However, he noted that the trail is still being considered for these areas despite the findings. Therefore, he said the sponsor feels the added protection of this legislation is needed because of a fear of bureaucracy interfering with the existing protections of the resource. Co-Chair John Torgerson introduced ALEXIS GRUNDMAN, as Guest Assistant Co-Chair. She is the nine-year old daughter of Debbie Grundman, staff to Co-Chair Sean Parnell. Co-Chair John Torgerson announced that the assistant co-chair would be directing the proceedings from this point forward. Senator Pete Kelly asked if the trail extension would eventually create a transportation corridor. Kevin Jardell responded that in the original designation of the coastal wildlife refuge, a transportation corridor was granted to allow access to Fire Island. He noted that was considered a "deal breaker" at the time. However, he said the current bill does not grant any surface transportation rights but instead requires that before any of those rights are granted, the legislature must approve the developmental plans. Senator Loren Leman followed up on the witness's statement that politics could potentially interfere with the protection of the refuge. He said he has received phone calls claiming the same scenario and he wanted to know if the sponsor had reason to believe that the department is being pressured to make certain decisions. He wondered if because the northern extension of the trail is named after the current governor, the decisions relating to this section of the trail are being "colored." He suggested naming the new portion of the trail in honor of someone else to ease the influence on the decisions. Kevin Jardell did not care to speculate on the reasons behind any decisions being made. He deferred to statements made by field biologists with the Department of Fish and Game as to the incompatibility of routing a trail through the refuge and the fact that these statements have not stopped the plan from proceeding. He said this fact raises concerns that there may be more than biological justifications being considered for this project. Senator Loren Leman commented that he found the different parties who support and oppose this bill interesting, such as the Anchorage Daily News editorial speaking against the bill and resource developers arguing in favor. Because of this anomaly, he wanted to get to the source of the legislation in case there is more to the issue. Senator Al Adams asked if this bill would hamper the widening of the New Seward Highway or the expansion of the railroad track near Rabbit Creek. Kevin Jardell replied that the sponsor does not believe this legislation would hamper any responsible development within the refuge if it were the state's best interest. Senator Al Adams asked permission to use the men's room. Assistant Co-chair Alexis Grundman refused permission. Co-Chair John Torgerson asked if the bill had a thorough hearing in the Senate Resources Committee. Kevin Jardell answered that an extensive hearing was held in the Senate Transportation Committee. ROB BOSWORTH, Deputy Commissioner, Department of Fish and Game testified the department is opposed to the bill because there is a planning process underway that has been carefully designed. He believed this bill would pre-empt that process unnecessarily. He suggested that the department, working with the public, municipalities and other state agencies, should be allowed to determine whether or not coastal trails, bicycle trails, pedestrian uses, etc. are detrimental to the refuge. Rob Bosworth contradicted the sponsor's earlier claim, saying that the department has not taken the position that a bike trial is fundamentally incompatible with the refuge. He hoped to determine whether there are ways that Alaskans could enjoy and appreciate the refuge through better access. Senator Randy Phillips asked when the final decision was going to be made. Rob Bosworth said he could not answer this question at this time and deferred to the Department of Transportation and Public Utilities, which is the agency that is developing the trail project. It is his understanding that the project was only in the beginning of the planning process. He pointed out that a preferred route was still being chosen using the University of Alaska and the public process. He noted that the Department of Fish and Game has the final approval authority over the refuge portion of the trail. If the preferred route of the trail does not cross the refuge, he said the Department of Fish and Game would have no involvement. Senator Randy Phillips asked if the entire project would be prevented from happening if the Department of Fish and Game does not grant a permit to cross the refuge. Rob Bosworth affirmed that could be the case only if the planned trail crosses the refuge. DENNIS POSHARD, Legislative Liaison, Office of the Commissioner, Department of Transportation and Public Facilities explained that the department, working with the Anchorage Metropolitan Area Transportation Study (AMATS) and the community, has just begun a route analysis study. He estimated the study would be completed by August 2000. At that time, he told the Committee, if the preferred route went through the wildlife refuge, the department would begin the permitting process with the Department of Fish and Game, the US Corps of Engineers wetland process, etc. to receive approval to construct the trail. He anticipated another year would be required to do the design work and complete the permit process. Senator Randy Phillips surmised that there would be approximately two years in which the Department of Transportation and Public Utilities, the Department of Fish and Game and the Alaska Railroad Corporation will be involved. He assumed the public would therefore have ample opportunity to be heard during these two years. Dennis Poshard affirmed and explained that the Department of Transportation and Public Utilities begins with a public planning process followed by another public process required by the US Environmental Protection Agency and the US Corps of Engineers to address the wetlands. He added that there is yet a third public process involved with obtaining a permit from the Department of Fish and Game. Senator Leman asked if Mr. Bosworth felt there was any pressure on the Department of Fish and Game to make decisions regarding this refuge. He knew the department is continually faced with challenging political decisions and supports the existing process in deciding this issue. However, Senator Loren Leman stated that he had been hearing from individuals, whose opinions he usually respects, suggesting that the department is under unusual pressure to come to the specific conclusion of using a particular route for the coastal trail expansion. He asked if the witness was testifying that the allegation was untrue and the Administration is not exercising undue influence over the department. He qualified that there is always some degree of politics involved with a land-use issue when there are different user groups involved, but he was referring to extraordinary political pressures. Mr. Bosworth replied that he is unaware of any unusual pressures, though he acknowledged there are many interest groups involved in the project including some department staff who have strong feelings about protecting the refuge. However, he said the department feels that for any refuge, it is appropriate to follow a systematic process of determining whether or not there is a compatibility or an incompatibility, and if an alternate route could mitigate impacts. He noted that process has never been done for this refuge and he could see no reason to eliminate a land-use option without careful consideration. Senator Leman admitted that as a private citizen, there is a part of him who wants to see the bike path project to proceed since he lives in the area and would have occasion to use the trail. However, as a legislature, he did not want to get involved so long as he could be convinced that the process is fair and the decisions are reached for the right reasons. He guessed that the reason for this legislation is because someone feels that the process is not - or will not - happen fairly for reasons he does not know. Rob Bosworth stressed that the state needs to have public support for its wildlife refuges. Because this refuge is located in an urban area, he felt it even more important that people have the right and the opportunity to appreciate and enjoy the refuge. Therefore, he fundamentally desired that all mitigating factors and alternatives be reviewed before making a determination against a land-use opportunity. Dennis Poshard pointed out that the coastal trail extension is the missing link between trails leading north from Anchorage along the Glenn and Parks highways and trails leading south along the Seward Highway. He stated the department has begun the public process to determine the appropriate route and do not anticipate making any decisions before August of next year. Regarding the issue of the Department of Fish and Game and the public process, Dennis Poshard quoted from the Anchorage Coastal Wildlife Refuge Management Plan, published by the Department of Fish and Game. This plan, according to Dennis Poshard, dictates the process for issuing a special area-wide permit. He read, "Coastal trail access may be allowed within the refuge where disturbance to fish and wildlife populations and their habitat is avoided, where safety considerations and conflicts to existing uses including waterfowl, hunting and rifle range use allow, and where compatible with management of refuge public access points and the goals of this management plan." He concluded that the Department of Fish and Game has already made it very clear the factors that must be taken into account before a permit will be issued. In addition to the Department of Fish and Game permit, Dennis Poshard reiterated that the project must also go through the US Corps of Engineers "404 NEPA Merger Agreement" that requires the Department of Transportation and Public Utilities to go through another substantial public process. Dennis Poshard also pointed out that two other wildlife refuges, one in Fairbanks and another in Juneau, have bike paths the that Department of Fish and Game has determined to be compatible with the goals of the refuges. Dennis Poshard then stressed that the legislature ultimately has the final word on the Anchorage project anyway with the power to pass legislation or by choosing to not appropriate the federal funding. Dennis Poshard addressed Senator Al Adams's earlier question regarding railroad and highway development. He noted that concerns were raised in another committee with Senator Georgianna Lincoln proposing an amendment that changed "surface transportation" to "bike path or trail." This amendment was the result of another bill regarding the airport expansion where it came to the Senate Transportation Committee's notice that the railroad has a 200-foot right-of-way, according to Dennis Poshard. He said it was since determined that if the Seward Highway were widened, the railroad would be displaced from its existing track and moved away from Potter's Marsh. He noted that the amendment was adopted then rescinded. Dennis Poshard concluded by saying that the department opposes the bill and believes the existing process is sufficient to deal with any public concerns. Co-Chair John Torgerson ordered the bill HELD and announced public testimony would be taken the next day. HOUSE BILL NO. 187 "An Act relating to the certificate of need program for nursing care facilities and other facilities; and providing for an effective date." This was the first hearing for this bill in the Senate Finance Committee. Senator Wilken presented the bill noting that the sponsors, the House Health Education and Social Services Committee, were unable to attend the meeting. He indicated that this bill is identical to SB 59 that the Committee heard previously. Senator Gary Wilken reminded members that the legislation is a result of the Long Term Care Task Force's Recommendation #21. He stated that one of the goals of the task force is to keep people in home settings rather than institutions, because it is less expensive and in many cases, the care is better. Senator Gary Wilken warned that there would be a financial risk if a "certificate of need" process is not implemented. He referred to the ability to build nursing homes using Medicaid funds, and cautioned that there could be a proliferation of new homes, which would cost the state. In response to this concern, this bill adds a third level of consideration before new nursing homes can be constructed, he stated. The original two criteria for new nursing home approval are accessibility and quality, and he noted that the new criteria would require consideration of cost- effectiveness and appropriateness. Tape: SFC - 99 #141, Side B ELMER LINDSTROM, Special Assistant, Office of the Commissioner, Department of Health and Social Services testified that the Department of Administration also contributed to the recommendations of the Long Term Care Task Force. He stated that the Department of Health and Social Services supports the bill. He had heard the bill described as a moratorium, but he assured the Committee that the department does not view this bill as such. He stressed that the bill actually gives the commissioner some additional standards, which the department feels are appropriate, when a certificate of need application is being reviewed. He predicted that in the future, the need for new nursing home beds will be demonstrated and will meet all the criteria. Elmer Lindstrom pointed out that the bill has a fiscal note, which reflects a one-time cost. He explained that the certificate of need program is administered by one staff member and because that staff already has several applications pending relating to acute-care programs, additional funds are necessary to contract out the task of setting up the new standards. He suggested that since there currently are no pending nursing home applications on file, this is an ideal time to implement the new criteria. Senator Gary Wilken commented that after the Committee had considered the companion SB 59, day-surgery and imaging center facilities were added to that bill. He noted that the conflicts regarding the additional facilities were since settled and this bill only addresses nursing homes. Senator Loren Leman pointed out a technical discrepancy with language page 4, lines 1 and 9, saying that "relating" should actually be "related". He felt the matter should be pointed out to the legal drafter. Senator Phillips wanted it put on the record that he has a possible conflict of interest with this legislation due to his employment with an organization that operates several nursing homes. Senator Adams objected to allowing Senator Randy Phillips abstain from voting on the bill. Senator Wilken offered a motion to report from Committee, CSHB 187(FIN) with individual recommendations and accompanying fiscal note from the Department of Health and Social Services in the amount of $26.5. Without objection, the bill was REPORTED OUT. ADJOURNMENT Assistant Co-Chair Alexis Grundman adjourned the Committee on behalf of Co-Chair John Torgerson until tomorrow at 2:00PM. SFC-99 (15) 5/15/99