MINUTES SENATE FINANCE COMMITTEE 1 April 1996 9:35 A.M. TAPES SFC-96, # 61, Side 1 SFC-96, # 62, Side 1 CALL TO ORDER Senator Steve Frank, Co-chairman, convened the meeting at approximately 9:35 A.M. PRESENT Co-chairman Frank along with co-chairman Halford, Senators Phillips, Sharp and Rieger were present when the meeting convened. Senators Donley and Zharoff arrived later. Also Attending: Nancy Slagle, Director, Office of Management and Budget; Sharon Barton, Director, Division of Administrative Services, Department of Administration; Nanci A. Jones, Director, Permanent Fund Dividend Division, Department of Revenue; Barbara Ritchie, Deputy Attorney General, Civil Division, Department of Law; Molly McCammon, Executive Director, Exxon Valdez Oil Spill Trustee Council; Traci Cramer, Administrative Officer, Exxon Valdez Oil Spill Trustee Council; Kathryn Daughhetee, Fiscal Analyst, Division of Legislative Finance; and aides to committee members. Marty Rutherford testified via teleconference. SUMMARY INFORMATION CS FOR HOUSE BILL NO. 468(FIN) am "An Act making supplemental appropriations for the expenses of state government and making and amending appropriations; ratifying certain state expenditures; and providing for an effective date." Testimony was given by the above-listed individuals regarding FY 96 supplemental appropriations for departments. Hearings will continue. CS FOR HOUSE BILL NO. 468(FIN) am "An Act making supplemental appropriations for the expenses of state government and making and amending appropriations; ratifying certain state expenditures; and providing for an effective date." Nancy Slagle was invited to join the committee. She referred to a letter of 24 March 96 requesting changes to the supplemental request. The first item was the increased need for the longevity bonus program for FY 96. It was identified that they were expecting the checks to be run on 26 March and updated the model forecast for the current year and the need is $1.6 million to cover the additional applicants that have entered into the program. Co-chairman Frank asked if there was information regarding in migration. Sharon Barton, Department of Administration was invited to join the committee. She said that on 27 March a packet was sent over that included a study "Elderly Graphic Profiles of the United States". What the studied showed was that Alaska is a net out migrator with respect to the elderly population. The surprising new information was the number of people reaching the age of 60 - 65 and those folks made up a larger percentage than had been anticipated, very much higher than in the other states. Senator Rieger said that elderly birth meant that a person who was here and now qualified as being elderly. Ms. Barton clarified this and said that it was those persons who reached this age between 1985 and 1990. She said that they relied on experience for the supplement request. Senator Sharp said there was an increase over anticipated payments for new applicants. Ms. Barton concurred. She said they relied on historical behaviour to determine how they will participate in the program. Nancy Slagle said the next item was a request for $150,000 for the permanent fund dividend division. This would be funds from the permanent fund dividend fund for garnishment fees that the division has statutory authority to charge ($2.00 fee) and this would assist the division to meet its obligations under contractual services. This is a shortage for processing a computer conversion. Nanci A. Jones was invited to join the committee. She explained the history of the project since December 1984. This would cover an unexpected charge back for the mainframe computer system. Senator Rieger asked what the total charge back that was being anticipated from the Department of Administration to the Permanent Fund Division. She said the total would be approximately $465,000. She said the actual usage by the division has increased. Senator Rieger said he felt this was an undue increase and has asked Senator Phillips to take a hard look at the entire mainframe system. The cost should not be going up. She advised that they must use their data base more than once a year. They are in the process of trying to establish a plan for hot back-up. Senator Rieger said he was skeptical of the total price tag and perhaps this could go to a private contractor to maintain the data. Nancy Slagle said the next item was amendments to the miscellaneous claims and stale dated warrants section of the bill, section 14(a), an increase to the Department of Administration and to Public Safety. Further sections include ratifications as identified in the original supplemental for Departments of Administration, Commerce, Labor and Public Safety to clean up some over-expenditures or under collections of revenue. The departments are continuing to try and clean up their accounting records. She said the AIDEA one was $16,000. She further said the last one was the Exxon Valdez Trustees Council requesting an appropriation of $6,670,500. in settlement funds for purchase of several small parcels in the Prince William Sound, Kenai Peninsula areas. Senator Halford indicated that it may have been better to have gone through LB&A. Senator Phillips said he was curious about River Ranch, located near mile 32 on the Kenai River. Ms. Slagle said there was a memo sent over this morning basically transmitting Department of Administration's regarding the longevity bonus. Also it requested a change in the Department of Law's judgments. The Department of Law had increased the amount of their request by $55,422 in general funds and $4,012 in public employee retirement funds and $13,900 in international airport revenue funds. Barbara Ritchie, Department of Law was invited to join the committee. She noted the additional judgments that came in since the original supplemental was put together for consideration. She explained the international airport fund being another $13,000. The original request had been put together by the Department of Transportation and they had not calculated the post judgment interest. The general funds request, "Sorensen", was a judgment in the amount of $2,969.61 with interest and was a DMV license revocation proceeding. (off record-return) Senator Rieger asked if the core of the case was the ruling saying there was a due process right involved in a revocation proceeding. Ms. Ritchie concurred. Senator Phillips referred to item #16 and Ms. Ritchie said that was part of the election case that grew out of the 1994 election. This was a reversal in the "Dansereau" case and since they were no longer the prevailing party they had to repay the prior cost award to "Dansereau". He continued on to item #17 and she identified "Cordova District Fishermen United" and this matter arose out of a review of a State Oil & Gas lease sale 1979. It involved an administrative appeal which produced a declaratory judgement. The judgment was an award of attorney fees and costs against the State. Senator Rieger asked about the appeal and how many points did the State win on. She said the State prevailed on one issue in the case. Senator Rieger noted that some of the fees were not disallowed because they pertained to the other point they lost on but because they were excessive. Senator Sharp asked if there was information weather the Trustees for Alaska were involved in the original complaint. Ms. Ritchie said they were not in the original case at the administrative level but entered later. However, the party is not entitled to attorney fees for time spent at the administrative level. She further advised co-chairman Frank that the "Brantly" and "Palmer" cases were discussed previously. This was an additional $13,900 in interest that had not been calculated in the original submittal on this judgment. Co-chairman Frank asked that she explain the PERS fund. She said this was an Anchorage case involving the Public Employee Retirement System. They were sued and the claim had been that under law that was in effect when the plaintiff joined PERS she was entitled to specific medical treatment that had been denied by AETNA. The case was settled for attorney fees, the State paying half and AETNA paying the other half. Nancy Slagle advised that was the end of the judgments. Co-chairman Frank introduced EVOS. (off record-return) (change to tape SFC-96, #62, Side 1) Molly McCammon was invited to join the committee. She noted there were two major habitat protection parcels with the oil spill area near the Kenai River. $12 million a year has been committed to be put in an account. An extensive planning process will be deciding on how to spend those funds in the next one to two years. She referred to the first phase of the small parcel program wherein willing sellers are represented that have agreed to sell their lands for appraised value as approved by a government appraiser. These are all parcels within the spill area. Two are in Prince William Sound and the remaining in the Kenai Peninsula. In light of the Kenai River parcels it would have been the council's preference to try and focus strictly on the area closest to the river. However, in dealing with private sellers basically it must be negotiated with what private sellers are willing to sell. The Department of Natural Resources would be responsible for managing these lands. The primary benefits for which they are being acquired is to protect the resources they surround. In some cases it is sockeye and pink salmon habitat, herring fisheries habitat, bird habitat, and intertidal resources. In other cases it would also provide additional opportunities for public access and recreation. Senator Phillips requested information regarding the Tulin parcel. She noted that it belonged to an elderly couple that had homesteaded the property. The benefit of this parcel was that it would provide beach access. She noted this parcel was 220 acres. The River Ranch parcel is 146 acres, near Mile 32 on the Kenai River. Current owners were considering putting in a fishing lodge and housing complex. The program for acquiring these parcels on the Kenai River is being done through a joint project of the Kenai Habitat Restoration funded by Senator Stevens. Any lands acquired under this program would be eligible for restoration. Senator Sharp noted that there was very little river frontage on the Tulin parcel. She said one of the main attributes of this parcel was the potential for recreation and tourism. Further, it is located on Katchemak Bay. The City of Kenai indicated they would rezone this portion of the bend of the river to conservation. All appraisals were conducted by state appraisers. Marty Rutherford testified via teleconference. In response to Senator Sharps inquiry she said she would get the information regarding the taxes paid on the parcels. Senator Rieger commented on government appraisal. The appraiser must determine the maximum value. Ms. McCammon advised that all the parcels were appraised as a blank slate. The landowners had no commitment that they would accept the appraisal and there was no negotiated offer beforehand. Senator Rieger further asked the success rate of people agreeing to sell. Ms. McCammon indicated there were 32 parcels considered for appraisal. Some acquisitions would be going through the Forest Service and the Department of Interior and will not go through the state process. There are another five or six possible parcels for consideration. The submission had to come from the landowner. Traci Cramer, Exxon Valdez Oil Spill was invited to join the committee. In response to co-chairman Frank's question regarding section 16, EVOS, she said it carried forward what had been previously approved by Legislative Budget & Audit Committee for the 1996 work plan. It was consistent with past language in previous reappropriation supplemental bills. Senator Halford requested copies of this paperwork be submitted. He noted this was the first number of small parcels involved. He said his concern was that this generation would sell out to government ownership instead of further private owners in areas that may be individually to their benefit but may not be to the benefit of overall private ownership in the future. The Kenai River has a lot of private land and he did not want to see the settlement eliminate the last vestiges of private ownership in the entire Prince Williams Sound. Ms. McCammon felt this would not happen because there were not enough landowners interested in selling or participating in the program. Only 32 parcels were deemed significant or important enough to actually have an appraisal done. Only those presently before the committee had agreed to sell at that price. She referred the committee to the Civil Settlement, Exxon Valdez booklet. She noted the whole program for the Prince William Sound was initiated by then Governor Hickel with the idea that the Whittier access road would come to pass. Senator Halford said his concern was that there would be private facilities available to the public adjacent to public land that help this land be used rather than government owned facilities. Senator Sharp commented regarding superinflation of the values and the prices going to be paid and the other was what would the joint property owners be faced with when the evaluation hits the assessment books and the surrounding properties that are adjoining are re- evaluated up to the price paid for the particular parcel. Ms. McCammon said that among the landowners those that seemed the happiest were those who had the parcel for twenty to forty years. Those who purchased their lands later were not on the list. Senator Halford voiced his further concerns. Co-chairman Frank requested RPL's and said Senators Sharp and Halford would submit their recommendations to the committee. ADJOURNMENT The meeting adjourned at approximately 10:55 A.M.