Legislature(2009 - 2010)HOUSE FINANCE 519

01/25/2010 01:30 PM House FINANCE

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01:32:01 PM Start
01:32:12 PM HB300 || HB302
03:44:34 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Governor's FY11 Budget Overview: TELECONFERENCED
Dept. of Environmental Conservation
Dept. of Fish & Game
HOUSE BILL NO. 300                                                                                                            
     "An Act making appropriations for the operating and                                                                        
     loan program expenses of state government, for certain                                                                     
     programs, and to capitalize funds; making supplemental                                                                     
     appropriations; making appropriations under art. IX,                                                                       
     sec. 17(c), Constitution of the State of Alaska; and                                                                       
     providing for an effective date."                                                                                          
HOUSE BILL NO. 302                                                                                                            
     "An Act making appropriations for the operating and                                                                        
     capital    expenses    of   the    state's    integrated                                                                   
     comprehensive mental health program; and providing for                                                                     
     an effective  date."                                                                                                       
Co-Chair Hawker presented the overviews for today.                                                                              
1:33:05 PM                                                                                                                    
DEPARTMENT OF ENVIRONMENTAL CONSERVATION                                                                                      
LARRY  HARTIG,  COMMISSIONER,   DEPARTMENT  OF  ENVIRONMENTAL                                                                   
CONSERVATION,   introduced   his  staff   in   Administrative                                                                   
services. He stated  the department mission to  protect human                                                                   
health and the environment. He  explained that the Department                                                                   
of Environmental  Conservation (DEC) is primary  a regulatory                                                                   
agency. He added that one of the  most important functions in                                                                   
the water  division is  the village  safe water and  matching                                                                   
grant  programs.   This  division   helps  small   and  large                                                                   
communities with  water and sanitation systems.  Commissioner                                                                   
Hartig    listed    the    department's    five    divisions:                                                                   
Administrative  Services  (budget,   financial,  information,                                                                   
leasing,   procurement,   and  environmental   crimes),   Air                                                                   
Quality  (set  federal  clean  air act  standards  and  issue                                                                   
compliance   permits),   Environmental   Health   (laboratory                                                                   
services,  state veterinarian,  food  safety and  sanitation,                                                                   
drinking  water,  solid  waste   and  pesticide  management),                                                                   
Water Quality and Spill Prevention and Response.                                                                                
Co-Chair  Stoltze  asked  how invasive  species  are  handled                                                                   
between  the Department  of Natural Resources  (DNR)  and the                                                                   
Department of  Environmental Conservation (DEC).  He wondered                                                                   
if  there   was  duplication   or  cooperation   between  the                                                                   
Commissioner Hartig replied that  the primary role of DEC was                                                                   
issuing  permits in  dealing  with invasive  species  through                                                                   
1:40:47 PM                                                                                                                    
Commissioner Hartig continued  with the Division of Spill and                                                                   
Response  which  deals  with  preventing  and  responding  to                                                                   
spills and  cleaning up spills.  There is also  an industrial                                                                   
prevention and pipeline program.                                                                                                
Representative Gara questioned  if the ongoing five cents per                                                                   
barrel  oil surcharge  adequately covers  spill response  and                                                                   
prevention  work. Commissioner  Hartig acknowledged  he would                                                                   
be discussing that later in his presentation.                                                                                   
Commissioner Hartig remarked that  the Division of Water sets                                                                   
water  quality standards,  facilities  programs, the  village                                                                   
and safe water municipal matching  grants program, and issues                                                                   
the cruise ship program permits for wastewater discharge.                                                                       
1:42:45 PM                                                                                                                    
Commissioner Hartig reported that  the total operating budget                                                                   
proposed  for FY2011  is $75,546,000  with  the general  fund                                                                   
component at  $19.7 million, federal  money at  $22.1 million                                                                   
and  $14 million  in  "Other".  It also  includes  commercial                                                                   
vessel funds, Ocean  Ranger funds, clean air  funds and other                                                                   
smaller funds.                                                                                                                  
Co-Chair  Hawker   believed  that  Commissioner   Hartig  was                                                                   
presenting  his  information  using  the  old  categorization                                                                   
methods, therefore an immediate  connection cannot be made on                                                                   
the totals  shown on the  legislature's short form  books. He                                                                   
stressed that  the fund  sources are the  same but  cannot be                                                                   
Commissioner   Hartig  announced  that   there  is   a  large                                                                   
component of federal  funds in the DEC budget,  but the funds                                                                   
are in  decline. He  highlighted an  increase in funding  for                                                                   
the drinking water  program. The proposed budget  increase in                                                                   
general funds of $300,000 and  the addition of five permanent                                                                   
full time positions. He explained  the reason for the request                                                                   
was that  in 2006 the  Environmental Protection  Agency (EPA)                                                                   
put forward three  new drinking water rules  or programs that                                                                   
the  department needs  to handle.  These  new programs  would                                                                   
increase  the workload  and oversight  in the department.  He                                                                   
also foresaw more future regulations.                                                                                           
1:46:16 PM                                                                                                                    
Representative Austerman requested  more detailed information                                                                   
about the  new EPA  rules. He wondered  how long  the federal                                                                   
government  will  be  matching  50/50 funds  with  the  state                                                                   
government.  Commissioner  Hartig  reported  that  the  three                                                                   
added rules were  number 17 through 19 on the  list issued by                                                                   
the  EPA. The  new  rules cover  disinfectants,  disinfection                                                                   
byproducts, long  term enhanced  service work treatment,  and                                                                   
ground  water. Commissioner  Hartig stated  he would  provide                                                                   
the details  on these rules to  the committee. He  noted that                                                                   
as   the  federal   government  adds   more  complex   rules,                                                                   
especially for rural communities,  his department is required                                                                   
to oversee  the training and  outreach in these  communities.                                                                   
He noted  that the new positions  would be added to  the base                                                                   
budget as permanent positions.                                                                                                  
Representative  Austerman inquired  how long  the 50  percent                                                                   
matching federal money would be available.                                                                                      
Commissioner Hartig  anticipated that the 50  percent federal                                                                   
money  would continue  for  several  years for  the  drinking                                                                   
water program.  The program is  nationwide, so if  EPA backed                                                                   
off funding all the other states  would be arguing for money.                                                                   
Commissioner Hartig  reported that  the three new  rules were                                                                   
implemented  in 2006  and the  state had until  2010 to  take                                                                   
primacy on  them. If  not implemented,  the state could  lose                                                                   
primacy of  this program. He  added that an anticipated  four                                                                   
new rules  will  be rolled  out by the  EPA in  the next  few                                                                   
years; therefore,  in the long  term plan in FY2013  there is                                                                   
another  $500,000 in  additional general  fund match  request                                                                   
with $500,000 in federal.                                                                                                       
Representative Austerman asked  out of 19 rules how long have                                                                   
they been in primacy.                                                                                                           
Commissioner Hartig replied that  primacy is taken in each of                                                                   
these rules.  If the  department elects  not to take  primacy                                                                   
then  the EPA  could take  the drinking  water program  over.                                                                   
Representative  Austerman  reiterated  that three  new  rules                                                                   
were being  implemented that was  costing the  state $300,000                                                                   
in general funds and $300,000  in federal money with five new                                                                   
positions created.  He asked for  further information  on how                                                                   
many new  employees have been  added with each new  EPA rule.                                                                   
Commissioner  Hartig answered  that new  positions have  been                                                                   
added as certain rules are implemented.  He remarked that his                                                                   
department would send the finance  committee a summary of new                                                                   
1:52:04 PM                                                                                                                    
Representative Gara asked for  a general fund cost for taking                                                                   
over primacy in the drinking water  area versus if primacy is                                                                   
not  taken. Commissioner  Hartig  said  that  would be  done.                                                                   
Representative  Gara questioned  if the  department also  had                                                                   
primacy in wastewater  and asked for a comparison  of primacy                                                                   
versus not taking  primacy. Commissioner Hartig  replied that                                                                   
one of concerns  is that EPA is  not set up to  take programs                                                                   
back;   therefore   the  question   would   be   theoretical.                                                                   
Representative Gara responded  that the federal law says this                                                                   
program must be  implemented even if the state  does not take                                                                   
primacy.  Commissioner Hartig  replied that  it would  take a                                                                   
lot of  preparation for the  federal government to  take over                                                                   
the program.                                                                                                                    
1:53:57 PM                                                                                                                    
Representative Kelly  asked that with the decline  in federal                                                                   
funds combined  with the added  new federal requirements  and                                                                   
the  federal  government's  inability  to  take  primacy;  he                                                                   
wondered  if   this  was  good   or  bad  news   for  Alaska.                                                                   
Commissioner  Hartig  responded  that  it would  be  bad  for                                                                   
Alaska and  hard for  someone outside of  Alaska to  run this                                                                   
Representative  Kelly restated that  Alaska might  choose not                                                                   
to have the  EPA programs or be  willing to pay for  them. If                                                                   
the  federal government  could not  take primacy  back or  be                                                                   
able to force  Alaska to take primacy, then  he believed this                                                                   
might be good  news for Alaska  to be able to choose  what is                                                                   
necessary. He  added that with  federal funds  declining, the                                                                   
state  will have  to  keep contributing  more  to keep  these                                                                   
programs working.                                                                                                               
1:57:42 PM                                                                                                                    
Co-Chair   Hawker   interjected   that   one  of   the   next                                                                   
rule/programs  anticipated  is called  the  Radon rule  which                                                                   
could cost  the state a lot  of money. He added  that another                                                                   
major revision  would  involve lead and  copper programs.  He                                                                   
noted that federal  rules are causing financial  problems for                                                                   
Alaska.  He announced  that  just  within all  the  agencies'                                                                   
budgets, there is  a 5.7 percent aggregate growth  that needs                                                                   
to be  cut to  3 percent,  which translates  to cutting  $130                                                                   
million  out  of  the  governor's   requested  general  funds                                                                   
1:59:40 PM                                                                                                                    
Commissioner  Hartig pointed  out that  the federal  drinking                                                                   
rules are  not a take it  or leave it option.  These programs                                                                   
are federal requirements and if  the state government did not                                                                   
take  it over  then  someone  else  would. He  questioned  if                                                                   
Alaska  would rather  have the  federal  or state  government                                                                   
enforcing  these   programs.  He  added  that   it  was  also                                                                   
important  to point  out that  the state  would lose  federal                                                                   
funds  attached   to  these  programs.  Commissioner   Hartig                                                                   
continued with  highlights from the FY2011  operating budget,                                                                   
noting  there  is  a  $260,000  general  fund  increment  for                                                                   
equipment maintenance agreements.  He informed that equipment                                                                   
warranties were expiring at the  Environmental Health Lab. He                                                                   
stated  that  $153,000  was  for   contractual  services  for                                                                   
pesticide   programs.  This   money   would  provide   expert                                                                   
consultation for the program and  would be totally funded out                                                                   
of  the  yearly  registration   fees  charged  to  those  who                                                                   
register pesticides to sell in Alaska.                                                                                          
Commissioner Hartig continued  that $150,000 in general funds                                                                   
would  be  used for  a  full time  position  for  consistency                                                                   
determination in  the Air Quality division and  help with the                                                                   
Outer Continental  Shelf (OCS) and Alaska  Gasline Inducement                                                                   
Act (AGIA) work.                                                                                                                
Co-Chair Hawker asked  if there was work within  the division                                                                   
that  was  not necessary  or  required.  Commissioner  Hartig                                                                   
responded  that the  Air Quality  division has  a lot of  new                                                                   
work and  needs the  greatest lead  time on  any oil  and gas                                                                   
projects before there is any development.                                                                                       
2:04:08 PM                                                                                                                    
Representative Kelly asked if  CO2 was a regulated substance.                                                                   
Commissioner Hartig  responded that  it was regulated  not at                                                                   
this time,  but there is  a requirement to monitor  reporting                                                                   
of   greenhouse   emissions    over   25   tons   per   year.                                                                   
Representative Kelly  expressed concern that there  was heavy                                                                   
pressure to regulate  emissions. He noted that if  there is a                                                                   
backlash  against  cap and  trade  that could  cost  Alaskans                                                                   
electricity and  fuel, he believed  the carbon  situation may                                                                   
not have  played out completely.  He emphasized that  as some                                                                   
of the expenditures continue to  accelerate; there might be a                                                                   
different result  than anticipated. He told  the commissioner                                                                   
to be suspicious  of anything adding cost to  the DEC heading                                                                   
in that direction.                                                                                                              
2:05:51 PM                                                                                                                    
Representative  Austerman asked  if there  were any  existing                                                                   
environmental  programs  not required  by  law.  Commissioner                                                                   
Hartig responded  no. He informed the committee  that Supreme                                                                   
Court  case, Massachusetts  vs.  EPA, held  that  if the  EPA                                                                   
finds that CO2  emissions were endangering the  health of the                                                                   
public, then  it must be regulated  as a pollutant  under the                                                                   
Clean Air  Act. The  EPA made  this endangerment finding  and                                                                   
will  proceed  to  regulate  CO2  and  other  greenhouse  gas                                                                   
emissions under the  Clean Air Act. He reported  that Senator                                                                   
Lisa Murkowski  introduced a  resolution that would  preclude                                                                   
EPA from going forward with this  plan, pending congressional                                                                   
action.  He warned that  there is  a risk  for Alaska  if the                                                                   
state  does  not evaluate  the  impact  of  a cap  and  trade                                                                   
program  or understand  how it  might  impact a  gas line  or                                                                   
other  economic  development programs  critical  to  Alaska's                                                                   
economy. He cautioned  that the discussions would  go forward                                                                   
without Alaska's input.                                                                                                         
Representative  Austerman asked what  would be the  duties of                                                                   
this new  full time position.  Commissioner Hartig  responded                                                                   
that this position  would look at OCS, AGIA  and the baseline                                                                   
information needed  and also look at the impact  of a federal                                                                   
program and how to represent Alaska in these discussions.                                                                       
2:09:16 PM                                                                                                                    
Co-Chair Stoltze  asked if the  various departments  would be                                                                   
willing to help the legislature  send a strong message to the                                                                   
federal  government  expressing  concern  regarding  cap  and                                                                   
trade issues.                                                                                                                   
Commissioner  Hartig replied  that the  governor has  taken a                                                                   
position on  cap and trade and  its possible impact  on a gas                                                                   
line project and  has sent letters to Alaska's  delegation in                                                                   
Washington. Co-Chair Stoltze asked  if it would be harmful to                                                                   
the  state   if  the  legislature  expresses   their  concern                                                                   
regarding federal  policies. Commissioner Hartig  believed it                                                                   
would be best to leave it with the governor's office.                                                                           
2:11:03 PM                                                                                                                    
Representative Salmon  referred to the pollution  problems in                                                                   
Fairbanks   and  asked   how   the  state   deals  with   it.                                                                   
Commissioner Hartig remarked that  the EPA set a standard for                                                                   
particulate matter,  the particles that go into  the air when                                                                   
burning  hydrocarbons,   at  2.5   micron  particles.   These                                                                   
particles  get  imbedded deep  in  the lungs  causing  health                                                                   
concerns.  If communities  do  not meet  the required  levels                                                                   
then  the consequences,  besides  the harm  to human  health,                                                                   
could be a cut  in federal highway funds.   When a community,                                                                   
such as Fairbanks,  does not meet this federal  law, then DEC                                                                   
works  with the  community to  develop  a plan  to come  into                                                                   
compliance.  Once the  plan  is in  place  and the  community                                                                   
starts operating  under the plan,  the EPA just  monitors the                                                                   
situation. If  the community does  not adopt a plan  then EPA                                                                   
will  implement their  own plan.  He  reminded the  community                                                                   
that  failure to  comply may  ultimately  end with  a cut  in                                                                   
highway funds.                                                                                                                  
2:13:33 PM                                                                                                                    
Representative Salmon asked if  anything was being done about                                                                   
the  smoke  problem   in  Fairbanks  and  the   Yukon  flats.                                                                   
Commissioner  Hartig  answered   that  the  department  works                                                                   
closely with  DNR and other  federal agencies to  monitor the                                                                   
metrological   conditions  and   warn   people  with   health                                                                   
advisories.   Representative  Salmon   questioned  what   the                                                                   
difference   was  between  summer   and  winter   conditions.                                                                   
Commissioner  Hartig stated  that  inversions  in the  winter                                                                   
traps the smoke,  but it does not rise to the  same levels as                                                                   
the large summer fires around Fairbanks in recent years.                                                                        
2:15:08 PM                                                                                                                    
Co-Chair Hawker  remarked that  he wanted  to get the  longer                                                                   
range goal for the department.                                                                                                  
Representative  Kelly  quoted  that  "this  investment  would                                                                   
allow the state to further its  objectives to address climate                                                                   
change  and efficiently  move forward  the construction  of a                                                                   
natural   gas   pipeline."   (Department   of   Environmental                                                                   
Conservation, Operating Budget  Presentation to House Finance                                                                   
Committee-Jan.25,  2120, page 2,  under Air Quality,  copy on                                                                   
file). He asked what the objectives of the state were.                                                                          
Commissioner Hartig remarked that  the objectives would be to                                                                   
make  sure that  if there  is  a federal  program to  control                                                                   
greenhouse emissions, it would  not hinder going forward with                                                                   
coal  and  the  natural  gas   pipeline.  He  added  that  to                                                                   
commercialize natural gas on the  North Slope there will be a                                                                   
huge  energy need  and  that cost  along  with federal  rules                                                                   
could make the  gas line unprofitable; therefore  it was very                                                                   
important for  DEC to know how  the carbon could  be managed.                                                                   
Representative  Kelly suggested that  the DEC help  the state                                                                   
find   ways   to  fight   the   federal   government   rules.                                                                   
Commissioner  Hartig  said they  were  trying  to move  in  a                                                                   
rational  way  toward  what  is   best  for  Alaska  and  its                                                                   
2:18:48 PM                                                                                                                    
Commissioner Hartig  moved on  to the capital  budget review.                                                                   
He  noted the  capital  budget proposal  is  $75 million  for                                                                   
FY2010.  The safe water  program is  $48,500,000, 75  percent                                                                   
federal  with  a  25 percent  state  match.  He  noted  there                                                                   
continues to be a 40 percent decline  in federal funding over                                                                   
the last  six years. The  FY2011 budget is approximately  $18                                                                   
million less  just because  of the  drop in federal  funding.                                                                   
Eventually the federal funds will  end so the question arises                                                                   
on what to do  for funding the village safe  water situation.                                                                   
Co-Chair  Hawker   voiced  his  concern   regarding  deferred                                                                   
maintenance  issues in  the villages  and wondered about  the                                                                   
accumulated exposure for the state regarding maintenance.                                                                       
Commissioner Hartig remarked that  not maintaining facilities                                                                   
may require them  to be replaced earlier resulting  in a huge                                                                   
expense  to the  state.  He added  that  lack of  maintenance                                                                   
might  also affect  the  reliability  of the  facilities.  He                                                                   
understood that  the high cost  of energy in  communities may                                                                   
be  putting  pressure  not to  fund  maintenance  issues.  He                                                                   
remarked  that the  legislature might  consider working  with                                                                   
the  federal  government  to   provide  some  incentives  for                                                                   
communities to develop sound maintenance plans.                                                                                 
Co-Chair Hawker  asked if the  DEC can use the  village safe-                                                                   
water earmark for maintenance or only for new construction.                                                                     
Commissioner  Hartig answered  that the  earmark is  used for                                                                   
new construction and to replace  facilities and upgrades, but                                                                   
not for maintenance.  He pointed out that  remote maintenance                                                                   
workers are on call to travel  to a community to train how to                                                                   
fix  problems, but  the remote  workers  do not  do the  work                                                                   
themselves.   He  indicated  that   the  DEC  was   exploring                                                                   
different ideas on how deal with maintenance issues.                                                                            
2:23:17 PM                                                                                                                    
Co-Chair Hawker asked about the prevention account balance.                                                                     
Commissioner Hartig referred to  the handout on the "nickel a                                                                   
barrel" tax on crude oil from  the North Slope and Cook Inlet                                                                   
(Department  of  Environmental  Conservation  Response  Fund,                                                                   
Prevention  Account-Balance  Projection,  copy on  file).  He                                                                   
mentioned this  tax is  split in the  Response Fund  into two                                                                   
accounts; the Prevention account  receives four cents and the                                                                   
Response Account  receives one  cent. The Prevention  account                                                                   
handles the spill prevention response  division. The one cent                                                                   
goes  into the  Response  Account  for emergency  spills.  He                                                                   
elaborated that  the $50 million  response fund  is available                                                                   
for emergencies.  If  this account drops  below $50  million,                                                                   
then the  one cent tax is  implemented until the  $50 million                                                                   
is restored.  He added  that with  declining oil  production,                                                                   
the surcharge will go down over  time. The Prevention Account                                                                   
Balance  graph shows  the  fund decline.  Commissioner  Lloyd                                                                   
noted that in FY2014,  the account will go into  the red. The                                                                   
only thing that has kept the account  from going into the red                                                                   
earlier is  the surplus  established years  ago. In  order to                                                                   
avoid  cutting back  on services,  the  options after  FY2014                                                                   
would be to  increase production, increase the  surcharge, or                                                                   
supplement the fund with general funds.                                                                                         
Co-Chair  Hawker  asked what  the  department  planned to  do                                                                   
about  the  bankrupt  fund  in  FY2014.  Commissioner  Hartig                                                                   
repeated  that  there  could  be  a  proposal  next  year  to                                                                   
increase  the surcharge  or supplement  it with general  fund                                                                   
money. He added  that this situation has been  brought to the                                                                   
attention  of  the legislature  each  year.  Co-Chair  Hawker                                                                   
asked  if  it was  possible  to  reduce  costs.  Commissioner                                                                   
Hartig agreed that cost savings was an option.                                                                                  
2:28:16 PM                                                                                                                    
Representative  Austerman  requested a  ten  year history  of                                                                   
what the fund  has generated and any growth  in expenditures.                                                                   
Commissioner Hartig agreed to  provide the information to the                                                                   
committee and subcommittee.                                                                                                     
Representative   Doogan  wondered   why  the   administration                                                                   
intended to spend $7.5 million  more than the fund's revenue.                                                                   
Commissioner Hartig repeated that  there was a surplus in the                                                                   
fund at present.  Representative Doogan asked why  it was the                                                                   
policy of the  department to spend down the  surplus money at                                                                   
this rate.                                                                                                                      
Commissioner  Hartig responded  that the  amount in  the fund                                                                   
was not  designed  to be the  amount the  Division of  Spill,                                                                   
Prevention, and  Response (SAR) needed for  their operations.                                                                   
He added  that because  of the amount  that existed  when the                                                                   
fund split  between the prevention  and response  accounts, a                                                                   
surplus was created. He added  that there was never an agreed                                                                   
budget for SPAR.  There was the belief that  the surcharge on                                                                   
crude oil production  would support SPAR.  Unfortunately this                                                                   
has gone down. The division is  at a point of filling the gap                                                                   
with the surplus,  but that is also declining.  He emphasized                                                                   
that a new way of funding will have to fill the gap.                                                                            
MIKE MAHER,  DIRECTOR, DIVISION  OF ADMINISTRATIVE  SERVICES,                                                                   
DEPARTMENT OF  REVENUE, explained  that the two  expenditures                                                                   
for capital or contaminated sites  cleanup are based on risk.                                                                   
For three  years the division  has not asked for  any capital                                                                   
funds for many  contaminated sites throughout  the state, but                                                                   
some sites  have reached  a critical point  where the  use of                                                                   
this fund or the  general fund is necessary. In  the past the                                                                   
legislature has  helped by adding  some general funds  to the                                                                   
2:33:02 PM                                                                                                                    
Representative Doogan asked for  a plan to solve the problem.                                                                   
Commissioner  Hartig responded that  the department  would be                                                                   
putting proposals  together for  a long  term plan.  The fund                                                                   
problem  is  all  triggered by  the  decline  in  production;                                                                   
therefore  additional  revenue  will  be  needed.    Co-Chair                                                                   
Hawker  voiced past  concern about  the  use of  the fund  to                                                                   
clean up  sites that may not  have been appropriate,  such as                                                                   
bailing out  other state  agencies. He  wondered if  this was                                                                   
still  happening.  Commissioner   Hartig  noted  this  year's                                                                   
proposed budget of $1 million  general fund money to clean up                                                                   
of some state's contaminated sites.                                                                                             
2:36:05 PM                                                                                                                    
Representative   Gara  asked   if  there   will  be   further                                                                   
discussion  on the  five cents  a barrel issue  in the  House                                                                   
Finance   committee   or   subcommittee.    Co-Chair   Hawker                                                                   
interjected  that the  discussion would  certainly be  in the                                                                   
subcommittee. Commissioner  Hartig indicated  his willingness                                                                   
to meet with any individual legislator  to discuss the matter                                                                   
further. Representative  Gara stated that the DEC  was put on                                                                   
a goal  to economize  and wondered if  this had happened.  He                                                                   
also asked  where the  $50 million  response fund was  today.                                                                   
Commissioner  Hartig responded  that the  one cent  surcharge                                                                   
was presently  in effect  to bring  the fund  back up  to $50                                                                   
million.  Mr.  Maher responded  that  the response  fund  was                                                                   
presently at $45 million. Representative  Gara asked how long                                                                   
it would take  to reach $50 million. Mr. Maher  answered that                                                                   
one cent is  roughly $2.3 million a year; therefore  it would                                                                   
take  about 2  1/2 to  3 years.  Co-Chair  Hawker added  that                                                                   
increasing production might solve the problem.                                                                                  
2:38:53 PM                                                                                                                    
Representative  Austerman asked  for information  on how  the                                                                   
four  cents is  being used.  Commissioner  Hartig noted  that                                                                   
there is  cost recovery on third  parties, but not  for state                                                                   
Representative  Kelly responded  that the commissioner  needs                                                                   
to put pressure on policymakers to make this sustainable.                                                                       
2:40:51 PM                                                                                                                    
Co-Chair Hawker remarked that  a review of legislative intent                                                                   
was needed.                                                                                                                     
Representative Salmon  questioned if the one  cent was capped                                                                   
at  $50  million.   Commissioner  Hartig  replied   that  was                                                                   
correct. Representative  Salmon inquired  what turns  the one                                                                   
cent on and  off. Commissioner Hartig answered  that if money                                                                   
is drawn from  the response fund then the one  cent surcharge                                                                   
turns on until $50 million is  reached. Representative Salmon                                                                   
asked  where the one  cent money  goes after  $50 million  is                                                                   
reached.  Commissioner  Hartig  said that  the  surcharge  is                                                                   
turned  off once  the $50  million is  reached. He  explained                                                                   
that when the DEC draws from the  fund, the governor, finance                                                                   
chairs  and  the  Department of  Revenue  are  notified.  The                                                                   
Department  of Revenue  sends a  bill for  the oil  surcharge                                                                   
until the $50 million is reached, then the billing stops.                                                                       
2:43:23 PM                                                                                                                    
Co-Chair Stoltze  wondered if the commissioner  had gone back                                                                   
to  the original  intent  of  the bill.  Commissioner  Hartig                                                                   
concluded that  in the  long term plan,  the key  issues were                                                                   
declining federal and response funds.                                                                                           
2:46:32 PM                                                                                                                    
DEPARTMENT OF FISH AND GAME                                                                                                   
DENBY  LLOYD,  COMMISSIONER,  DEPARTMENT  OF  FISH  AND  GAME                                                                   
(DFG),  provided  a  broad overview  of  the  department.  He                                                                   
referred  to Article  8 in  the  Alaska Constitution  stating                                                                   
that   the   legislature  will   provide   for   utilization,                                                                   
development  and   conservation  of  all   natural  resources                                                                   
belonging  to  the  state  for the  maximum  benefit  of  its                                                                   
people.  He  read  the  department  missions  statement,  "To                                                                   
protect, maintain,  and improve  the fish, game,  and aquatic                                                                   
plant  resources  of the  state,  and  manage their  use  and                                                                   
development  in the best  interest of  the economy  and well-                                                                   
being  of  the  people  of the  state,  consistent  with  the                                                                   
sustained yield principle." He  stressed that sustained yield                                                                   
means obtaining ongoing production  and use of the resources.                                                                   
The   department   deals   with   fisheries,   hunting,   and                                                                   
conservation  of fish  and  wildlife primarily  within  state                                                                   
boundaries.  The  DFG  must also  work  with  federal  agency                                                                   
authorities, such  as the National Marine  Fisheries Service,                                                                   
the  U.S. Forest  Service,  Bureau  of Land  Management,  and                                                                   
others. The department  must also comply with  the Endangered                                                                   
Species  Act  and  Marine  Mammal  protection  Act  which  he                                                                   
believed  to  be  an encroachment  on  some  of  the  state's                                                                   
authority. He  also remarked  on some international  agencies                                                                   
that  affect   the  department's  work.   Commissioner  Lloyd                                                                   
stressed  that  the people  of  Alaska are  passionate  about                                                                   
hunting, trapping, and fishing resources.                                                                                       
Commissioner  Lloyd listed  the  department's core  services:                                                                   
Harvest  Management,  Stock  Assessment,   Customer  Service,                                                                   
Public   Involvement,   State    Sovereignty,   and   Habitat                                                                   
Protection.    (Alaska  Department  of Fish  and  Game,  FY11                                                                   
Governor's Operating Budget Request  Overview, copy on file).                                                                   
In  order to  accomplish the  core  services, the  department                                                                   
internally   takes   workforce  development   seriously.   He                                                                   
mentioned  the difficulty  in  retention  and recruitment  of                                                                   
employees along with hunters and  anglers who provide much of                                                                   
the department's revenues.                                                                                                      
2:54:23 PM                                                                                                                    
Commissioner Lloyd referred to  the three budget tables (page                                                                   
3).  The Current  Capacity  table  is the  FY2010  authorized                                                                   
budget which is broken out by  the six core service programs.                                                                   
The  next  table   deals  with  transactions   of  increments                                                                   
proposed for FY2011  operating budget. The last  table is the                                                                   
FY2011 Governor's  Budget. Commissioner Lloyd noted  that the                                                                   
two   main  programs   are  harvest   management  and   stock                                                                   
assessment.  He added  that harvest  management  is the  most                                                                   
fundamental service provided to  determine the population and                                                                   
biological productive parameters.                                                                                               
2:55:46 PM                                                                                                                    
Vice-Chair Thomas  inquired how  the stock assessment  monies                                                                   
have  gone up  or  down  in the  past  ten years.  Mr.  Lloyd                                                                   
responded  that   he  would  send  the  information   to  the                                                                   
Representative  Doogan  asked  about the  numbers  under  the                                                                   
"other funds" category.                                                                                                         
Mr.  Lloyd   listed  state  general  funds,   federal  funds,                                                                   
licensing  revenues,   fines  and  forfeitures,   interagency                                                                   
receipts, and test fisheries.  Co-Chair Hawker noted that the                                                                   
information was located  under numeral "V" in  the short form                                                                   
2:58:00 PM                                                                                                                    
Commissioner   Lloyd   referred   to  the   Key   Performance                                                                   
Indicators of each core program (page 4-5).                                                                                     
Co-Chair Hawker  noted the  received increment request  money                                                                   
was for Western  Region Fisheries Management  and wondered if                                                                   
there might be additional federal  funds now that the federal                                                                   
government  has  declared  the  western  region  fisheries  a                                                                   
disaster. Mr.  Lloyd hoped there would be  additional federal                                                                   
funds available.  There have  been additional projects  added                                                                   
over  the  last  several  years   that  will  provide  better                                                                   
management  of  those runs.  He  added  there is  an  ongoing                                                                   
federal  grant process  through  the Pacific  Coastal  Salmon                                                                   
Recovery  Fund program,  but  it will  be  shared with  other                                                                   
western states.                                                                                                                 
3:00:35 PM                                                                                                                    
Representative  Austerman asked how  much money is  left over                                                                   
from the sustainable salmon funds.  Mr. Lloyd said it depends                                                                   
on  which year  of the  grant fund.  Vice-Chair Thomas  asked                                                                   
where the  funds for Crystal  Lake Hatchery would  come from.                                                                   
Commissioner Lloyd  reported he did not know,  but would look                                                                   
into  the matter.  He  added  there are  ongoing  discussions                                                                   
among many  constituent groups  for the Southeast  Mitigation                                                                   
Fund. This  is money appropriated  by the federal  government                                                                   
to the state  of Alaska in recognition of some  detriments in                                                                   
Southeast due to the Pacific Salmon agreement.                                                                                  
3:03:25 PM                                                                                                                    
Representative Salmon  wondered what the money  in the budget                                                                   
would do  for the  Yukon River.  Commissioner Lloyd  remarked                                                                   
that  in  the  operating  budget, there  was  a  request  for                                                                   
$130,000   to  help   continue  the   Chinook  salmon   stock                                                                   
identification   program   to  determine   their   movements.                                                                   
Commissioner  Lloyd noted a  number of  items in the  capital                                                                   
budget  that could  be  used for  fishery  research; such  as                                                                   
$750,000 for an  ongoing effort in the Western  Alaska Salmon                                                                   
Identification  program. He  shared that  when completed  the                                                                   
study will  be the  largest and  most intensive salmon  stock                                                                   
genetic identification  study  anywhere. In additional  there                                                                   
is a request  for $200,000 to  enhance aerial survey  of Chum                                                                   
salmon  and  $250,000  to  refine  the  pilot  station  sonar                                                                   
3:07:02 PM                                                                                                                    
Representative Joule  asked the department's  plans regarding                                                                   
subsistence issues.                                                                                                             
Commissioner  Lloyd  responded   that  the  department  would                                                                   
continue  to  work  with  the  federal  government  substance                                                                   
review process. He  noted that Alaska would  like the federal                                                                   
government to  recognize the state's sovereignty  on fish and                                                                   
wildlife  management.  The  federal   subsistence  management                                                                   
program  occurred  when  Alaska  failed to  comply  with  the                                                                   
federal  rural position  under the  Alaska National  Interest                                                                   
Lands  Conservation  Act  (ANILCA).  The  department  is  not                                                                   
contesting  the  federal  preference  on  federal  lands  for                                                                   
federally  eligible  subsistence  users.  Commissioner  Lloyd                                                                   
added   that   the  department   is   responsible   for   the                                                                   
conservation of the  fish and wildlife stocks  upon which the                                                                   
federally eligible users are dependent.                                                                                         
Representative  Joule asked how  the dual management  process                                                                   
is   working.  Commissioner   Lloyd  alleged   it  would   be                                                                   
preferable  not to  have  dual management,  but  it has  been                                                                   
getting operationally better over the years.                                                                                    
3:12:07 PM                                                                                                                    
Representative Gara  asked if there was any  compensation for                                                                   
those who  were unable to fish  King [Chinook] salmon  on the                                                                   
Yukon  River  after  it  had   been  wrongly  closed  due  to                                                                   
miscounting.  Commissioner  Lloyd  declared  that  the  Yukon                                                                   
River  is a  difficult  area to  manage.  He  noted that  the                                                                   
closing has been  characterized as an error  or miscount, but                                                                   
in actuality,  given the total  run size of the  Chinook run,                                                                   
the statistics were  within 15 to 20 percent  of the estimate                                                                   
of  the total  run. He  agreed  that for  a region  suffering                                                                   
economic problems,  but it  is a  dramatic problem.  In prior                                                                   
years  there  had  been too  much  harvesting  hindering  the                                                                   
conservation  goals. Commissioner Lloyd  said that  people or                                                                   
communities were not  paid back, but DEC tried  to design the                                                                   
opening and closing of the summer  Chum fishers and, later in                                                                   
the  year, the  Coho fisheries  to allow  more harvesting  to                                                                   
occur.   Representative   Gara   contended   that   in   more                                                                   
economically  depressed areas,  reliant on  one industry,  it                                                                   
seems to call for a more financial response.                                                                                    
3:15:51 PM                                                                                                                    
Co-Chair  Stoltze asserted  that subsistence  issues are  the                                                                   
state's highest priority. Commissioner  Lloyd agreed that the                                                                   
department operates under the  mandate that subsistence has a                                                                   
priority.  Co-Chair  Stoltze asked  if  management  decisions                                                                   
were being  made before  or after the  fish enter  the Alaska                                                                   
river  systems. Commissioner  Lloyd  answered that  fisheries                                                                   
looked  at  both  before  and  after  they  enter  the  river                                                                   
Co-Chair Stoltze  noted that  in 2008  the number of  anglers                                                                   
purchasing fishing licenses was  8 percent over of the target                                                                   
goal,  but  the days  the  anglers  spent fishing  was  under                                                                   
target.  He wondered  if this  would change  in 2009 and  how                                                                   
this  would  affect  department  policy.  Commissioner  Lloyd                                                                   
responded that the department  did not know the 2009 numbers,                                                                   
but  he  did  not  believe  that  policy  affected  the  2008                                                                   
numbers.  He   believed  economic  conditions   affected  the                                                                   
numbers more.                                                                                                                   
Co-Chair  Stoltze   maintained  that  when  there   are  more                                                                   
closures  and  less  angler  days,   that  could  affect  the                                                                   
3:21:54 PM                                                                                                                    
Vice-Chair  Thomas  believed  that  the  once  the  Anchorage                                                                   
Hatchery opens  some of  these problems  might be solved.  He                                                                   
noted that Fairbanks  does not have a  hatchery. Commissioner                                                                   
Lloyd warned  that more fish  is not  always the best  way to                                                                   
address all management issues.                                                                                                  
3:23:43 PM                                                                                                                    
Representative  Salmon asked  if  there were  two sonar  near                                                                   
mouth of the Yukon River and one  at the border. Commissioner                                                                   
Lloyd answered  that there is  one sonar site near  the mouth                                                                   
at Pilot Station;  there are two sonar aiming  from different                                                                   
banks counted as  one. There is also sonar at  Eagle near the                                                                   
Canadian border.                                                                                                                
Representative  Salmon asked  who  decides when  to shut  the                                                                   
salmon flow into the Yukon River.                                                                                               
Commissioner Lloyd  responded that it was impossible  to know                                                                   
how many salmon would be returning  each year. The department                                                                   
only issues  projections or forecasts.  He added  that salmon                                                                   
management  deals with  escapement; targeting  the number  of                                                                   
fish that  need to escape  through the  fishery to end  up on                                                                   
the spawning  grounds. He  reminded that it  is not  an exact                                                                   
science. Representative  Salmon asked  if another  sonar site                                                                   
after the  Tanana River would  give a better estimate  of how                                                                   
many  salmon   were  heading  toward  the   Canadian  border.                                                                   
Commissioner  Lloyd commented  that additional  sonar is  not                                                                   
always the  answer. He noted  the department operates  aerial                                                                   
surveys  in the  spawning grounds  and would  put into  place                                                                   
other projects,  but often  not enough  money for  additional                                                                   
3:30:01 PM                                                                                                                    
Representative  Austerman indicated that  prior to  the state                                                                   
having the  oil money there were  other systems in  place. He                                                                   
wondered  why the department  doesn't  request more money  to                                                                   
run  the department  in the  manner  it needs  to manage  the                                                                   
fishery  stocks. Commissioner  Lloyd  replied that  different                                                                   
departments  would ask  for different  amounts  of money.  He                                                                   
added that the  DFG has enjoyed some good growth  and focused                                                                   
on some problem areas, but there  were good opportunities for                                                                   
additional  investment to  do a  better job  of getting  more                                                                   
from sustained yield.                                                                                                           
Representative  Austerman believed  the Administration  needs                                                                   
to ask for what they need, and  then the legislature needs to                                                                   
fund  it. He  asked how  many  systems around  the state  are                                                                   
having ongoing problems.                                                                                                        
Mr. Lloyd responded  that he does not have a  count. He noted                                                                   
that Alaska  is known as a  leader in salmon  management, but                                                                   
problem  cycles  in  productivity  tend to  move  around  the                                                                   
state. There  are some  chronic areas  of difficulty  such as                                                                   
the  Susitna  Valley,  Norton   Sound  and  Yukon  River.  He                                                                   
mentioned eight salmon stocks  of concern around the state of                                                                   
3:36:46 PM                                                                                                                    
Representative Gara agreed that  counting fish on every river                                                                   
system is not the same, but he  contended that it seemed like                                                                   
a lot  less effort  and equipment goes  into counting  on the                                                                   
Yukon River.                                                                                                                    
Commissioner Lloyd stated that  was not the case. He asserted                                                                   
that  the  Yukon  River  was   getting  a  lot  of  attention                                                                   
factoring in  the logistical  difficulties, but agreed  there                                                                   
was a lot of room for growth.  Representative Gara reiterated                                                                   
that the perception is a lot more  money is given to counting                                                                   
on the Kenai River versus the Yukon River.                                                                                      
3:39:13 PM                                                                                                                    
Commissioner Lloyd  shared that he  did not have  the budgets                                                                   
for  the  two  rivers  before   him,  but  he  believed  that                                                                   
assumption   was  wrong.   Co-Chair   Hawker  mentioned   the                                                                   
Commercial Fisheries Revolving  Loan Fund is a successful and                                                                   
important program within the agency.  He stressed his concern                                                                   
of taking  money from this  fund to support other  government                                                                   
or department activities.                                                                                                       
3:40:51 PM                                                                                                                    
Representative Kelly asked about  some thoughts on the guides                                                                   
use variance.                                                                                                                   
Commissioner  Lloyd maintained  that the  reason the  DFG and                                                                   
DNR were  going though  this exercise  deals with  identified                                                                   
problems  of crowding  and too  many guides  in too small  an                                                                   
area. It  may be necessary  to limited  the number  of guides                                                                   
per area and improve the quality  of service. The tradeoff is                                                                   
that if you restrict the number  of guides, the revenue might                                                                   
increase, but also reduce someone's  opportunity to engage in                                                                   
the guiding business.                                                                                                           
Co-Chair Hawker  voiced his concern about the  objectivity of                                                                   
the board members.                                                                                                              
Commissioner  Lloyd asked if  Co-Chair Hawker believed  there                                                                   
were  too many  vested guiding  interests on  the board.  Co-                                                                   
Chair Hawker remarked  that one group of  professionals feels                                                                   
that  another established  group  controls the  board and  is                                                                   
excluding,  injuring and  damaging  them.  He emphasized  the                                                                   
desire  for these  boards  to  be as  fair  and objective  as                                                                   
3:44:34 PM                                                                                                                    
Representative  Kelly  declared  the  outcome  could  be  the                                                                   
disenfranchisement of a large  group of people who earn their                                                                   
living as guides.  Often when rules are  changed unilaterally                                                                   
is  causes  dislocation  in  the   bush  communities  and  he                                                                   
believed this has elements of the same problem.                                                                                 
Commissioner Lloyd  stated that  the review has  been ongoing                                                                   
for  at least  three years.  Representative Kelly  reiterated                                                                   
that there was  a belief that it was driven by  the "good old                                                                   
Representative  Salmon  inquire about  the  chain of  command                                                                   
for  stopping  the  fish on  the  Yukon  River.  Commissioner                                                                   
Lloyd  stated that  the state's  management  system for  fish                                                                   
and  game  is  unique,  but  there   is  an  emergency  order                                                                   
authority  granted to the  department  by the Alaska  statute                                                                   
which provides  for the  opening and  closing of fishing  and                                                                   
hunting  seasons based  of the  assessment  of harvest  goals                                                                   
and  biological productivity.  The  department has  delegated                                                                   
this power to as  local a level as possible.  The strength of                                                                   
the  system  is that  people  in  the  field with  real  time                                                                   
access to the  information and direct interaction  with local                                                                   
users are making the decisions.                                                                                                 

Document Name Date/Time Subjects
ADF&G FY 11 Operating Budget Presentation 1.22.10Overview.pdf HFIN 1/25/2010 1:30:00 PM
DEC Overview01 22 2010 (3).pdf HFIN 1/25/2010 1:30:00 PM
ADF&G handout correction 1.28.10pg.3.pdf HFIN 1/25/2010 1:30:00 PM