Legislature(2009 - 2010)HOUSE FINANCE 519

01/29/2010 01:30 PM FINANCE


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01:37:03 PM Start
01:37:20 PM HB300 || HB302
03:54:34 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
= HB 300 APPROP: OPERATING BUDGET/LOANS/FUNDS
+ Governor's FY11 Budget Overview: TELECONFERENCED
Dept. of Revenue
Dept. of Natural Resources
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."                                                                                                        
                                                                                                                                
1:37:20 PM                                                                                                                    
                                                                                                                                
FY  11 GOVERNOR'S  BUDGET OVERVIEWS:  DEPARTMENT OF  NATURAL                                                                
RESOURCES                                                                                                                   
                                                                                                                                
Representative Gara corrected a  mistake made at yesterday's                                                                    
meeting  regarding  graduate   programs  at  the  university                                                                    
level.  He spoke  in support  of Fairbanks  as the  flagship                                                                    
campus.                                                                                                                         
                                                                                                                                
1:41:16 PM                                                                                                                    
                                                                                                                                
TOM  IRWIN, COMMISSIONER,  DEPARTMENT OF  NATURAL RESOURCES,                                                                    
referred  to  a  handout  entitled,  "Alaska  Department  of                                                                    
Natural Resources  - House  Finance Committee  Overview". He                                                                    
began by  stating the Department  of Natural  Resource (DNR)                                                                    
mission: Develop, conserve and  maximize the use of Alaska's                                                                    
natural resources consistent with the public interest.                                                                          
                                                                                                                                
1:43:41 PM                                                                                                                    
                                                                                                                                
Commissioner  Irwin   listed  the   department's  divisions,                                                                    
offices, and  boards and commissions,  as shown on  slide 1.                                                                    
He  referred  to chart  1  on  slide  3, which  shows  DNR's                                                                    
priority programs.                                                                                                              
                                                                                                                                
Co-Chair  Hawker  expressed  appreciation for  the  detailed                                                                    
spreadsheet on the department's organization.                                                                                   
                                                                                                                                
Commissioner Irwin  described the sections of  the pie chart                                                                    
which  show budget  allocations  by  priority. The  programs                                                                    
provide resource opportunities  for resource development. He                                                                    
highlighted the blue  section - 40.1 percent  of the budget,                                                                    
the   largest   section    related   to   natural   resource                                                                    
development. The next largest  area is wildfire management -                                                                    
22.4 percent.                                                                                                                   
                                                                                                                                
1:47:56 PM                                                                                                                    
                                                                                                                                
Commissioner Irwin turned  to slide 4 to  detail the current                                                                    
status  of the  FY 10  budget. The  adjusted base  operating                                                                    
budget  for  FY 10  is  $133  million. One-time  items,  the                                                                    
Mental  Health Trust  Land Office  and multi-year  operating                                                                    
appropriations,  increase the  FY 10  budget by  $12 million                                                                    
for  a total  of  $145 million.  This  includes funding  for                                                                    
DNR's  portion of  the AGIA  implementation.  He noted  that                                                                    
over  half of  the  budget  is general  fund  - 53  percent.                                                                    
Federal dollars  make up  11 percent,  and the  remaining 36                                                                    
percent is in the "other"  category. He detailed the "other"                                                                    
category items.                                                                                                                 
                                                                                                                                
Co-Chair Hawker  noted an anomaly between  the Mental Health                                                                    
Trust  budget  and  the  way  state  agencies  handle  their                                                                    
budgets. It results  in what would appear to  be an increase                                                                    
in the  agency budget by  $2.3 million. He pointed  out that                                                                    
the  perceived  increase  is not  an  actual  increase.  The                                                                    
Mental  Health  Trust  Authority operates  on  a  zero-based                                                                    
budget.  The appearance  of the  extra millions  is not  new                                                                    
financing.                                                                                                                      
                                                                                                                                
1:50:33 PM                                                                                                                    
                                                                                                                                
Commissioner Irwin  listed the number of  permanent and non-                                                                    
permanent  positions  in   the  department.  The  department                                                                    
employs between 900  and 1,000 Alaskans, less  in the winter                                                                    
and more  in the  summer. He  highlighted several  jobs. The                                                                    
main DNR  offices are in  Anchorage, Juneau,  and Fairbanks.                                                                    
There  are  typically around  130  vacancies  or about  11.5                                                                    
percent of total positions. He  spoke of job classes and pay                                                                    
differential. He  noted the challenge  of having  to recruit                                                                    
for certain jobs.                                                                                                               
                                                                                                                                
Co-Chair  Hawker asked  which categories  were difficult  to                                                                    
fill  and  if  the  legislature   could  help  in  any  way.                                                                    
Commissioner  Irwin gave  an example  of  the difficulty  of                                                                    
finding fire fighters. He spoke  of the necessity to compete                                                                    
for certain  jobs due to  the complications of  modern life.                                                                    
Co-Chair  Hawker wondered  if there  was difficulty  filling                                                                    
higher-paid  positions.  Commissioner  Irwin  reported  that                                                                    
there  were problems  with  losing college-trained  workers,                                                                    
and finding highly skilled, top-level workers.                                                                                  
                                                                                                                                
1:58:33 PM                                                                                                                    
                                                                                                                                
Representative Joule pointed out  that the commissioner rose                                                                    
from  the ranks.  Commissioner  Irwin  agreed that  industry                                                                    
experience was  important, but sometimes it  is difficult to                                                                    
afford to  hire those workers.  He maintained that  both are                                                                    
needed.                                                                                                                         
                                                                                                                                
Representative  Austerman agreed  that  this  was a  problem                                                                    
throughout departments  and warrants a  separate discussion.                                                                    
Co-Chair   Hawker    noted   that    collective   bargaining                                                                    
negotiations  were  pending   and  several  labor  questions                                                                    
should be considered by the committee.                                                                                          
                                                                                                                                
Representative Kelly related the  conversation to hiring for                                                                    
the  pipeline.  He  commented on  the  current  job  picture                                                                    
nationwide. He has  heard that it is hard to  find hires for                                                                    
top people.                                                                                                                     
                                                                                                                                
Commissioner  Irwin reported  that his  top people  have not                                                                    
gone  to the  federal government,  but there  is competition                                                                    
across the  board. Co-Chair Hawker commented  on the ability                                                                    
of salary  overrides for exempt positions,  which has helped                                                                    
to retain some positions.                                                                                                       
                                                                                                                                
2:02:55 PM                                                                                                                    
                                                                                                                                
Representative Joule  wondered if  positions could  be moved                                                                    
up  in order  to fill  openings  as needed.  He wondered  if                                                                    
there were more  out-of-state applicants. Commissioner Irwin                                                                    
said   he  has   not  seen   more  non-Alaskan   applicants.                                                                    
Representative Joule had  heard rumors about out-of-stater's                                                                    
moving north.                                                                                                                   
                                                                                                                                
2:03:54 PM                                                                                                                    
                                                                                                                                
LETA  SIMONS,   DIRECTOR,  DIVISION  OF   SUPPORT  SERVICES,                                                                    
DEPARTMENT  OF NATURAL  RESOURCES, addressed  Representative                                                                    
Joule's  question.  She noted  a  problem  in filling  upper                                                                    
level forestry jobs.  She offered to provide  data on failed                                                                    
recruitments from outside the state.                                                                                            
                                                                                                                                
Representative   Salmon  asked   how  fires   are  screened.                                                                    
Commissioner Irwin replied that  all fires from the previous                                                                    
year are examined  and the management plan  is reviewed. Not                                                                    
every fire  is put out.  He shared statistics  on lightening                                                                    
strikes. He  clarified that some  forest fires need  to burn                                                                    
out  in order  to prevent  fires in  the future.  He related                                                                    
that he does not meddle  in the management of fire fighting,                                                                    
but leaves that up to  the experts who have significant data                                                                    
for their use. He spoke of  a concern about the smoke damage                                                                    
from fires.                                                                                                                     
                                                                                                                                
2:10:31 PM                                                                                                                    
                                                                                                                                
Commissioner  Irwin  explained  that Fairbanks  is  easy  to                                                                    
protect  from   fires;  however,  Anchorage  is   not.  Fire                                                                    
fighting plans are continuously being updated.                                                                                  
                                                                                                                                
Representative Kelly asked what  the criteria are whether to                                                                    
fight a fire  or not. He thought that fires  were not fought                                                                    
for  smoke. Commissioner  Irwin  explained  that some  fires                                                                    
were  fought for  smoke due  to  potential health  problems.                                                                    
Representative  Kelly thought  that  the  message should  be                                                                    
communicated honestly as to which  fires would be fought and                                                                    
why. He shared a personal story.                                                                                                
                                                                                                                                
2:14:16 PM                                                                                                                    
                                                                                                                                
Commissioner  Irwin emphasized  that  there  would be  fires                                                                    
that cannot be stopped.                                                                                                         
                                                                                                                                
Co-Chair  Hawker  commented  that supplemental  budgets  are                                                                    
anticipated  for fire  fighting. He  expected a  $35 million                                                                    
request. Commissioner  Irwin thought  it would be  about $40                                                                    
million.                                                                                                                        
                                                                                                                                
Ms.  Simons clarified  that the  budget would  end up  being                                                                    
around  $40 million  or more,  but  the actual  supplemental                                                                    
would  be the  same  amount as  the emergency  declarations,                                                                    
which total $35 million.                                                                                                        
                                                                                                                                
2:16:22 PM                                                                                                                    
                                                                                                                                
Commissioner Irwin turned to slide  5 - recent highlights of                                                                    
DNR.  He noted  that  the department  received $8.5  million                                                                    
from  North Slope  lease sales,  an increase  of $2  million                                                                    
over  2008. He  termed it  a positive  pattern. He  said the                                                                    
department   has   collected   $20  million   from   royalty                                                                    
settlement negotiations.  ExxonMobil completed  drilling and                                                                    
casing the surface  section of its first  production well at                                                                    
Pt.  Thomson.  The  department   continues  to  support  the                                                                    
development  of a  pipeline to  deliver North  Slope natural                                                                    
gas  to   markets  outside  of  Alaska.   ExxonMobil  joined                                                                    
TransCanada  to progress  the Alaska  Pipeline Project.  The                                                                    
legislature has allowed the department  to move forward with                                                                    
AGIA. He spoke highly of TransCanada.                                                                                           
                                                                                                                                
2:20:19 PM                                                                                                                    
                                                                                                                                
Commissioner Irwin reported  on a trip to  Houston to gather                                                                    
information  about  the  open season.  He  spoke  highly  of                                                                    
ExxonMobil.                                                                                                                     
                                                                                                                                
Representative  Austerman  requested information  about  the                                                                    
Federal Stimulus Act.                                                                                                           
                                                                                                                                
Commissioner  Irwin related  that  there  was $10.7  million                                                                    
left  of  Stimulus  money. The  department  is  planning  on                                                                    
spending the funds  on putting Alaskans to  work this coming                                                                    
summer in  various projects. He  spoke of two  benefits from                                                                    
Stimulus  money. One  is putting  Alaskans to  work and  the                                                                    
other is  training that will  also benefit the  fire season.                                                                    
Representative Austerman  asked if the money  would be spent                                                                    
this summer. Commissioner Irwin said it would.                                                                                  
                                                                                                                                
2:22:32 PM                                                                                                                    
                                                                                                                                
Co-Chair  Hawker  clarified  that the  Stimulus  money  bill                                                                    
passed  last  year approves  funding  until  June 30,  2010.                                                                    
There is language in HB  300 that continues the funding into                                                                    
the subsequent  fiscal year. Commissioner Irwin  pointed out                                                                    
that the $10.7 figure is from the Federal Stimulus Act.                                                                         
                                                                                                                                
Representative  Fairclough inquired  if the  amount is  $8.5                                                                    
billion or $5.7  billion in FY 09, as reflected  on slide 5.                                                                    
Commissioner Irwin  said it  is $5.7  billion. He  stated an                                                                    
intention to generate  more money. Representative Fairclough                                                                    
requested an  update on  the AGIA process  as it  relates to                                                                    
First Nation issues.                                                                                                            
                                                                                                                                
2:24:45 PM                                                                                                                    
                                                                                                                                
Commissioner Irwin  informed the  committee that  the issues                                                                    
are significant; however,  the NPA TransCanada right-of-ways                                                                    
are  well-grounded. Representative  Fairclough wished  for a                                                                    
timeline for  permits. She recalled  that the  Alaska Native                                                                    
claim took a significant  amount of time. Commissioner Irwin                                                                    
offered   to  provide   updated   Alaska  Pipeline   Project                                                                    
information   to   the   committee  in   order   to   answer                                                                    
Representative Fairclough's questions.                                                                                          
                                                                                                                                
Representative Fairclough  asked if  there were  8.3 million                                                                    
acres  of new  state land.  She wondered  if the  goal of  a                                                                    
million acres  of transfer had happened.  Commissioner Irwin                                                                    
believed  the goal  was 1.9  million acres.  He pointed  out                                                                    
that Alaska  has gained as  much ground the last  four years                                                                    
as the  size of  Massachusetts and Connecticut  combined. He                                                                    
noted   that   getting   land  has   its   burdens.   Native                                                                    
corporations and  the state over-selected lands.  He thought                                                                    
11 million or 12 million acres were over-selected.                                                                              
                                                                                                                                
Co-Chair Hawker inquired  about the RS 2477  rights of ways.                                                                    
He recalled  that the legislature  used LB&A to  manage that                                                                    
process because it believed that  the administration was not                                                                    
pursuing land  rights of ways  with vigor. He  requested the                                                                    
department's take on the issue.                                                                                                 
                                                                                                                                
Commissioner  Irwin  explained  the process  that  would  be                                                                    
required to  settle the RS  2477 issue. He thought  it would                                                                    
require a  lawsuit. He  predicted it would  be a  $2 million                                                                    
lawsuit.                                                                                                                        
                                                                                                                                
2:30:44 PM                                                                                                                    
                                                                                                                                
Commissioner  Irwin   addressed  Representative  Austerman's                                                                    
question  regarding  abandoned  wells. He  related  how  DNR                                                                    
worked with  the Pearl  bankruptcy. A buyer  in the  form of                                                                    
Cook Inlet Energy was  found. Representative Austerman asked                                                                    
if the industry posted a  bond. Commissioner Irwin said that                                                                    
DNR has  a fund that was  used. The reality is  there is not                                                                    
enough protection  in some areas  of the state. The  fund is                                                                    
not sufficient for today's risk.                                                                                                
                                                                                                                                
2:33:06 PM                                                                                                                    
                                                                                                                                
Representative  Gara clarified  that  he  voted against  all                                                                    
taxes except for a fair share for oil tax.                                                                                      
                                                                                                                                
2:34:14 PM                                                                                                                    
                                                                                                                                
Commissioner Irwin turned again  to recent highlights of the                                                                    
department.  He spoke  of  successes  when permitting  mine,                                                                    
land, and water projects, such  as Kensington, Red Dog, Fort                                                                    
Knox, Pebble, and Donlin Creek.                                                                                                 
                                                                                                                                
Commissioner Irwin  spoke of contracts  with state  parks to                                                                    
replace toilet facilities. He  discussed the needless damage                                                                    
that happens in state parks.                                                                                                    
                                                                                                                                
Co-Chair Hawker  recalled a capital  development improvement                                                                    
plan for state parks. He  wondered if DNR's budget supported                                                                    
that plan.  Commissioner Irwin stated  that he  supports the                                                                    
governor's budget.  This administration  has put  in another                                                                    
step to  move forward  on parks  maintenance. He  offered to                                                                    
find out if the budget  keeps up with the original statewide                                                                    
plan.                                                                                                                           
                                                                                                                                
Representative   Austerman   thought    "user   fees"   were                                                                    
necessary. He  complimented the work  that James  King does.                                                                    
Commissioner  Irwin described  how other  governments manage                                                                    
their parks with donations.                                                                                                     
                                                                                                                                
2:39:37 PM                                                                                                                    
                                                                                                                                
Representative Foster  appreciated work that  the department                                                                    
does on park maintenance,  especially the toilet facilities.                                                                    
Commissioner  Irwin shared  that  the  facilities are  great                                                                    
looking.                                                                                                                        
                                                                                                                                
Representative Gara  brought up a concern  about the expense                                                                    
of state park  use. He wondered about guided  float trips on                                                                    
the  Kenai  River  and  a  survey which  could  lead  to  an                                                                    
exclusion from  using the river. Commissioner  Irwin replied                                                                    
that the department has made  no decisions regarding the use                                                                    
of the Kenai  River. He shared some history  about the Kenai                                                                    
River's impaired  fishery and the restrictions  imposed. The                                                                    
state must continue to manage such issues fairly.                                                                               
                                                                                                                                
Representative Gara noted  that did not want to  see half of                                                                    
the  float  trips  reserved for  non-Alaskans.  Commissioner                                                                    
Irwin stressed that he works for all Alaskans.                                                                                  
                                                                                                                                
2:44:34 PM                                                                                                                    
                                                                                                                                
Co-Chair  Hawker spoke  of a  universal challenge  involving                                                                    
the  loss  of  federal   funding  authority.  He  questioned                                                                    
whether the state should continue  to supplant federal money                                                                    
with state funds. He questioned  if the state should support                                                                    
things  like  the  Alaska   Volcano  Observatory  (AVO),  by                                                                    
supplanting  federal monies.  Commissioner Irwin  thought it                                                                    
was  critical   to  continue  to  support   this  issue.  He                                                                    
supported  his  view  with   statements  about  air  traffic                                                                    
safety.                                                                                                                         
                                                                                                                                
Co-Chair  Hawker asked  if the  state  is actively  pursuing                                                                    
this issue. Commissioner  Irwin replied that it  is a matter                                                                    
of  safety first,  business  second. He  termed  it a  small                                                                    
amount of money for safety.                                                                                                     
                                                                                                                                
2:48:45 PM                                                                                                                    
                                                                                                                                
Ms. Simons  added that the request  for the FY 11  budget is                                                                    
for  $300,000.  The  goal  is to  have  DNR  maintain  their                                                                    
funding efforts for AVO.  American Recovery and Reinvestment                                                                    
Act (ARRA) funds which have stepped  in to pick up the slack                                                                    
are  short term  funds.  Co-Chair Hawker  believed that  the                                                                    
$1.5 million  in ARRA  funds were  approved at  the December                                                                    
LB&A meeting.                                                                                                                   
                                                                                                                                
Commissioner  Irwin  wondered  if  it  was  a  philosophical                                                                    
question about replacing federal funding.                                                                                       
                                                                                                                                
Co-Chair  Hawker questioned  if the  state was  aggressively                                                                    
seeking to replace federal funds.                                                                                               
                                                                                                                                
Representative Joule commented that  the department had been                                                                    
silent  regarding coastal  zone  management.  He noted  high                                                                    
levels of  frustration in the  coastal communities  with the                                                                    
lack of  response and the  lack of alternatives  offered. He                                                                    
believed  there  would  have  to be  more  dialogue  in  the                                                                    
future.                                                                                                                         
                                                                                                                                
Co-Chair  Hawker echoed  concerns  regarding the  lack of  a                                                                    
productive dialogue.                                                                                                            
                                                                                                                                
2:53:33 PM                                                                                                                    
                                                                                                                                
Commissioner Irwin acknowledged that it was an issue.                                                                           
                                                                                                                                
Representative  Fairclough  asked   if  the  department  has                                                                    
worked with  DOT to see if  landing fees might be  used as a                                                                    
revenue source to  fund the AVO, rather  than general funds.                                                                    
She thought  there could be  a partnership with  the private                                                                    
sector.                                                                                                                         
                                                                                                                                
Commissioner  Irwin was  not aware  of  discussions to  that                                                                    
effect. He offered to get more information.                                                                                     
                                                                                                                                
Commissioner   Irwin  turned   to  slide   6  -   department                                                                    
priorities.  He  suggested  presenting  more  details  in  a                                                                    
handout to distribute to the committee at a future date.                                                                        
                                                                                                                                
Co-Chair Hawker agreed.                                                                                                         
                                                                                                                                
Representative  Gara  queried   which  department  addresses                                                                    
pipeline spills.                                                                                                                
                                                                                                                                
Commissioner Irwin  responded that both DNR  and DEC respond                                                                    
to oil  spills. The goal of  DNR is to work  on gap analysis                                                                    
using the Petroleum System  Integrity Office (PSIO), whereas                                                                    
DEC  deals with  risk analysis.  He suggested  the issue  be                                                                    
addressed at another time at more length.                                                                                       
                                                                                                                                
2:58:41 PM          AT EASE                                                                                                   
3:05:24 PM          RECONVENED                                                                                                
                                                                                                                                
DEPARTMENT OF REVENUE                                                                                                       
                                                                                                                              
PAT  GALVIN, COMMISSIONER,  DEPARTMENT OF  REVENUE, referred                                                                    
to a  handout entitled,  "FY 11  Budget Overview".  He began                                                                    
with a pie  chart on slide 2 - core  and corporations, which                                                                    
depicts the  breakdown of the  Department of  Revenue (DOR).                                                                    
The blue  section is the  department core services,  the red                                                                    
section is  the Alaska Housing Finance  Corporation section,                                                                    
and  the green  section  is the  Permanent Fund  Corporation                                                                    
section.                                                                                                                        
                                                                                                                                
Co-Chair  Hawker interjected  that the  budget subcommittees                                                                    
would attend to the specific details by agency.                                                                                 
                                                                                                                                
Commissioner Galvin  referred to slide 3  where the priority                                                                    
programs  are depicted.  The bulk  of the  dollar amount  is                                                                    
spent managing  investments. The money is  used for internal                                                                    
personnel and  external managers. The blue  portion is funds                                                                    
collected from the Tax Division  and from a portion of Child                                                                    
Support  Services. The  red portion  is the  distribution of                                                                    
funds  to  Child Support  Services  and  the Permanent  Fund                                                                    
Dividend. The tiny purple portion  is for the Long Term Care                                                                    
Ombudsman  Program  and  for  statutory  conflict  avoidance                                                                    
purposes.                                                                                                                       
                                                                                                                                
3:10:52 PM                                                                                                                    
                                                                                                                                
Commissioner  Galvin  described  what  the  Long  Term  Care                                                                    
Ombudsman  does, as  depicted on  slide 4.  The governor  is                                                                    
requesting  an increment  to fund  a person  to oversee  the                                                                    
investigation and follow up of  this program. He opined that                                                                    
the  position   was  overdue  because   of  the   growth  in                                                                    
complaints.                                                                                                                     
                                                                                                                                
Co-Chair Hawker  observed that the growth  in complaints was                                                                    
an alarming statistic.  He wondered if there was  a need for                                                                    
a regulatory solution.                                                                                                          
                                                                                                                                
3:13:07 PM                                                                                                                    
                                                                                                                                
GINGER  BLAISDELL,  DIRECTOR,   DIVISION  OF  ADMINISTRATIVE                                                                    
SERVICES,   DEPARTMENT  OF   REVENUE,  explained   that  the                                                                    
complaints  were family  driven and  varied and  were on  "a                                                                    
one-to-one"  basis. There  has been  no request  for statute                                                                    
changes.                                                                                                                        
                                                                                                                                
Commissioner Galvin  continued with slide 5  - a description                                                                    
of the  Tax Division's  responsibilities. He  emphasized the                                                                    
importance of the annual tax report.                                                                                            
                                                                                                                                
Co-Chair  Hawker noted  that the  excise tax  is responsible                                                                    
for motor  fuel taxes. He  wondered if  that tax were  to be                                                                    
eliminated, if  there would be a  corresponding reduction in                                                                    
personnel. Commissioner Galvin replied  that there would not                                                                    
be  a reduction  in staff  because  there would  still be  a                                                                    
reporting requirement.                                                                                                          
                                                                                                                                
3:16:16 PM                                                                                                                    
                                                                                                                                
Commissioner   Galvin   related  the   Treasury   Division's                                                                    
responsibilities, as  shown on slide  6. The budget  item is                                                                    
an increment related  to management of the  general fund and                                                                    
other  sub-accounts,  such   as  the  Constitutional  Budget                                                                    
Reserve (CBR).  The increment shown  is for  management fees                                                                    
for the CBR.                                                                                                                    
                                                                                                                                
Co-Chair Hawker called the CBR  the state's savings account.                                                                    
He  wondered  what  the  debt  of  the  CBR  currently  was.                                                                    
Commissioner  Galvin  reported  that the  debt  between  the                                                                    
general  fund  and  the  CBR was  about  $400  million.  The                                                                    
current balance is roughly $8.6  billion. There is a balance                                                                    
in the statutory budget reserve  (SBR) of about one billion.                                                                    
Co-Chair  Hawker summarized  that the  CBR debt  is down  to                                                                    
about $400 million.                                                                                                             
                                                                                                                                
Representative Doogan  asked if the $400  million represents                                                                    
money  that used  to be  in the  CBR and  was taken  out and                                                                    
spent.  Commissioner  Galvin  clarified that  the  remaining                                                                    
amount that  would need to  be refunded in order  to satisfy                                                                    
the  previous withdrawals  is  $400 million.  Representative                                                                    
Doogan restated  his question  to ask  if earnings  it might                                                                    
have  had were  included, or  if it  is just  the principle.                                                                    
Commissioner Galvin deferred to Mr. Burnett.                                                                                    
                                                                                                                                
Co-Chair  Hawker  asked  for the  response  to  include  the                                                                    
authority upon which the answer is based.                                                                                       
                                                                                                                                
3:20:04 PM                                                                                                                    
                                                                                                                                
JERRY BURNETT,  DEPUTY COMMISSIONER, DEPARTMENT  OF REVENUE,                                                                    
addressed if  whether the amount included  the earnings that                                                                    
would have been  there if the money had  never been removed.                                                                    
He explained that  each year, on an  accounting basis, there                                                                    
is  negative  amount  in  the  general  fund.  That  is  the                                                                    
principal amount and  not the earnings that  could have been                                                                    
earning interest. If lost earnings  are included, the number                                                                    
might be larger, but there is no way of knowing.                                                                                
                                                                                                                                
Co-Chair  Hawker inquired  where "payback"  is defined.  Mr.                                                                    
Burnett replied that  it is in the  Constitution, Article 9,                                                                    
Section 17, which was passed in 1990.                                                                                           
                                                                                                                                
Co-Chair Hawker noted  that Representative Doogan's question                                                                    
was important.                                                                                                                  
                                                                                                                                
Representative  Austerman  asked  if there  was  about  $8.6                                                                    
billion in  the CBR  currently and about  $1 billion  in the                                                                    
SBR. Commissioner Galvin said that was correct.                                                                                 
                                                                                                                                
3:22:20 PM                                                                                                                    
                                                                                                                                
Commissioner Galvin returned to  the responsibilities of the                                                                    
Treasury  Division.   He  pointed  out  that   the  Treasury                                                                    
Division  was the  primary staff  to  the Alaska  Retirement                                                                    
Management  Board   (ARMB)  and  is  the   location  of  the                                                                    
unclaimed property function.                                                                                                    
                                                                                                                                
Commissioner  Galvin explained  the  role  of the  Permanent                                                                    
Fund  Dividend   (PFD)  Division  -  slide   7.  He  related                                                                    
significant   changes   in   operations   and   distribution                                                                    
practices.  He  noted  one budget  item,  an  increment  for                                                                    
$100,000 for Information Technology (IT) training.                                                                              
                                                                                                                                
3:25:40 PM                                                                                                                    
                                                                                                                                
Representative  Gara  asked about  the  CBR.  He shared  his                                                                    
understanding of the CBR. He questioned future obligations.                                                                     
                                                                                                                                
Mr.  Burnett explained  that CBR  fund language  states that                                                                    
the only  future money that  would go  into the CBR  are tax                                                                    
royalty  settlements  from  court  cases  or  administrative                                                                    
proceedings, such as  from the TAPS Tariff  cases last year.                                                                    
The   past  year,   over  $400   million   was  added   from                                                                    
settlements.  Representative Gara  presented a  hypothetical                                                                    
case where  a new  base level  was established.  Mr. Burnett                                                                    
agreed with the example.                                                                                                        
                                                                                                                                
Co-Chair  Hawker stated  that Legislative  Finance explained                                                                    
that only  the principle of  the CBR that was  borrowed must                                                                    
be repaid,  not the  interest accrued.  He pointed  out that                                                                    
the state  has included interest in  repayments. Mr. Burnett                                                                    
clarified  that  while  that  is   correct,  it  is  not  an                                                                    
equivalent to the amount lost in the transaction.                                                                               
                                                                                                                                
3:29:31 PM                                                                                                                    
                                                                                                                                
Representative Doogan  asked for an explanation  of the fund                                                                    
source  for the  PFD Division.  Commissioner Galvin  said it                                                                    
was money  transferred from  the PFD  fund. No  general fund                                                                    
monies are used.                                                                                                                
                                                                                                                                
Representative  Fairclough wondered  if there  was a  way to                                                                    
cross  reference  PFD  applications  or  have  multiple-year                                                                    
applications  so that  those who  forget could  recoup their                                                                    
dividend. Commissioner Galvin replied  that there is no such                                                                    
plan  in  place.  Representative Fairclough  wondered  if  a                                                                    
different  system  could  be used  for  long-time  Alaskans.                                                                    
Commissioner  Galvin  discussed  the "once  in  a  life-time                                                                    
application".                                                                                                                   
                                                                                                                                
3:34:27 PM                                                                                                                    
                                                                                                                                
Commissioner Galvin  reported on the Child  Support Services                                                                    
Division (CSCD)  - slide  8. He noted  an award  received by                                                                    
the division,  the PAC-10  Challenge Preventing  Arrears Cup                                                                    
for 2009.  He explained a  fund source change  for balancing                                                                    
the agency's budget. The  American Recovery and Reinvestment                                                                    
Act (ARRA) funding changes occurred during the past year.                                                                       
                                                                                                                                
Co-Chair Hawker  asked why  administrative services  did not                                                                    
request  an increment  for Child  Support Services  Division                                                                    
(CSCD).  Mr. Burnett  reported  that  no increment  requests                                                                    
have been requested since 2002 because none were needed.                                                                        
                                                                                                                                
3:38:51 PM                                                                                                                    
                                                                                                                                
Commissioner   Galvin   described    the   duties   of   the                                                                    
Commissioner's Office - slide 9.  He related that there were                                                                    
pending IT issues  that would require support.  He noted two                                                                    
reports: AGIA Project Report and ACES Status Report.                                                                            
                                                                                                                                
Representative Gara  requested an  update on  AGIA. Co-Chair                                                                    
Hawker  expected updated  reports  to  be considered  across                                                                    
agencies. Representative  Gara requested a  report. Co-Chair                                                                    
Hawker   agreed   to   provide   that   information   later.                                                                    
Commissioner Galvin  said that  on Monday  there would  be a                                                                    
presentation in House Resources.                                                                                                
                                                                                                                                
3:42:24 PM                                                                                                                    
                                                                                                                                
Commissioner Galvin  related that the Alaska  Municipal Bond                                                                    
Bank Authority (AMBBA) falls within  the Treasury Division -                                                                    
slide 10.  Two pieces  of legislation  are proposed  to deal                                                                    
with this  funding, the  Crime Lab  and the  University Life                                                                    
Sciences Building.  Ms. Blaisdell reported on  the status of                                                                    
those bills.                                                                                                                    
                                                                                                                                
Representative  Fairclough  spoke  of Build  America  Bonds.                                                                    
Commissioner Galvin informed the  committee that there are a                                                                    
number of different public financing options.                                                                                   
                                                                                                                                
Mr.  Burnett related  that Build  America Bonds  are taxable                                                                    
debt  bonds  subsidized  by the  federal  government.  Local                                                                    
governments have  made use of them.  Should the certificates                                                                    
of  participation  pass, it  is  likely  that Build  America                                                                    
bonds would  be used for  a portion  of the debt.  The State                                                                    
Debt  Committee  would deal  with  them.  The Recovery  Zone                                                                    
Bonds are for areas without  bonding authority for local and                                                                    
commercial  projects. They  have  up to  45 percent  federal                                                                    
subsidy attached. Both bonds must  be done in 2010. Co-Chair                                                                    
Hawker  was looking  forward  to  the legislation  regarding                                                                    
those bonds.                                                                                                                    
                                                                                                                                
3:47:57 PM                                                                                                                    
                                                                                                                                
Commissioner  Galvin turned  to the  Alaska Housing  Finance                                                                    
Corporation. He spoke of two  pieces of pending legislation,                                                                    
Revenue Bonds  for Veterans and Energy  Efficiency Bonds for                                                                    
weatherization.                                                                                                                 
                                                                                                                                
Representative  Salmon asked  about the  status of  the PFD.                                                                    
Commissioner  Galvin  reported  that  the  PFD  balance  has                                                                    
recovered significantly from where it  was a year ago. It is                                                                    
currently  approaching $35  billion. He  noted that  the PFD                                                                    
Corporation has  a variety of  increments in the  budget. He                                                                    
stated  his view,  as a  board member,  that the  APFC Board                                                                    
attempts  to tightly  manage the  budget  and requests  only                                                                    
necessary items.                                                                                                                
                                                                                                                                
3:51:17 PM                                                                                                                    
                                                                                                                                
Commissioner Galvin discussed  the department's 10-year plan                                                                    
-  slide  13.  He   related  that  the  department's  budget                                                                    
projection remains flat. Co-Chair  Hawker asked if the spike                                                                    
in  the graph  was  showing  capital spending.  Commissioner                                                                    
Galvin said that was correct.                                                                                                   
                                                                                                                                
Co-Chair  Hawker asked  about the  growth of  fund balances,                                                                    
assuming an increase  of 7 percent per year.  He inquired if                                                                    
the fund balances are earning  7 percent a year. Mr. Burnett                                                                    
clarified that  the expectation is that  fund balances would                                                                    
increase. Co-Chair Hawker asked if  it was an aggregate. Mr.                                                                    
Burnett agreed.  Co-Chair Hawker  concluded that  that would                                                                    
imply  surpluses  in  all  areas of  operations  at  a  rate                                                                    
aggregating 7 percent  per year for the next  ten years. Mr.                                                                    
Burnett agreed and added that  the larger funds do naturally                                                                    
increase.                                                                                                                       
                                                                                                                                
3:54:34 PM                                                                                                                    
                                                                                                                                
Commissioner Galvin  discussed oil and gas  requests - slide                                                                    
1.  He said  they  were related  to  the AGIA  reimbursement                                                                    
function. Four  new positions were identified  and are being                                                                    
requested. He spoke  of the audit of  the AGIA Reimbursement                                                                    
Fund and the  need for a fiscal systems  analysis to support                                                                    
negotiations of gasline  fiscal terms. Representative Doogan                                                                    
asked  for  clarification  of  the last  item  in  a  future                                                                    
discussion.                                                                                                                     
                                                                                                                                

Document Name Date/Time Subjects
Overview DNR Presentation.pdf HFIN 1/29/2010 1:30:00 PM
Rev. Dept Overview.pdf HFIN 1/29/2010 1:30:00 PM
LFD Budget Overview page 35.pdf HFIN 1/29/2010 1:30:00 PM
DOR Overview