Legislature(2009 - 2010)HOUSE FINANCE 519

02/10/2010 01:30 PM FINANCE

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01:38:28 PM Start
01:38:42 PM HB326 || HB225
03:44:21 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Heard & Held
Heard & Held
+ Overviews by Office of Management and TELECONFERENCED
Budget: Operating Appropriations; Capital
and Deferred Maintenance Appropriations
+ Bills Previously Heard/Scheduled TELECONFERENCED
HOUSE BILL 326                                                                                                                
     "An  Act  making  supplemental  appropriations,  capital                                                                   
     appropriations,   and  other  appropriations;   amending                                                                   
     appropriations;    repealing   appropriations;    making                                                                   
     appropriations  to capitalize  funds; and providing  for                                                                   
     an effective date."                                                                                                        
HOUSE BILL 325                                                                                                                
     "An  Act  making  capital  appropriations  for  deferred                                                                   
     maintenance   projects,   equipment   replacement,   and                                                                   
     emergency  repairs;  and   providing  for  an  effective                                                                   
OFFICE OF MANAGEMENT AND BUDGET OVERVIEWS                                                                                     
1:39:25 PM                                                                                                                    
JAMES  ARMSTRONG,  STAFF,  CO-CHAIR  STOLTZE,  pointed  to  a                                                                   
prepared  handout  that  lists  side  by  side  the  Deferred                                                                   
Maintenance  Capital Requests  and  the Regular  Supplemental                                                                   
Capital  Request  (copy  on  file).  He  indicated  that  the                                                                   
handout  would make  it easier  to see the  requests as  each                                                                   
department  presents  their  requests.  He  pointed  out  the                                                                   
backup in the binder and noted  that Section 3 is the Capital                                                                   
Budgets   for   the   Regular   Supplemental   and   on   the                                                                   
spreadsheets, starting on Page  11, Section 57. He added that                                                                   
the last  section in the  binder is the Deferred  Maintenance                                                                   
Requests (FY10,  HB 225  & HB  226 Governor's Supplemental  &                                                                   
Deferred Maintenance Budgets, Book 1, copy on file).                                                                            
KAREN  REHFELD, DIRECTOR,  OFFICE OF  MANAGEMENT AND  BUDGET,                                                                   
OFFICE OF THE  GOVERNOR, appreciated dealing  with both bills                                                                   
today. She remarked  that the deferred maintenance  bill is a                                                                   
straight  forward  bill  with  the  governor  proposing  $100                                                                   
million to  allocate across  all departments  listed on  a 2-                                                                   
page  spreadsheet.  She  explained  that  the  agencies  will                                                                   
explain  where  they  are  listed   on  the  spreadsheet  and                                                                   
describe  their   projects  then  take  questions   from  the                                                                   
Mr.  Armstrong   stated  that   the  bold  listings   on  the                                                                   
spreadsheet are  the Appropriations and listed  below are the                                                                   
Allocation Requests.                                                                                                            
1:43:38 PM          AT EASE                                                                                                   
1:47:03 PM          RECONVENED                                                                                                
Mr. Armstrong clarified  that the last Section  in the binder                                                                   
is deferred maintenance where  most of the day would probably                                                                   
be spent.  He noted that  in Section  3 there are  four other                                                                   
requests from three different agencies.                                                                                         
ERIC SWANSON,  DIRECTOR, DIVISION OF SERVICES,  DEPARTMENT OF                                                                   
ADMINISTRATION, ADMINISTRATIVE  stated a request on Line 2 of                                                                   
the Spreadsheet  with $4,250,000 for deferred  maintenance of                                                                   
facilities in the public building  fund. These facilities are                                                                   
managed by the Department of Administration  and are projects                                                                   
that  can be  moved on  quickly to  address certain  deferred                                                                   
maintenance needs.  He added that  all the facilities  are in                                                                   
Representative  Austerman  asked  if  all  the  buildings  in                                                                   
Juneau were government buildings.  Mr. Swanson responded that                                                                   
was correct.                                                                                                                    
1:49:38 PM                                                                                                                    
Representative Gara  asked how the working  document prepared                                                                   
by  Representative  Stoltze's  office  showing  two  deferred                                                                   
maintenance   requests  related   to  the  spreadsheet   with                                                                   
multiple requests. Mr. Swanson  replied that the two requests                                                                   
correspond to  the lines  in the bill.  The longer  lists are                                                                   
the  detailed list  of the  facilities in  need. Ms.  Rehfeld                                                                   
explained  there  are  two projects  for  the  Department  of                                                                   
Administration  in  the  bill   that  are  broken  down  into                                                                   
Facilities  Deferred  Maintenance and  the  Telecommunication                                                                   
System deferred maintenance.                                                                                                    
Representative  Austerman  noted   that  on  Page  5  of  the                                                                   
deferred maintenance  section there is a listing  of nineteen                                                                   
projects in Juneau.                                                                                                             
Mr. Swanson reported  that the request for the  $4,250,000 is                                                                   
for 7 projects recently identified.  Representative Austerman                                                                   
noted they do not match up with  his information. Ms. Rehfeld                                                                   
explained that  Mr. Swanson was  referring to  specific items                                                                   
for the  first allocation  of money.  Mr. Swanson noted  that                                                                   
page 5  is the correct part  of the original  package request                                                                   
Representative Austerman asked  if the committee had the most                                                                   
updated list. Ms.  Rehfeld noted that the committee  does not                                                                   
have the list  being used by some departments.  She explained                                                                   
that Mr.  Swanson was reading  from a newer list  identifying                                                                   
the higher  priority projects.  She indicated that  OMB would                                                                   
be providing the newer list.                                                                                                    
1:55:03 PM                                                                                                                    
Ms. Rehfeld apologized  to the committee. She  explained that                                                                   
today's   goal  was   listen   to  each   agency's   deferred                                                                   
maintenance  needs so  that  these higher  priority  projects                                                                   
could be completed in the first year.                                                                                           
1:55:51 PM                                                                                                                    
Representative  Fairclough thought it  would be difficult  to                                                                   
see  if the  committee agrees  with  the prioritized  listing                                                                   
without the information in front of them.                                                                                       
Ms. Rehfeld suggested going through  a few agencies to see if                                                                   
the  information  meets  the  needs  of  the  committee.  She                                                                   
believed most would be straight forward requests.                                                                               
Mr. Swanson  continued to  his second  request of $3  million                                                                   
for   deferred   maintenance   on   the   state   of   Alaska                                                                   
telecommunication   system.  He  stated  that   communication                                                                   
towers located  throughout the  state have  parts in  need of                                                                   
repair or replacement.                                                                                                          
Representative Gara referred to  the prior funding history of                                                                   
$1.5 and  $2.7 million  and wondered why  request is  so much                                                                   
larger (page 6).                                                                                                                
Mr.   Swanson  answered   that   there   are  many   deferred                                                                   
maintenance projects on the list  for SATS facilities in need                                                                   
of  serious  repair   and  the  department  was   taking  the                                                                   
opportunity to catch-up.                                                                                                        
Co-Chair Stoltze  expressed his irritation in  not having all                                                                   
the information available for  the committee. He wondered how                                                                   
many other agencies  have projects where the  information has                                                                   
not been provided to the committee.                                                                                             
Ms. Rehfeld responded that the  information will vary between                                                                   
departments. Some  departments will be able to  give a direct                                                                   
list and others  will need to refer to a second  list that is                                                                   
not presently available.                                                                                                        
Co-Chair  Stoltze  instructed  Ms. Rehfeld  to  present  only                                                                   
those  departments where  all the  information was  available                                                                   
for the committee.                                                                                                              
2:00:53 PM     AT EASE                                                                                                        
2:08:27 PM     RECONVENED                                                                                                     
Co-Chair  Stoltze mentioned  the  departments  that would  be                                                                   
heard during the meeting.                                                                                                       
Ms. Rehfeld  explained that she  wanted to bring the  list of                                                                   
projects  with the  list of  priorities.  She indicated  that                                                                   
some agencies have done better  job with backup material than                                                                   
2:09:53 PM                                                                                                                    
Mr. Armstrong interjected that  the committee should refer to                                                                   
Section  3 in the  binder for  the Department  of Commerce  &                                                                   
Economic Development.                                                                                                           
JO ELLEN HANRAHAN, DIVISION DIRECTOR,  DEPARTMENT OF COMMERCE                                                                   
& ECONOMIC DEVELOPMENT,  noted that the  supplemental request                                                                   
of $2.1 million  would complete the City of  Kodiak Community                                                                   
Jail Facility.  The facility  has space  for all of  Kodiak's                                                                   
law   enforcement   programs,   animal   control,   community                                                                   
services,  area  regional dispatch,  and  regional  emergency                                                                   
operations. The city  is experiencing a shortage  of funds to                                                                   
complete the project  of the community jail  (Section 3, page                                                                   
1).  She elaborated  that if  the facility  is not  completed                                                                   
then the  community will  be operating  out of two  different                                                                   
facilities with  the police station  in one building  and the                                                                   
community  jail in  another. This  will  increase the  annual                                                                   
operating costs by $1.3 million a year.                                                                                         
Co-Chair Stoltze asked if this  is one of the SB 65 projects.                                                                   
Ms. Rehfeld responded that was correct.                                                                                         
Representative  Gara needed  to know  where this  information                                                                   
was located. Mr. Armstrong reiterated  that it was located in                                                                   
Section  3 of  the binder.  He explained  that some  agencies                                                                   
have requests  contained within the regular  supplemental and                                                                   
the deferred maintenance supplemental.                                                                                          
2:13:28 PM                                                                                                                    
Representative   Austerman  asked   why  the  Department   of                                                                   
Commerce  is  carrying  these  funds  through.  Ms.  Hanrahan                                                                   
explained  that  the  Department  of Commerce  is  the  named                                                                   
agency because  the grants to municipalities  go through this                                                                   
department.  The request  originated from  the Department  of                                                                   
2:14:45 PM                                                                                                                    
ANA  KIM, DIRECTOR,  ADMINISTRATIVE  SERVICES, DEPARTMENT  OF                                                                   
EDUCATION AND  EARLY DEVELOPMENT  requested $1.7  million for                                                                   
Mt.   Edgecumbe  High   School   deferred  maintenance.   She                                                                   
indicated that  this will complete the  remaining maintenance                                                                   
on  the boys  and  girls dorms  and drainage  improvement  at                                                                   
Heritage  Hall.  She  noted it  should  also  cover  asbestos                                                                   
removal from the  storage warehouse and demolition  of an oil                                                                   
paint shop building.                                                                                                            
Representative Doogan  asked if there will be  an actual list                                                                   
from the Administration  for all the projects  under the $100                                                                   
million  request.  Co-Chair  Stoltze   answered  it  will  be                                                                   
coming. Representative  Doogan asked when the  committee will                                                                   
receive this  list. Ms. Rehfeld  responded that the  hope was                                                                   
to have  it already,  but it  will be  sent to the  committee                                                                   
members as quickly as possible.  Representative Doogan wanted                                                                   
to make  sure detailed information  was forthcoming  in order                                                                   
to make decisions.                                                                                                              
2:18:02 PM                                                                                                                    
Mr. Armstrong  remarked that a  spreadsheet arrived  late the                                                                   
previous evening,  but corrections needed  to be made  by the                                                                   
Administration  before it could  be handed out.  He indicated                                                                   
his intention  to personally deliver the spreadsheet  with an                                                                   
explanation  as  soon  as  it  is  available.  Representative                                                                   
Doogan reiterated that it was needed.                                                                                           
2:19:23 PM                                                                                                                    
Ms.  Rehfeld  noted  that  the  backup  in  the  binder  does                                                                   
represent  a  significant  amount  of  information.  The  new                                                                   
spreadsheet  will  supplement   this  information  with  more                                                                   
Representative  Gara elaborated that  it was unrealistic  for                                                                   
the committee  to know  if the amount  of money requested  is                                                                   
the right price  for the project. He assumed  that someone in                                                                   
the department  determines the  amount is the  most efficient                                                                   
manner  to get  the  project completed,  but  noted that  the                                                                   
committee must take this information  on face value. He asked                                                                   
who makes these decisions.                                                                                                      
Ms. Rehfeld shared that state  agencies have facilities plans                                                                   
and managers  who work on 6  year plan projects. Part  of The                                                                   
challenge is  the funding for  projects on an  ongoing basis.                                                                   
When a 6 year plan is made, there  are professional estimates                                                                   
made to  determine costs.  When the projects  go out  to bid,                                                                   
these numbers might  change. If the estimate  comes in higher                                                                   
than budgeted then the agency  will do what they can with the                                                                   
allotted money. She reiterated  that the agencies bring forth                                                                   
the best possible  estimates for any project.  Representative                                                                   
Gara wanted to know how these projects were decided on.                                                                         
Ms.  Rehfeld  declared  that   originally  a  large  list  of                                                                   
projects from  all the state's  agencies with a  $1.9 billion                                                                   
backlog  was  given  to  the   administration.  The  governor                                                                   
proposed  a  $100 million  a  year  five-year plan  with  the                                                                   
intention  of going  as far down  the list  as possible.  She                                                                   
noted  that the  agencies were  asked to  list their  highest                                                                   
2:24:24 PM                                                                                                                    
KRISTIN  RYAN, DIRECTOR,  DIVISION  OF ENVIRONMENTAL  HEALTH,                                                                   
DEPARTMENT OF ENVIRONMENTAL CONSERVATION,  requested $200,000                                                                   
for the  Environmental Health  Lab deferred maintenance.  She                                                                   
explained   that   this  would   correct   the   deficiencies                                                                   
identified during a federal inspection  to seal the room that                                                                   
handles contagious  toxins. She noted that the  Department of                                                                   
Transportation provided the estimates.                                                                                          
TOM LAWSON, DIRECTOR, ADMINISTRATIVE  SERVICES, DEPARTMENT OF                                                                   
FISH AND GAME, referred to three  projects listed on lines 8,                                                                   
9, and 10 of the deferred maintenance  spreadsheet. The first                                                                   
project  for  $850,000  was  for   infrastructure  needs  and                                                                   
upgrades in statewide employee  housing. He explained that in                                                                   
areas where there are no housing  opportunities for transient                                                                   
and seasonal staff,  the department provides  the housing. He                                                                   
pointed out the  most serious needs were in  Dutch Harbor and                                                                   
Yakatat. The plan  for Dutch Harbor would be  to contract for                                                                   
a  modular  to  be  shipped  to   the  location.  Mr.  Lawson                                                                   
continued that the Yakatat cabin  does not have running water                                                                   
so the plan would be to purchase  a single family dwelling or                                                                   
contract for  a modular. He added  that this method  has been                                                                   
used before and is very efficient.                                                                                              
Representative  Fairclough  asked why  this  is listed  under                                                                   
deferred maintenance  and not  listed in the capital  budget.                                                                   
Mr.  Lawson responded  that  in a  situation  where there  is                                                                   
existing housing  that is sub-standard  the choice is  for it                                                                   
to be repaired, replaced or built.  Representative Fairclough                                                                   
believed this was capital not deferred maintenance project.                                                                     
2:30:38 PM                                                                                                                    
Co-Chair  Stoltze  agreed  that  both  sounded  like  capital                                                                   
Representative Gara  inquired that since these  areas had few                                                                   
employees was the department asking  for single family units.                                                                   
Mr. Larson  agreed. Representative  Gara noted that  the cost                                                                   
of  the units  could  range  from  $300,000 to  $600,000.  He                                                                   
questioned  if that was  the appropriate  amount of  money in                                                                   
those areas.  Mr. Lawson responded  that he did not  know. He                                                                   
agreed that the figure could be  high, but the department has                                                                   
needs  that exceed  the money  that is  being requested.  The                                                                   
estimates  are  only  ranges. Co-Chair  Stoltze  agreed  that                                                                   
seems  high for  a  single family  home,  especially with  no                                                                   
Representative Austerman  agreed that the  requested $850,000                                                                   
seems  vague. He  believed the  figures needed  to be  broken                                                                   
down further.                                                                                                                   
Mr. Lawson  continued  that the second  request for  $700,000                                                                   
was for  upgrades to statewide  storage and shop  facilities.                                                                   
He referred to  a number of camps and offices  throughout the                                                                   
state where  field equipment and  fuel need to be  stored. He                                                                   
noted  that these  facilities  will need  to  be upgraded  or                                                                   
replaced. He remarked that the  department would start in the                                                                   
communities of King Salmon, Yakatat, McGrath, and Haines.                                                                       
Representative Austerman responded  that the replacement that                                                                   
is a capital, not a deferred maintenance issue.                                                                                 
2:35:08 PM                                                                                                                    
Ms.  Rehfeld  commented  that  the emphasis  is  on  deferred                                                                   
maintenance,  but if an  estimate to  perform the upgrade  or                                                                   
renovation  is too  high, then  the  recommendation might  be                                                                   
made  that  it is  cheaper  to  just replace  the  structure.                                                                   
Representative  Austerman agreed  that it  might be  a better                                                                   
idea to  replace the structure,  but emphasized that  if that                                                                   
is the  decision then the department  needs to return  with a                                                                   
different project  list. Ms. Rehfeld responded  that if there                                                                   
is  major renovation  then it  is in  major maintenance,  but                                                                   
adding facility space falls under the construction label.                                                                       
Mr. Lawson continued with the  third project for $450,000 for                                                                   
upgrades  to the  Kodiak Warehouse  compound. This  warehouse                                                                   
needs  a  roof  replacement  and  siding.  This  is  a  major                                                                   
compound for in Kodiak.                                                                                                         
Representative  Doogan asked what  is kept in  the warehouse.                                                                   
Mr.  Lawson  responded  that  the  warehouse  stores  smaller                                                                   
vessels, outboard motors, trucks,  and maintenance equipment.                                                                   
2:37:44 PM                                                                                                                    
ALISON ELGEE, ASSISTANT COMMISSIONER,  FINANCE AND MANAGEMENT                                                                   
SERVICES, DEPARTMENT  OF HEALTH  AND SOCIAL SERVICES,  listed                                                                   
two  requests  that  fall  into   the  Pioneer  Home  program                                                                   
throughout  the   state  and  non-Pioneer   home  facilities.                                                                   
Included in  the non-pioneer homes  are the juvenile  justice                                                                   
facility,   Alaska  Psychiatric   Institute,  public   health                                                                   
nursing  facilities,  and  other   buildings  throughout  the                                                                   
state. The  projects listed  extend beyond the  appropriation                                                                   
requested,  but the projects  are listed  in priority  order.                                                                   
The money  provided by  the committee will  be used  in order                                                                   
down the list until the money runs out.                                                                                         
Co-Chair  Stoltze  asked  if  they  would  be  going  through                                                                   
projects from top to bottom on  the list. Ms. Elgee indicated                                                                   
that the  lists are reviewed  and reprioritized  annually and                                                                   
sometime  the  priorities  can  change. She  noted  the  list                                                                   
before the  committee today  is best  information of  the top                                                                   
Representative  Austerman asked if  the $4 million  will only                                                                   
take the department through the first four projects.                                                                            
JENNIFER KLEIN,  FACILITIES MANAGER,  DEPARTMENT OF  HEALTH &                                                                   
SOCIAL  SERVICES, replied  that  the $4  million should  take                                                                   
them to number eleven on the list (Section 3, page 19).                                                                         
2:42:48 PM                                                                                                                    
Ms. Elgee  moved to the  spreadsheet for HB 326  supplemental                                                                   
requests (Page 12,  line 60). This request will  complete the                                                                   
Medicaid  Management  Information   System  project.  It  was                                                                   
identified  last  year  in  developing  the  budget  for  the                                                                   
management information  system. There  is a process  where an                                                                   
approved planning  document is  reviewed and approved  by the                                                                   
federal   government.  The   project   receives  90   percent                                                                   
participation  on   the  part  of  the   federal  government,                                                                   
therefore the  funding reviewed for  this project is  a 90/10                                                                   
split.  Unfortunately  an error was made failing  to identify                                                                   
that  when  the federal  government  approved  that  planning                                                                   
document  they  indicated  that  there had  been  a  previous                                                                   
effort to develop an MMIS system  that the federal government                                                                   
already paid  for once and stated  they would not  pay again.                                                                   
The  federal government  subtracted $4.5  million from  their                                                                   
participation  in  the particular  development  effort.  This                                                                   
left  the project  with a  $4  million general  fund hole.  A                                                                   
second issue arose  with the coding of the  MMIS environment.                                                                   
This system is  also under development in one  of the Dakotas                                                                   
where  they are  slightly  ahead.  They discovered  in  their                                                                   
development   a  significant   coding  error  that   required                                                                   
remediation.  This  has  set   the  project  back  one  year;                                                                   
therefore the increased costs are for this extension.                                                                           
2:45:50 PM                                                                                                                    
Representative  Doogan noted that  page 12 lists  the request                                                                   
for  $6.2  million  in  general funds  and  $8.7  million  in                                                                   
federal funds  for a total of  $14,990,000. He asked  if that                                                                   
was  correct.  Ms.  Elgee  replied  that  is  the  amount  of                                                                   
supplemental  funds  being requested.  Representative  Doogan                                                                   
asked if the additional fund requests  and the lesser federal                                                                   
funds are accounted for in these  requests. Ms. Elgee replied                                                                   
yes. Representative  Doogan asked if these funds  will finish                                                                   
the project.  Ms. Elgee  replied yes,  according to  the best                                                                   
information available today.                                                                                                    
2:47:29 PM                                                                                                                    
GUY BELL,  ASSISTANT COMMISSIONER  AND DIRECTOR,  DIVISION OF                                                                   
ADMINISTRATIVE  SERVICES, DEPARTMENT  OF LABOR AND  WORKFORCE                                                                   
DEVELOPMENT,  reported one  item for  $1 million in  deferred                                                                   
maintenance  for  the  Alaska   Vocational  Technical  Center                                                                   
(AVTEC).  The  vocational  center  operates  16  state  owned                                                                   
buildings,  11 of  which are  over  25 years  old. The  money                                                                   
request is for maintenance staff  and associated supplies for                                                                   
maintenance of  the facilities. Three maintenance  staff from                                                                   
capital improvement  project receipts perform the  day to day                                                                   
work. The remainder  of the funding is allocated  to priority                                                                   
projects   including   lightening,  security   and   drainage                                                                   
improvements  to  parking  lots   and  facilities,  hazardous                                                                   
material  abatement,  residential  and  cafeteria  facilities                                                                   
equipment and  improvements. Commissioner Bell  noted for the                                                                   
record  that priorities  change  as things  break down  which                                                                   
cannot always be anticipated.                                                                                                   
Representative  Austerman  remarked   that  $310,900  of  the                                                                   
request  for deferred  maintenance  was  paying salaries  for                                                                   
some maintenance  personnel. Commissioner Bell  answered that                                                                   
some  of  the  maintenance  staff   are  funded  through  the                                                                   
operating appropriations and the  remaining three are through                                                                   
the  capital budget.  Representative Austerman  asked if  the                                                                   
three on staff currently are paid  every year through capital                                                                   
funds. Commissioner Bell answered yes.                                                                                          
Co-Chair Stoltze agreed that was  strange for employees to be                                                                   
in the capital budget.                                                                                                          
Commissioner  Bell noted that  this information  is disclosed                                                                   
in the operating  budget request. In the past  there has been                                                                   
discussion for  requesting general  funds for these  staff so                                                                   
they become  part of the base,  but a decision has  been made                                                                   
to fund a component of the staff  for review each year in the                                                                   
deferred maintenance part of the capital budget.                                                                                
2:52:13 PM                                                                                                                    
Co-Chair  Stoltze  maintained  that historically  even  short                                                                   
term employees are in the capital budget.                                                                                       
Representative  Fairclough  asked   if  the  three  employees                                                                   
receive  retirement.  Mr.  Bell  answered  yes  as  they  are                                                                   
permanent employees.  Representative Fairclough asked  if the                                                                   
deferred  maintenance was  coming  out of  the general  fund.                                                                   
Commission  Bell  responded  yes.  Representative  Fairclough                                                                   
deferred to  the co-chair to see  if these positions  need to                                                                   
be removed  from the  budget.  She asked how  long they  have                                                                   
been funded.  Commissioner  Bell responded  that he has  been                                                                   
with the  department since 2003  and the positions  have been                                                                   
funded in this manner the entire time.                                                                                          
2:53:53 PM                                                                                                                    
Representative  Gara referred  to  the HB  325  spreadsheets,                                                                   
page 31, on the  AVTEC request and noted that  for FY2010 the                                                                   
request is  for $1 million but  in FY2010 the  requests jumps                                                                   
to  $45   million.  He  asked   what  the  amount   was  for.                                                                   
Commissioner Bell  remarked that there are a  number of older                                                                   
buildings that need to be replaced  or repaired. He mentioned                                                                   
a  135 student  dormitory that  has  reached the  end of  its                                                                   
useful  life.  When  this  happens the  question  is  if  the                                                                   
building  should  be  renovated  or  replaced,  and  in  this                                                                   
situation  the  decision is  to  replace  it. This  has  been                                                                   
identified as  a deferred  maintenance project,  not capital,                                                                   
but  he does  realize the  committee probably  looks at  this                                                                   
issue as  more of a capital  project. He added that  it would                                                                   
be more expensive to renovate then replace.                                                                                     
Representative Gara  asked that it seems like a  lot of money                                                                   
for maintenance  for a building  that will soon  be renovated                                                                   
or replaced.  Commissioner Bell agreed  that is an  issue. He                                                                   
argued that the  facilities need to be maintained  until they                                                                   
are replaced.  Representative Gara  wondered how much  of the                                                                   
$560,000  goes for  an interim  patch for  the residence  and                                                                   
cafeteria.  Commissioner  Bell  deferred  to  Fred  Esposito,                                                                   
Director, AVTEC.  Co-Chair Stoltze asked if  Mr. Esposito was                                                                   
on  line, not  hearing a  response he  moved on  to the  next                                                                   
Representative  Austerman requested  more information  on the                                                                   
actual use of the requested funds  before any decisions could                                                                   
be made.                                                                                                                        
2:57:57 PM                                                                                                                    
Mr.  Armstrong  remarked the  in  the Department  of  Labor's                                                                   
short  form  there are  FY2009  Actuals  of $867,000  of  CIP                                                                   
receipts and AVTEC expended $168,700.                                                                                           
2:58:28 PM                                                                                                                    
LETA  SIMONS,   DIRECTOR,  DIVISION   OF  SUPPORT   SERVICES,                                                                   
DEPARTMENT OF NATURAL RESOURCES,  mentioned three requests on                                                                   
the  deferred maintenance  list.  She named  the state  parks                                                                   
deferred  maintenance,   emergency  repairs,   and  equipment                                                                   
replacement at  $3,480,000. She  listed the state  park areas                                                                   
that would receive the funds.                                                                                                   
Representative   Fairclough  asked   if  the  Department   of                                                                   
Transportation  gave these  estimates.  Ms. Simons  responded                                                                   
that the department  has their own engineers  who provide the                                                                   
estimates.  Representative  Fairclough   questioned  at  what                                                                   
level  of design  detail  the  projects were  estimated.  Ms.                                                                   
Simons deferred to James King for the answer.                                                                                   
JAMES   KING,  DIRECTOR   OF   PARKS  AND   RECREATION   (via                                                                   
teleconference),  responded  that   there  has  been  a  long                                                                   
process  evaluating  and  determining   deferred  maintenance                                                                   
needs and  their engineers have  looked at these  projects to                                                                   
verify they are deferred maintenance  and have provided costs                                                                   
estimates. He added  that about 40 percent to  50 percent are                                                                   
design.   Mr.  King   explained   that   the  department   is                                                                   
comfortable  with the  numbers,  but the  actual bid  numbers                                                                   
might come in more or less.                                                                                                     
Representative Fairclough  asked the administrative  overhead                                                                   
costs  on  these projects.  Mr.  King  responded that  it  is                                                                   
variable depending  on the  project. There  may be  a greater                                                                   
process for some  projects that would result in  a 25 percent                                                                   
or higher administrative costs.                                                                                                 
Co-Chair  Stoltze questioned  if there  was a percent  range.                                                                   
Mr. King  stated that the  high would  be 25 percent  and the                                                                   
low would be zero.                                                                                                              
3:06:50 PM                                                                                                                    
Vice-Chair  Thomas wondered  what the  improvements were  for                                                                   
the Chilkat State Park in Haines.  Mr. King reported that the                                                                   
road  is no  longer  gradable because  the  top material  has                                                                   
eroded  and many  campsites  have  become unusable  and  need                                                                   
Vice-Chair Thomas  welcomed the road improvements  and voiced                                                                   
his concern  that the Department  of Transportation  does not                                                                   
maintain the road.                                                                                                              
3:09:38 PM                                                                                                                    
Representative  Doogan noticed  that approximately  one third                                                                   
of  the money  is unallocated  spending and  wondered if  the                                                                   
money would  be given to the  agency with just the  hope they                                                                   
do the right  thing without having more  precise information.                                                                   
Ms. Simons responded that health  and sanitation projects are                                                                   
evaluated in  the spring to see  what might need to  be dealt                                                                   
with  after the  winter.  Representative  Doogan stated  that                                                                   
this  was  a  new  category  of  deferred  maintenance  where                                                                   
projects are  to be  named later.  Ms. Simons responded  that                                                                   
the  projects are  not listed  because the  priority will  be                                                                   
accessed year to year.                                                                                                          
Ms. Simons  continued  that another request  of $330,000  was                                                                   
for the  Division of  Agriculture Plant  Material Center  for                                                                   
$330,000.  This is  a production  farm,  feed laboratory  and                                                                   
research facility  that support  the agriculture  industry in                                                                   
Alaska. This  request will help  eliminate the  flooding near                                                                   
the  main   buildings  and   greenhouses,  replace   outdated                                                                   
equipment, provide  paving and drainage, upgrade  a spray rig                                                                   
and purchase a medium size tractor.                                                                                             
3:14:02 PM                                                                                                                    
Representative  Austerman remarked  that some requests,  like                                                                   
the new tractor, look like capital  projects. Ms. Simon noted                                                                   
there is  a question  of what is  deferred maintenance.   The                                                                   
department   defines   deferred  maintenance   as   something                                                                   
currently being  used and necessary  for operations  that now                                                                   
needs to be replaced or upgraded.                                                                                               
Representative  Austerman  observed  there are  outdated  and                                                                   
rusting machinery  in rural areas  that cannot get  funded or                                                                   
replaced because it  does not make it into  the capital list.                                                                   
He did not consider the replacement  of a tractor as deferred                                                                   
maintenance.  Representative  Doogan  asked  if  there  is  a                                                                   
functioning definition of deferred maintenance.                                                                                 
Ms. Rehfeld declared  there are several definitions  of major                                                                   
maintenance. She asserted that  the governor was clear in his                                                                   
budget  regarding  the  necessity to  protect  current  state                                                                   
assets. The lists  presented by the agencies  will be refined                                                                   
over the  5 year  program. She  reiterated  that part of  the                                                                   
issue is if replacement is a better value than renovation.                                                                      
Representative  Doogan appreciated  that refined  information                                                                   
will be forthcoming, but added  that $100 million in requests                                                                   
are in front of committee now  and more information is needed                                                                   
when it comes to appropriating this money.                                                                                      
3:19:25 PM                                                                                                                    
Ms. Rehfeld  agreed but  suggested that  when looking  across                                                                   
the departments  at the variety  of projects from  buildings,                                                                   
roads,  facilities,  vessels,  and  airports  there  will  be                                                                   
different definitions that need to be looked at.                                                                                
Representative  Gara   recalled  that  the   administration's                                                                   
position  was  that deferred  maintenance  should  be  funded                                                                   
quickly so  that the immediate  projects could be  started as                                                                   
rapidly  as  possible with  the  rest  being done  later.  He                                                                   
emphasized that this budget was  filled with projects that do                                                                   
not need to be accomplished before  the rest of the budget is                                                                   
completed. He  referred to the  DNR request for  $190,000 for                                                                   
the Mt. McKinley Meat Plant. He  failed to understand why the                                                                   
project  requests  needed to  be  done before  other  capital                                                                   
projects. Ms.  Rehfeld stressed that the  governor's interest                                                                   
is to get the  deferred maintenance on the table  to help put                                                                   
Alaskans to work.                                                                                                               
Co-Chair  Stoltze agreed  more  scrutiny  might be  necessary                                                                   
when    examining    the   deferred    maintenance    budget.                                                                   
Representative Austerman  maintained the need  for clarity on                                                                   
the process.                                                                                                                    
3:25:07 PM                                                                                                                    
Representative Gara asked if the  governor's intention was to                                                                   
get  projects running  a month  earlier  than other  projects                                                                   
maybe it would  be useful to have the  administration present                                                                   
a list  of the  actual projects  that need to  be out  on the                                                                   
street a month early.                                                                                                           
Ms. Simons continued with the  last line item of $190,000 for                                                                   
the  Mt.  McKinley   meat  plant  machinery   and  efficiency                                                                   
3:28:19 PM                                                                                                                    
MICHELLE   RIZK,  BUDGET  DIRECTOR,   UNIVERSITY  OF   ALASKA                                                                   
FAIRBANKS,  stated that  the University  of Alaska  maintains                                                                   
400 buildings, with an average  age of 31 years, and with 6.7                                                                   
million square  feet. The deferred maintenance  bill includes                                                                   
$37.5  million   for  the  annual  requirement   to  maintain                                                                   
existing   facilities   and    reduce   additional   deferred                                                                   
maintenance  needs.  The  money  would be  spread  among  the                                                                   
state's  campuses  and  a  list has  been  submitted  to  the                                                                   
3:31:11 PM                                                                                                                    
Co-Chair  Stoltze wondered  how many  buildings were  at each                                                                   
Ms. Rizk replied that the University  of Alaska Fairbanks has                                                                   
242 of  the 399  buildings. The  blue book  list details  how                                                                   
funds   would  be   distributed.  She   continued  that   the                                                                   
University  of  Alaska Anchorage  has  53 buildings  and  the                                                                   
University of Alaska Southeast has 34 facilities.                                                                               
3:32:37 PM                                                                                                                    
Representative  Doogan  requested from  Ms.  Rizk  a list  of                                                                   
priorities  for clarification.  He asked  if the first  $37.5                                                                   
million  in  projects  would be  completed  first.  Ms.  Rizk                                                                   
clarified that the most critical  parts of each project would                                                                   
be handled first.                                                                                                               
Representative Doogan asked how  the $37.5 million is divided                                                                   
up among  the campuses. Ms. Rizk  responded that she  has not                                                                   
told the committee that information,  but it is listed on the                                                                   
sheet that the committee will receive.                                                                                          
Vice-Chair  Thomas questioned  the  capital  budget with  $25                                                                   
million listed for schools which  is for deferred maintenance                                                                   
and wondered  why  it was not  listed with  the $100  million                                                                   
deferred maintenance list.                                                                                                      
Ms. Rehfeld replied that the legislature  will make decisions                                                                   
about what should  be included in this package.  She recapped                                                                   
that  the governor's  intention  was to  focus  on state  and                                                                   
university facilities  with $100 million a year  for the next                                                                   
five years. Schools would not  necessarily be part of that 5-                                                                   
year  plan,  but were  traditionally  addressed  through  the                                                                   
capital budget  process. She agreed  that the problem  may be                                                                   
in defining deferred maintenance projects.                                                                                      
Vice-Chair  Thomas  argued  that   every  time  schools  come                                                                   
looking for major maintenance  money it is to the legislature                                                                   
and he felt the  $25 million for the schools  should be added                                                                   
the governor's $100 million deferred  maintenance budget as a                                                                   
higher priority.                                                                                                                
3:38:00 PM                                                                                                                    
Representative  Gara wanted  to make  sure the $37.5  million                                                                   
request  for  the  next  five   years  was  the  university's                                                                   
priority. He noted that dormitory  space at the university is                                                                   
a problem that should be addressed.  He asked if the list for                                                                   
the  $37.5  million  ranks ahead  of  some  new  construction                                                                   
projects.  Ms.  Rizk  responded  that the  Board  of  Regents                                                                   
overall   number  one   priority   is  maintaining   existing                                                                   
facilities and  deferred maintenance. The board  has only one                                                                   
new construction priority, the Life Sciences Building.                                                                          
Representative Gara questioned  if the science building being                                                                   
funded  was for  the Anchorage  building, not  the one  being                                                                   
replaced  in  Fairbanks.  Ms.  Rizk agreed  it  was  for  the                                                                   
Science Building in Anchorage.                                                                                                  
Co-Chair  Stoltze appreciated  the  dilemma  of building  new                                                                   
facilities, but the  reality is that repairs  might be needed                                                                   
on the existing facility.                                                                                                       
Representative   Fairclough    asked   how    much   deferred                                                                   
maintenance money  was provided  to the university.  Ms. Rizk                                                                   
responded  that $3.2 million  was allocated  even though  the                                                                   
Board  of  Regents  requested   $50  million.  Representative                                                                   
Fairclough  questioned  if  inside  the  university's  budget                                                                   
there is  a fund that holds  deferred maintenance  money. Ms.                                                                   
Rizk replied that the capital funds are separate.                                                                               
Representative  Fairclough  inquired if  any  money was  left                                                                   
from last  year's allocated  funds after completing  projects                                                                   
and,  if so,  how much.  She added  that  the university  was                                                                   
asking for $37.5  million, but she had been  told in previous                                                                   
years  that  $50  million  would  never  meet  the  needs  of                                                                   
deferred maintenance projects.                                                                                                  
Ms. Rizk responded that the Board  of Regents distributes the                                                                   
funds to specific  projects. There is a fund  established for                                                                   
each  specific project  and five  years to  spend the  money.                                                                   
There are  times were there  may be a  balance in  that fund.                                                                   
Representative Fairclough  asked if the balance  transfers to                                                                   
a  new  project  or  is there  a  larger  account  for  funds                                                                   
available to be used for projects by the university.                                                                            
Ms.  Rizk  maintained that  the  funds  were allocated  to  a                                                                   
specific project.  Representative Fairclough wondered  if the                                                                   
project runs under  and funds are remaining,  would the money                                                                   
sweep  back to  the  general fund  or  is it  reallocated  to                                                                   
another project. Ms. Rizk declared  that the Board of Regents                                                                   
approves  projects,  but  if  a balance  is  left,  then  the                                                                   
university would look at other  deferred maintenance projects                                                                   
that had not been funded and would  bring this information to                                                                   
the board  and ask to  use the remaining  funds for  the next                                                                   
need on the list.                                                                                                               
3:44:21 PM                                                                                                                    
Representative Doogan  questioned if he was  correct that the                                                                   
amount  each  agency  received  was  related  to  the  square                                                                   
footage of  its facilities.  Ms. Rehfeld  agreed that  it was                                                                   
allocated by the square footage.                                                                                                
Representative  Doogan argued that  the expenditures  are not                                                                   
for square  footage in  many places  since the requests  were                                                                   
not always for a building or facility.                                                                                          
Mr. Armstrong  stated he  would get  the spreadsheets  in the                                                                   
blue book referenced by Ms. Rizk to the committee.                                                                              

Document Name Date/Time Subjects
HB325 HB326 Stoltze Handout.pdf HFIN 2/10/2010 1:30:00 PM