Legislature(2015 - 2016)HOUSE FINANCE 519

03/31/2016 08:30 AM FINANCE

Note: the audio and video recordings are distinct records and are obtained from different sources. As such there may be key differences between the two. The audio recordings are captured by our records offices as the official record of the meeting and will have more accurate timestamps. Use the icons to switch between them.

Download Mp3. <- Right click and save file as

Audio Topic
08:32:16 AM Start
08:33:32 AM Confirmations: Alaska Mental Health Trust Authority
08:49:50 AM HB373
09:29:57 AM SB124
10:23:19 AM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Please Note Time --
+ Confirmation Hearing: TELECONFERENCED
Alaska Mental Health Trust Authority
Moved HB 373 Out of Committee
Heard & Held
Scheduled but Not Heard
Scheduled but Not Heard
Scheduled but Not Heard
+ Bills Previously Heard/Scheduled TELECONFERENCED
                  HOUSE FINANCE COMMITTEE                                                                                       
                      March 31, 2016                                                                                            
                         8:32 a.m.                                                                                              
8:32:16 AM                                                                                                                    
CALL TO ORDER                                                                                                                 
Co-Chair  Thompson   called  the  House   Finance  Committee                                                                    
meeting to order at 8:32 a.m.                                                                                                   
MEMBERS PRESENT                                                                                                               
Representative Mark Neuman, Co-Chair                                                                                            
Representative Steve Thompson, Co-Chair                                                                                         
Representative Dan Saddler, Vice-Chair                                                                                          
Representative Bryce Edgmon                                                                                                     
Representative Les Gara                                                                                                         
Representative Lynn Gattis                                                                                                      
Representative David Guttenberg                                                                                                 
Representative Scott Kawasaki                                                                                                   
Representative Cathy Munoz                                                                                                      
Representative Lance Pruitt                                                                                                     
Representative Tammie Wilson                                                                                                    
MEMBERS ABSENT                                                                                                                
ALSO PRESENT                                                                                                                  
Jerome   Selby;  Marty   Rutherford,  Acting   Commissioner,                                                                    
Department  of Natural  Resources; Alex  Nouvakhov, Division                                                                    
of Oil and Gas, Department  of Natural Resources; Matt Gill,                                                                    
External  Affairs, Senior  Manager, Tesoro;  Senator Stoltz,                                                                    
Sponsor,  District;  Denise  Daniello,  Executive  Director,                                                                    
Alaska   Commission    on   Aging;    Jacqelli   Ziegenfuss,                                                                    
Administrative  Operations Manager  II, Senior  Disabilities                                                                    
Services,  Department of  Health and  Social Services;  Kris                                                                    
Curtis, Legislative Auditor,  Alaska Division of Legislative                                                                    
Audit;  Marie  Darlin,  AARP, Juneau;  Representative  Cathy                                                                    
HB 249    ELECTRONIC TAX RETURNS & MOTOR FUEL TAX                                                                               
          HB 249 was SCHEDULED but not HEARD.                                                                                   
HB 250    INDIV. INCOME TAX: CREDITS; RETURNS                                                                                   
          HB 250 was SCHEDULED but not HEARD.                                                                                   
HB 319    SNOWMOBILE REGISTRATION FEES                                                                                          
          HB 319 was SCHEDULED but not HEARD.                                                                                   
HB 373    APPROVAL OF SALE OF ROYALTY OIL TO TESORO                                                                             
          HB 373 was REPORTED out of committee with a "do                                                                       
          pass" recommendation and with one previously                                                                          
          published indeterminate fiscal note: FN1 (DNR).                                                                       
SB 124    EXTEND SUNSET ON AK COMMISSION ON AGING                                                                               
          SB 124 was HEARD and HELD in committee for                                                                            
          further consideration.                                                                                                
CONFIRMATIONS: ALASKA MENTAL HEALTH TRUST AUTHORITY                                                                             
Co-Chair Thompson reviewed the agenda for the day.                                                                              
8:33:32 AM                                                                                                                    
^CONFIRMATIONS: ALASKA MENTAL HEALTH TRUST AUTHORITY                                                                          
He relayed that  Laraine Derr would not  be confirmed during                                                                    
the current meeting.                                                                                                            
8:33:59 AM                                                                                                                    
JEROME SELBY, was interested in  the public service position                                                                    
because he saw  it as an opportunity to  help Alaskans using                                                                    
state  resources. The  Mental Health  Trust assets  would be                                                                    
used  to  develop jobs  for  Alaskans  while providing  more                                                                    
funds for the  trust and its targeted  set of beneficiaries.                                                                    
He  enjoyed developing  natural  resources of  which he  had                                                                    
several years of experience.                                                                                                    
Mr. Shelby had been the  Mayor for the Kodiak Island Borough                                                                    
for 24 years.  He had also served on the  U.S. Department of                                                                    
the   Interior,    Minerals   Management    Service,   Outer                                                                    
Continental   Shelf   Policy  Committee   making   decisions                                                                    
regarding all  of the  offshore oil  assets in  America. The                                                                    
borough had operated the Kodiak  Island Mental Health center                                                                    
while he was mayor. Since  then the management of the center                                                                    
had been  contracted out  to Providence  hospital. He  had a                                                                    
long history  of working with  the trust. He also  felt that                                                                    
it was  a good time  to ensure additional dollars  went into                                                                    
the  trust because  of the  state's tight  budget times.  He                                                                    
spoke  of  the Alaska  Mental  Health  Trust Board  recently                                                                    
approving  about $4  million in  assistance  dollars to  the                                                                    
Department of Health and Social  Services (DHSS). He enjoyed                                                                    
working together  to come up  with solutions to  benefit the                                                                    
people of Alaska.                                                                                                               
Representative Guttenberg  commented that  Mr. Selby  had an                                                                    
impressive resume. He  asked him to talk about  how he would                                                                    
apply his  personal experience to  the board. He  wanted him                                                                    
to elaborate  on how he  would be  a natural fit.  Mr. Selby                                                                    
had a substantial history in  health care going back to 1971                                                                    
and had  a good feel for  health care delivery. He  spoke of                                                                    
his  experience in  Kodiak using  the land  the borough  had                                                                    
received  from  the  state to  generate  revenue  through  a                                                                    
number of  leases. Several of the  leases became development                                                                    
opportunities   that   fueled  and   strengthened   Kodiak's                                                                    
economy.  He   enjoyed  putting  things  together   to  make                                                                    
successful ventures.                                                                                                            
8:38:56 AM                                                                                                                    
Vice-Chair Saddler asked if Mr.  Selby was actively serving.                                                                    
Mr.  Selby  was  currently  serving  and  had  attended  the                                                                    
February and  March board  meetings. He  was pleased  that a                                                                    
timber  sale had  been approved  by the  board at  the March                                                                    
Vice-Chair Saddler  mentioned that  the board had  made some                                                                    
important  decisions  to  dedicate  funds  to  the  Medicaid                                                                    
reform bill.   He asked  Mr. Selby  how he voted.  Mr. Selby                                                                    
commented that with  his limited experience on  the board he                                                                    
relied  on  recommendations  from   staff  and  other  board                                                                    
members.  He  used  a   "common  sense"  approach  measuring                                                                    
against  the Alaska  Mental  Health  Trust's guidelines  and                                                                    
Vice-Chair  Saddler  mentioned  that   the  range  of  trust                                                                    
beneficiaries was broad. He asked  if Mr. Selby had a better                                                                    
understanding   or  experience   with  any   one  class   of                                                                    
beneficiaries over  another. Mr.  Selby did not.  The mental                                                                    
health  center within  the Kodiak  Island  Borough tried  to                                                                    
serve  a  range of  needs.  He  was  aware  that it  was  an                                                                    
unreasonable expectation  that the center could  cover every                                                                    
possible  need especially  with limited  funding. Therefore,                                                                    
wise decisions had to be made.                                                                                                  
8:42:48 AM                                                                                                                    
Vice-Chair  Saddler   asked  about   how  Mr.   Selby  would                                                                    
influence the  trust's board decisions. Mr.  Selby responded                                                                    
that  he  hoped his  expertise  would  help the  board  make                                                                    
better decisions and would result  in return in revenues and                                                                    
service  delivery.  He noted  his  ability  to help  discern                                                                    
amongst various options and to  make tough decisions. He was                                                                    
comfortable  and  had  a significant  amount  of  experience                                                                    
making difficult decisions.                                                                                                     
Representative   Edgmon  thanked   the  committee   for  the                                                                    
thoughtful  questions and  spoke in  support of  Mr. Selby's                                                                    
appointment  to the  board.  While Mr.  Selby  was mayor  of                                                                    
Kodiak,  the representative  had  a  long work  relationship                                                                    
with him.  He mentioned the  trust as  a unique body  with a                                                                    
unique responsibility.  The  representative thought that Mr.                                                                    
Selby's experience being an ideal  fit in terms of him being                                                                    
a  very  involved  member  and  the  mission  of  the  trust                                                                    
authority.  He  encouraged  other  members  to  support  Mr.                                                                    
Selby's confirmation.                                                                                                           
Co-Chair Thompson  acknowledged Representative  Cathy Tilton                                                                    
in  the   audience.  He  stated   that  he   encouraged  the                                                                    
advancement  of  Mr. Selby's  name  to  the joint  body  for                                                                    
8:45:57 AM                                                                                                                    
AT EASE                                                                                                                         
8:49:05 AM                                                                                                                    
Co-Chair Thompson intended  to move HB 373  out of committee                                                                    
in the current day if it was the will of the members.                                                                           
HOUSE BILL NO. 273                                                                                                            
     "An Act relating to the transfer of the title to a                                                                         
     vehicle, including certain manufactured homes and                                                                          
     trailers, on the death of the owner; and providing for                                                                     
     an effective date."                                                                                                        
8:49:50 AM                                                                                                                    
MARTY   RUTHERFORD,  ACTING   COMMISSIONER,  DEPARTMENT   OF                                                                    
NATURAL RESOURCES, indicated she  would be providing a brief                                                                    
overview of the proposed sale  of the state's royalty oil to                                                                    
Commissioner Rutherford  relayed that she would  discuss the                                                                    
process and  the criteria  for royalty-in-kind  (RIK) sales.                                                                    
She would  also discuss the  specific contract terms  of the                                                                    
Tesoro RIK  contract. She would  also be  mentioning another                                                                    
royalty  oil  contract   the  state  was  in   the  mist  of                                                                    
Commissioner  Rutherford began  with slide  2: "Royalty  In-                                                                    
Kind versus Royalty In-Value":                                                                                                  
     The State has a choice to take its royalty in-kind                                                                         
     (RIK) or in-value (RIV)                                                                                                    
        · When the State takes its royalty as RIV, the                                                                          
          lessees who produce the oil also market the                                                                           
          State's share along with their own production and                                                                     
          pays the State the value of its royalty share.                                                                        
        · When SOA takes its royalty share as RIK, the SOA                                                                      
          assumes ownership of the oil, and the DNR                                                                             
          Commissioner disposes of it through the sale                                                                          
          procedures prescribed by AS 38.05.183.                                                                                
        · Currently, the SOA receives all royalties as RIV;                                                                     
          historically, the SOA has regularly taken                                                                             
          royalties as RIK.                                                                                                     
Commissioner   Rutherford  advanced   to   slide  3:   "Non-                                                                    
Competitive RIK Sale Process":                                                                                                  
        · Before taking RIK, the DNR Commissioner must find                                                                     
          it is in the State's best interest.                                                                                   
        · DNR must decide whether to sell RIK pursuant to a                                                                     
          competitive   auction    or   a   non-competitive,                                                                    
          negotiated sale.                                                                                                      
        · Solicitation of Interest issued January 2015 to                                                                       
          prospective purchasers to gauge market interest.                                                                      
        · DNR  determined  that  there was  not  competition                                                                    
          allowing for  a competitive sale, and  proposes to                                                                    
          enter  into the  negotiated 5  year contract  with                                                                    
Commissioner    Rutherford    continued    to    slide    4:                                                                    
"Commissioner's Decision Criteria":                                                                                             
     AS 38.05.183(e) states that  the commissioner must sell                                                                    
     the  State's  royalty  oil  to  the  buyer  who  offers                                                                    
     "maximum  benefits to  the citizens  of the  state." In                                                                    
     making  this   determination,  the   commissioner  must                                                                    
        1. The cash value offered                                                                                               
        2. The projected effects of the sale  on the economy                                                                    
          of the state                                                                                                          
        3. The projected benefits of refining  or processing                                                                    
          the oil in state                                                                                                      
        4. The ability of the  prospective buyer  to provide                                                                    
          refined products for distribution  and sale in the                                                                    
          state  with  price  or   supply  benefits  to  the                                                                    
          citizens of the state                                                                                                 
        5. The eight criteria listed in AS  38.06.070(a), as                                                                    
          reviewed by the Royalty Board                                                                                         
Commissioner Rutherford noted that she would be talking                                                                         
about the eight criteria in greater detail in another                                                                           
Commissioner Rutherford turned to slide 5: "Approval                                                                            
Process for the RIK Sale":                                                                                                      
        · DNR  must make  a Best  Interest Finding  (BIF) in                                                                    
          support of the sale                                                                                                   
        · Preliminary  BIF issued  February 2016;  final BIF                                                                    
          issued in March 2016.                                                                                                 
        · DNR  presented the  sale to  the Royalty  Board on                                                                    
          March  15, 2016;  the Board  reviewed the  BIF and                                                                    
          the contract,  and unanimously voted  to recommend                                                                    
          the Legislature approve the sale to Tesoro.                                                                           
        · Prior   to  finalizing   the  RIK   contract,  the                                                                    
          Legislature  must   pass  a  bill   ratifying  the                                                                    
          contract with Tesoro (HB 373; SB 205).                                                                                
8:54:44 AM                                                                                                                    
Commissioner Rutherford discussed  slide 6: "Royalty Board's                                                                    
Decision Criteria":                                                                                                             
     AS 38.06.070(a) states that the Alaska Royalty Oil and                                                                     
     Gas Development Advisory Board must consider:                                                                              
        1. The revenue needs and projected  fiscal condition                                                                    
          of the state;                                                                                                         
        2. The existence and extent of present and projected                                                                    
          local and regional needs for oil and gas                                                                              
        3. The desirability of localized capital investment,                                                                    
          increased payroll, secondary development and                                                                          
          other possible effects of the sale;                                                                                   
        4. The projected social impacts of  the transaction;                                                                    
        5. The    projected     additional     costs     and                                                                    
          responsibilities which could be imposed upon the                                                                      
          state and affected political subdivisions by                                                                          
         development related to the transactions.                                                                               
Commissioner  Rutherford  stated  that   number  3  was  not                                                                    
applicable  because the  state  was selling  to an  existing                                                                    
refinery   that  had   been   using  alternative   privately                                                                    
purchased supplies. She  also relayed that number  5 was not                                                                    
applicable because the state had an established refinery.                                                                       
Commissioner Rutherford turned to  slide 7: "Royalty Board's                                                                    
Decision Criteria Cont.":                                                                                                       
     AS 38.06.070(a) states that the Alaska Royalty Oil and                                                                     
     Gas Development Advisory Board must consider:                                                                              
        6. The existence of specific local or regional labor                                                                    
          or consumption markets or both which should be                                                                        
          met by the transaction;                                                                                               
        7. The projected positive or  negative environmental                                                                    
         effects related to the transactions; and                                                                               
        8. The projected effects of the proposed transaction                                                                    
          upon existing private commercial enterprise and                                                                       
          patterns of investment.                                                                                               
Commissioner  Rutherford   added  that  the   royalty  board                                                                    
reviewed the final best interest  finding and the associated                                                                    
Tesoro contract.  They voted  unanimously to  recommend that                                                                    
the legislature approve the sale.                                                                                               
Commissioner Rutherford spoke on slide 8: "Tesoro RIK                                                                           
Contract Terms":                                                                                                                
        · 5 year  contract for 20,000 to  25,000 barrels per                                                                    
        · The  RIK sales  price uses  a netback  formula and                                                                    
          provides higher revenue to State compared to RIV.                                                                     
        · If   Tesoro   nominates   zero   barrels   for   3                                                                    
          consecutive months, the contract terminates.                                                                          
        · Security:  Tesoro   shall  provide  a   letter  of                                                                    
          opinion  from a  financial analyst  or a  stand-by                                                                    
          letter of credit equal in  value to 90 days of ANS                                                                    
          royalty  oil  (if  rating  falls  below  BBB-  and                                                                    
        · In-state processing:  Tesoro to  use "commercially                                                                    
          reasonable   efforts"   to   manufacture   refined                                                                    
          products from the ANS royalty oil.                                                                                    
        · Employment of Alaska  residents: no discrimination                                                                    
          against AK companies and residents.                                                                                   
Commissioner  Rutherford highlighted  that  Tesoro had  over                                                                    
210  Alaskan   employees  and   employed  over   40  Alaskan                                                                    
contractors. The plant  was located in Nikiski  and had been                                                                    
in operation for several decades.                                                                                               
8:58:26 AM                                                                                                                    
Commissioner Rutherford detailed slide 9: "RIK Contract                                                                         
     ANS Spot Price - $1.95 - Tariff Allowance +/- Quality                                                                      
     Bank Adjustments - Line Loss                                                                                               
        · ANS Spot Price  = Average US West  Coast Price for                                                                    
          Alaska North Slope oil (reported by industry                                                                          
          trade publications Platts and Reuters)                                                                                
        · $1.95 RIK Differential                                                                                                
        · Destination  value minus  marine  costs  so RIK  >                                                                    
        · Tariff Allowance = TAPS  and Pipelines upstream of                                                                    
        · Quality  Bank Adjustments  = as  reported by  TAPS                                                                    
          Quality Bank Administrator.                                                                                           
        · Line Loss (loss of volume between PS1 and the                                                                         
Commissioner Rutherford pointed to  the price formula listed                                                                    
at  the  top  of  the  slide in  red.  The  Revenue  In-Kind                                                                    
contract prices  equaled the Arctic  North Slope  (ANS) spot                                                                    
price minus $1.95  minus a tariff allowance,  adjusted for a                                                                    
quality bank  - either  up or  down -  minus line  loss. She                                                                    
explained that ANS  spot price was the  destination value of                                                                    
ANS at the United States  West Coast - determined by reports                                                                    
from the  industry trade  publications, Reuters  and Platts.                                                                    
The  next item  deducted  was a  location differential.  She                                                                    
reported  that  the   amount  of  $1.95  was   used  in  the                                                                    
solicitation of  interest. She explained that  starting with                                                                    
the   ANS  spot   price  the   state  deducted   the  marine                                                                    
transportation  costs.  When  the  state  received  RIV  and                                                                    
looked    to    the     working    interest    owners    the                                                                    
shippers/producers  charged  the  state  between  $3.30  and                                                                    
$3.70 for  the cost  of the  marine transportation  from the                                                                    
Valdez Marine  Terminal to  the West  Coast. The  state then                                                                    
deducted the  tariff allowance, a  combination of  the Trans                                                                    
Alaska   Pipeline  tariff   and   the  upstream   pipelines.                                                                    
Following those deductions the state  adjusted for a quality                                                                    
bank, determined  by the TAPS quality  bank administrator at                                                                    
the  Federal Energy  Regulatory Commission  (FERC). Finally,                                                                    
the  line  loss  was  deducted,  the  loss  of  volume  that                                                                    
occurred  between  Pump  Station  1 and  the  Valdez  Marine                                                                    
Terminal. The  resulting figure equaled  the value  that the                                                                    
state  of Alaska  received.  She  explained that  difference                                                                    
between RIK versus RIV was  about $1.95 versus $3.50 - about                                                                    
$1.50  in the  state's favor.  The only  distinction between                                                                    
calculating  the RIK  versus  was  RIV had  to  do with  the                                                                    
amount being deducted.                                                                                                          
Commissioner Rutherford  highlighted slide 10:  "Contract is                                                                    
in the State's Best Interest":                                                                                                  
        · DNR estimates the State will receive $45 to $56                                                                       
          million in additional revenue over taking RIV.                                                                        
        · Producers deduct around $3.30 to $3.70 from the                                                                       
          west coast value as a "transportation deduction"                                                                      
          in arriving at the price for RIV.                                                                                     
        · The proposed Tesoro contract will deduct only                                                                         
          $1.95 as a "location differential" from the west                                                                      
          coast ANS value.                                                                                                      
        · The proposed sale provides crude to Tesoro's                                                                          
          refinery at Nikiski with associated economic and                                                                      
          social benefits to Alaska's economy:                                                                                  
        · Tesoro employs approximately 210 Alaskans                                                                             
        · Tesoro produces 59,000 bpd refined products at                                                                        
          its Nikiski refinery                                                                                                  
        · Tesoro refinery's estimated contribution to the                                                                       
          local economy is $127mm                                                                                               
9:02:55 AM                                                                                                                    
Commissioner  Rutherford  moved  to  slide  11:  "Additional                                                                    
Royalty Oil Sales":                                                                                                             
     •Additional royalty oil volumes are available for the                                                                      
     other in-state refiner, Petro Star; helping maintain a                                                                     
     competitive in-state refining industry.                                                                                    
     •DNR is currently negotiating sales with Petro Star of                                                                     
     remaining royalty oil under similar contractual terms.                                                                     
     •The  proposed Tesoro  contract  and forthcoming  Petro                                                                    
     Star  contract  will  allow  for  additional  sale  oil                                                                    
     nominations to maximize royalty  oil sales if the State                                                                    
    has more royalty oil than is currently forecasted.                                                                          
Commissioner Rutherford  added that  if the volume  fell the                                                                    
state would  be pro-rationing both contracts  down together.                                                                    
She concluded  her presentation  and made  herself available                                                                    
for questions.                                                                                                                  
Co-Chair Thompson  asked about the quality  bank adjustment.                                                                    
He asked her to elaborate on the subject.                                                                                       
Commissioner Rutherford  suggested Mr. Nouvakhov would  be a                                                                    
better person to address Co-Chair Thompson's question.                                                                          
ALEX  NOUVAKHOV,  DIVISION OF  OIL  AND  GAS, DEPARTMENT  OF                                                                    
NATURAL RESOURCES, responded that  the quality adjustment in                                                                    
the netback  evaluation equation  looked at the  crude which                                                                    
was being sold  at the entry of the TAPS  and compared it to                                                                    
the comingled stream  at the Valdez point.  If any residuals                                                                    
were frozen  into the TAPS  the payment or penalty  would be                                                                    
borne  by  Petro  Star  rather than  the  sellers.  The  two                                                                    
contracts  between  the State  and  Tesoro  and between  the                                                                    
state   and  Petro   Star  would   have  the   same  quality                                                                    
Commissioner  Rutherford  explained  to Mr.  Nouvakhov  that                                                                    
because both  Petro Star  and Tesoro took  their oil  at the                                                                    
terminus  the question  was whether  there  was any  quality                                                                    
bank adjustment involved in the formula for Tesoro.                                                                             
9:06:30 AM                                                                                                                    
Mr.  Nouvakhov responded  in the  affirmative. He  explained                                                                    
that there  was because, depending on  the nominating field,                                                                    
the state had  an option as to which fields  and crudes were                                                                    
nominated.  For example,  if the  state nominated  something                                                                    
for  the  crude  oil  field  and then  compared  that  to  a                                                                    
commingled final  crude in Valdez  there might be  a quality                                                                    
Co-Chair Thompson was still unclear.  He thought the quality                                                                    
bank  had to  do with  the amount  of product  taken off  by                                                                    
Petro Star  in the Fairbanks area.  They take out a  part of                                                                    
the product  and what was placed  back in the line  was of a                                                                    
lesser quality.  Therefore, there was a  quality bank change                                                                    
to Petro  Star. He furthered that  if Tesoro took it  out in                                                                    
the same as  it would go to  the West Coast and  did not put                                                                    
anything back in the line,  he wondered if there would still                                                                    
be  a quality  bank  adjustment.  They did  not  put back  a                                                                    
lesser quality product into any line.                                                                                           
Mr. Nouvakhov  responded that Co-Chair Thompson  was correct                                                                    
that Tesoro  did not put  any product  back into a  line. He                                                                    
detailed  that the  crude the  state  sold at  the point  of                                                                    
delivery at Pump  Station 1 could be of  a different quality                                                                    
than the  final commingled  ANS crude  which Tesoro  took at                                                                    
the Valdez Terminal.                                                                                                            
Commissioner  Rutherford furthered  that the  state received                                                                    
an average  of 12.5 percent  from certain fields.  The state                                                                    
took  delivery of  its RIK  from  Pump Station  1. What  was                                                                    
delivered  downstream  from  that  could  be  of  lessor  or                                                                    
greater  quality. The  quality  bank used  an adjustment  to                                                                    
calculate either a  deduction or an increase  to the state's                                                                    
value to ensure  the state would receive  the pure molecular                                                                    
value for the units from which the state received its oil.                                                                      
Representative  Wilson commented  that Petro  Star would  be                                                                    
effected  by  the  quality   bank  differently  than  Tesoro                                                                    
because  of  their location.  She  did  not think  how  they                                                                    
[Tesoro]  were  effected  had  anything  to  do  with  their                                                                    
contracts  because   a  certain  portion  was   not  in  the                                                                    
contract. It was  dealt with separately because  of it being                                                                    
a  federal   government  related  transaction   and  certain                                                                    
information   was   unknown   at  the   time.   Commissioner                                                                    
Rutherford indicated  she was correct.  She relayed  that it                                                                    
was  an effort  to  ensure  that where  the  state took  its                                                                    
molecules and  the composition  of the  particular molecules                                                                    
were  accommodated  so  that   when  they  were  mixed  with                                                                    
everything   going  into   line  the   state  received   the                                                                    
appropriate value for the molecules.                                                                                            
9:10:03 AM                                                                                                                    
Representative   Wilson   thanked  Department   of   Natural                                                                    
Resources for making  it possible for the state  to keep its                                                                    
own  oil  in  the  state  and  using  it  for  the  in-state                                                                    
refinery. She hoped it would  result in keeping the refinery                                                                    
more profitable and steady. She  hoped the state had learned                                                                    
a  lesson  from what  happened  at  Flint Hills  and  looked                                                                    
forward to the arrival of Petro Star.                                                                                           
Representative Gara  was fine with  the bill. He was  glad a                                                                    
rider was  not in  the bill  like there  had been  two years                                                                    
previously.  He commented  that the  more he  looked at  the                                                                    
legislation  the   unhappier  he   became  about   what  the                                                                    
legislature   did  2   years   prior.   He  explained   that                                                                    
legislation that passed  granted up to $10  million per year                                                                    
of tax  credits adding to  the royalty renewal  contract for                                                                    
three  company owners  of refineries.  Tesoro had  indicated                                                                    
they did not want them. He  did not believe the state was in                                                                    
the kind  of financial  condition to  continue that  kind of                                                                    
legislating.  He opined  that in  part the  budget was  very                                                                    
unfair to many people. He thought  it would be unfair not to                                                                    
give the  $10 million to Tesoro  if the state was  giving it                                                                    
to others.  He would consider  offering an amendment  on the                                                                    
House Floor.                                                                                                                    
Co-Chair  Thompson  indicated   that  the  discussion  would                                                                    
continue on the house floor.                                                                                                    
Representative Guttenberg had assumed  that the quality bank                                                                    
calculation   was  zero.   He  realized   that  there   were                                                                    
adjustments for quality  per field. He queried  if there was                                                                    
a daily calculation  on flow rate. He wondered  if the state                                                                    
was  taking oil  from its  high volume  fields. Commissioner                                                                    
Rutherford  responded that  she would  ask Mr.  Nouvakhov to                                                                    
speak to  his question  about flow.  She responded  that the                                                                    
State of Alaska received its  royalty oil as it was produced                                                                    
by producers. The  state could not over lift  or under lift.                                                                    
When the  producers produced from  various fields  the state                                                                    
received its  royalty percentage from particular  leases. If                                                                    
there was  a variation  of the royalty  rate, it  would very                                                                    
between leases. The state took it  as it was produced by the                                                                    
various working interests by field and by lease.                                                                                
9:13:54 AM                                                                                                                    
Vice-Chair  Saddler asked  about  the effects  of the  price                                                                    
indices rising  substantially. He wondered if  the contracts                                                                    
for the sale  to Tesoro had any provisions  for an escalated                                                                    
price.  Commissioner  Rutherford  explained that  the  place                                                                    
where the state  captured how the price was  variable was at                                                                    
the ANS spot price.                                                                                                             
Vice-Chair   Saddler   asked  Commissioner   Rutherford   to                                                                    
describe the  negotiations that lead to  the equalization of                                                                    
the pro-rata  provisions in exchange for  changed volume for                                                                    
Petro Star.                                                                                                                     
Commissioner  Rutherford detailed  that when  the department                                                                    
went  out  for  the   solicitation  of  interest  the  state                                                                    
received  various responses.  Two of  the five  parties that                                                                    
responded were North Slope Producers  who had indicated that                                                                    
while they might be able to  meet a price point of $195 they                                                                    
were intending to ship out  of state for refining. The state                                                                    
had  received a  response from  Flint Hills  indicating they                                                                    
were  closing  down  and  not  interested.  The  state  also                                                                    
received  a   response  from  Petro  Star   that  they  were                                                                    
interested  but were  not willing  to hit  the price  point.                                                                    
Tesoro expressed  their interest and willingness  to hit the                                                                    
price  point. The  state, then  began its  negotiations with                                                                    
Tesoro. As  negotiations with  Tesoro progressed  Petro Star                                                                    
came back  expressing their interest  and the  desired price                                                                    
point. The state was well  into the negotiating process with                                                                    
Tesoro.  As  part  of trying  to  accommodate  Petro  Star's                                                                    
desire for volume  the state asked Tesoro if  it was willing                                                                    
to give  up some of  its volume to accommodate  Petro Star's                                                                    
interest.  The  state  believed  it   was  good  to  have  a                                                                    
competitive environment for refining  in Alaska. In exchange                                                                    
the   state  had   looked  at   providing   Tesoro  with   a                                                                    
preferential pro-rationing  position. She furthered  that as                                                                    
the  negotiations continued  a point  was reached  where all                                                                    
partners  were  relatively  satisfied.  In the  end  it  was                                                                    
decided  that  neither  party  would  have  a  pro-rationing                                                                    
decision. The state would pro-ration down equally between                                                                       
any contracts the state had in place.                                                                                           
Co-Chair Thompson asked for further questions.                                                                                  
9:17:22 AM                                                                                                                    
MATT GILL, EXTERNAL AFFAIRS, SENIOR MANAGER, TESORO, urged                                                                      
members support for the legislation. He read from a                                                                             
prepared statement:                                                                                                             
     Tesoro Corporation is  a Fortune 100 company  and is an                                                                    
     independent   refiner   and   marketer   of   petroleum                                                                    
     products. Tesoro's  refining operations  started Alaska                                                                    
     with the purchase of the Kenai refinery back in 1969.                                                                      
     Our  Kenai refinery  has  the  operational capacity  to                                                                    
     produce up to  72,000 barrels per day  and is primarily                                                                    
     focused  on  Jet  and  Diesel  production  followed  by                                                                    
     gasoline  and  gasoline  blendstocks, heating  oil  and                                                                    
     heavy fuel oils, propane and  asphalt. We operate a 68-                                                                    
     mile, common-carrier products  pipeline that transports                                                                    
     jet  fuel, gasoline  and  diesel fuel  to  the Port  of                                                                    
     Anchorage and the  Anchorage International Airport. The                                                                    
     wholesale delivery  of our products occurs  through our                                                                    
     terminals  in Kenai,  Anchorage, our  Nikiski dock  and                                                                    
     the Port of Anchorage.                                                                                                     
     In addition to being the  largest taxpayer in the Kenai                                                                    
     Peninsula  Borough,  Tesoro  is also  able  to  provide                                                                    
     around  225 family  wage jobs  at  the refinery,  along                                                                    
     with about  30 full-time  contractors that  are working                                                                    
     in  and  around the  refinery  year  round. We  provide                                                                    
     retail fuels  at our  company-owned Tesoro  2-Go retail                                                                    
     outlets as  well as at  numerous branded  and unbranded                                                                    
     outlets. We employ operators who  work at our terminals                                                                    
     in the Port of Anchorage and in Nikiski.                                                                                   
     We are  a major  supporter of  the Cook  Inlet Regional                                                                    
     Citizens  Advisory  Council  (CIRCAC) and  the  largest                                                                    
     member of  the Cook  Inlet Spill Prevention  & Response                                                                    
     team (CISPRI).                                                                                                             
     We actively  support a wide  range of local  events and                                                                    
     programs  - from  employee fundraising  for the  United                                                                    
     Way to youth sports programs.  Each year we sponsor all                                                                    
     of  the  5th  and  6th   grade  classes  on  the  Kenai                                                                    
     Peninsula to conduct a mission  at the Kenai Challenger                                                                    
     Learning  Center and  we are  the Signature  Sponsor of                                                                    
     "Caring for the Kenai" program.                                                                                            
     Tesoro strongly  urges you to  support House  Bill 373,                                                                    
     "An  Act approving  and ratifying  the sale  of royalty                                                                    
     oil by  the State of  Alaska to Tesoro  Corporation and                                                                    
     Tesoro   Refining  and   Marketing  Company   LLC;  and                                                                    
     providing for an effective date."                                                                                          
     This legislation  is the result of  constructive dialog                                                                    
     and productive  negotiations between the  Department of                                                                    
     Natural Resources  and the  Tesoro Corporation.  By all                                                                    
     accounts,  our  company  was very  impressed  with  the                                                                    
     State's ability to understand our  issues and arrive at                                                                    
     a mutually  beneficial agreement  that is truly  a win-                                                                    
     win for  both parties as  well as accommodating  to the                                                                    
     other refineries in the State.                                                                                             
     For the State, the DNR  estimates that it will continue                                                                    
     to  receive a  price for  its Royalty-in-Kind  oil that                                                                    
     exceeds the price  it would have receive  if it elected                                                                    
     to keep its Royalty Oil in Value.                                                                                          
     For Tesoro, this  5 year contract will  provide us with                                                                    
     a stable supply  of ANS crude while also  giving us the                                                                    
     volumetric  flexibility  to help  accommodate  seasonal                                                                    
     fluctuations  in  demand   for  refined  products.  The                                                                    
     availability,  flexibility  and   stability  that  this                                                                    
     contract  offers will  have a  positive  impact on  our                                                                    
     ability  to  maintain  our ongoing  operations  at  our                                                                    
     Kenai refinery.                                                                                                            
     In  order to  accommodate the  needs of  the other  in-                                                                    
     state  refiners, Tesoro  and  the  State modified  this                                                                    
     contract  to  reduce volumes  as  well  as eliminate  a                                                                    
     proration clause and a 5 year extension option.                                                                            
     Tesoro believes in Alaska's future  and is committed to                                                                    
     being an  active corporate citizen. We  look forward to                                                                    
     continuing  to  provide  Alaskans  with  clean  burning                                                                    
     fuels to keep your homes  warm and your cars, boats and                                                                    
     snow machines traveling across this great state.                                                                           
     I urge you to support House Bill 373.                                                                                      
9:21:20 AM                                                                                                                    
Representative  Pruitt  reported   regularly  getting  asked                                                                    
about pricing.  He asked Mr.  Gill how Tesoro saw  the sales                                                                    
impacting   the   consumer.    Mr.   Gill   clarified   that                                                                    
Representative  Pruitt  was  asking  about  gasoline  prices                                                                    
versus oil prices.                                                                                                              
Representative  Pruitt  responded  affirmatively.  Mr.  Gill                                                                    
relayed that the  approval or denial of  the contract before                                                                    
the committee would  have no direct impact  on street prices                                                                    
of  gasoline  and  Tesoro's  other   oil  products.  It  was                                                                    
strictly  a commercial  transaction between  Tesoro and  the                                                                    
State of Alaska, equivalent to a commercial seller.                                                                             
Vice-Chair Saddler  queried about any other  supply of crude                                                                    
oil that would replace the  state RIK oil. He wondered about                                                                    
the current  source of capacity  assuming there would  be no                                                                    
change in  the refinery  throughput. Mr. Gill  reported that                                                                    
currently Tesoro  took every  drop of  oil produced  in Cook                                                                    
Inlet, the  company's base supply. It  supplemented the Cook                                                                    
Inlet  oil  with  ANS crude  either  through  state  royalty                                                                    
contracts  or  through  contracts  with  other  North  Slope                                                                    
producers. On rare occasion the  company had to import crude                                                                    
oil  from  out  of  state to  fill  its'  needs.  Currently,                                                                    
Tesoro's  royalty oil  contract,  which  expired in  January                                                                    
2016, left  the company  with a gap  until the  new contract                                                                    
was in effect in August  2016. It was his understanding that                                                                    
the  company had  to purchase  some Russian  crude to  bring                                                                    
into the refinery.                                                                                                              
9:23:37 AM                                                                                                                    
Co-Chair Thompson OPENED public testimony.                                                                                      
Co-Chair Thompson CLOSED public testimony.                                                                                      
Co-Chair  Thompson asked  Vice-Chair Saddler  to review  the                                                                    
fiscal note.                                                                                                                    
Vice-Chair  Saddler reviewed  one indeterminate  fiscal note                                                                    
from DNR, Division of Oil  and Gas, Office of Management and                                                                    
Budget,  component number  439.  The fiscal  note was  dated                                                                    
March 23, 2016.                                                                                                                 
Co-Chair  Neuman MOVED  to report  HB 373  out of  Committee                                                                    
with   individual  recommendations   and  the   accompanying                                                                    
indeterminate fiscal note. There  being NO OBJECTION, it was                                                                    
so ordered.                                                                                                                     
HB  373 was  REPORTED  out  of committee  with  a "do  pass"                                                                    
recommendation   and    with   one    previously   published                                                                    
indeterminate fiscal note: FN1 (DNR).                                                                                           
9:25:01 AM                                                                                                                    
AT EASE                                                                                                                         
9:29:05 AM                                                                                                                    
SENATE BILL NO. 124                                                                                                           
     "An Act extending the termination date of the Alaska                                                                       
     Commission on Aging; and providing for an effective                                                                        
Co-Chair Thompson relayed the next  bill, SB 124. He did not                                                                    
intend  to  move the  bill  from  committee in  the  current                                                                    
meeting. He read a list of available testifiers.                                                                                
9:29:57 AM                                                                                                                    
SENATOR  STOLTZ, SPONSOR,  explained that  his district  was                                                                    
part of  the home of  the fastest growing  senior population                                                                    
in  the State  of  Alaska.  He had  introduced  the bill  by                                                                    
request. It  was a bill supported  by numerous organizations                                                                    
of seniors, individual seniors, and  a wide array of others.                                                                    
He wanted to  reflect that it was not his  bill but one that                                                                    
belonged  to the  senior community  and a  broader group  of                                                                    
Senator  Stoltz relayed  that the  extension  of the  sunset                                                                    
which   would    expire   in   July   2016    followed   the                                                                    
recommendations  of  the  Budget and  Audit  Committee.  Ms.                                                                    
Curtis and her staff performed  the audit and recommended an                                                                    
8   year  extension.   There   were  other   recommendations                                                                    
including  the commission  improving its  public notices  of                                                                    
subcommittees.  He   encouraged  public   participation.  He                                                                    
doubted that  the commission  did anything  intentionally to                                                                    
discourage public involvement.  The other recommendation was                                                                    
a  gentle  admonition,  because   of  scarce  resources,  to                                                                    
confine its' agenda to activities  of senior Alaskans rather                                                                    
than  wandering into  other policy  areas. The  Senate State                                                                    
Affairs Committee  and the  Senate Finance  Committee looked                                                                    
at the  fiscal impact.  The Senate  Finance Committee  had a                                                                    
lengthy discussion about the fiscal  note, which he remarked                                                                    
was a  significant aspect.  There were  recommendations made                                                                    
by the  Senate Finance Committee for  more significant cuts.                                                                    
The committee  mediated at  the reduction  of one  person in                                                                    
the current year and the  potential reduction of 2 people in                                                                    
subsequent years. They arrived  at those conclusions working                                                                    
with the administration.                                                                                                        
Senator  Stoltz felt  the bill  was fairly  straight forward                                                                    
and  came  down  to  whether   the  commission  performed  a                                                                    
significant role. He thought the  Alaska Commission on Aging                                                                    
was the  conduit for which  federal funds were  received. He                                                                    
thought  the amount  was approximately  $11 billion.  He and                                                                    
the  audit division  believed  the  commission performed  an                                                                    
important function.  The Senate Finance committee  looked at                                                                    
the finances  and remembered two words,  "We're broke," that                                                                    
were relevant  to any  discussion on  any state  issue being                                                                    
dealt  with. In  spite of  the state's  fiscal situation  he                                                                    
thought the commission had a worthy role.                                                                                       
9:35:11 AM                                                                                                                    
Co-Chair Neuman  mentioned the analysis  on the  fiscal note                                                                    
it discussed  how the Older  Americans Act  provided $12,851                                                                    
in  funding  for  seniors  in  FY 16.  He  wondered  if  the                                                                    
commission decided  how the money was  spent. Senator Stoltz                                                                    
responded   that   the    commission,   working   with   the                                                                    
administration, was  likely to decide  how the money  was to                                                                    
be spent. He deferred to  Ms. Daniello to provide a detailed                                                                    
description.  Some  of  the  money  was  designated  through                                                                    
various components of the budget.                                                                                               
Co-Chair  Neuman thought  members  were  advocates of  local                                                                    
control. The health commission  controlled federal funds for                                                                    
programs that  affected seniors.  Senator Stoltz  added that                                                                    
it was one of the strongest  citizen boards in the state. He                                                                    
noted  that Rachel  Greenberg from  his region  was a  great                                                                    
member.  He  also  mention  Edna  Debreeze,  another  active                                                                    
member. He  thought there was  a deep well of  knowledge and                                                                    
capability  on  the  citizens'  board that  he  was  not  as                                                                    
concerned about  a diminution of  admission the board  was a                                                                    
solid citizen's board.                                                                                                          
Co-Chair  Thompson thanked  Senator  Stoltz.  He called  Ms.                                                                    
Daniello to the table to answer questions.                                                                                      
9:38:07 AM                                                                                                                    
DENISE  DANIELLO, EXECUTIVE  DIRECTOR, ALASKA  COMMISSION ON                                                                    
AGING, introduced herself.                                                                                                      
Co-Chair Thompson was looking  at the fiscal note eliminated                                                                    
by the other body. He  wondered about the elimination of one                                                                    
full  time position  from the  commission in  FY 17  and two                                                                    
full time positions beginning removed  from the budget in FY                                                                    
18. He asked  about the effect it would have  on the board's                                                                    
ability to fulfill its statutory responsibility.                                                                                
Ms. Daniello commented that it  would have a dramatic impact                                                                    
on the  board's ability to do  what it had been  doing since                                                                    
the   commission's  inception   in   1981.   Based  on   her                                                                    
understanding of the Senate  Finance Committee's fiscal note                                                                    
it was  an elimination  of one  position in  FY 2017  and an                                                                    
elimination of  a second position  in FY  18 for a  total of                                                                    
two staff positions  resulting in a 50  percent reduction of                                                                    
its staff. She remarked that  the state had a growing senior                                                                    
population.   Currently,  there   were  more   than  120,400                                                                    
seniors, 75,000 of whom were 65  years and older. It was not                                                                    
just the growing senior population,  but was also the growth                                                                    
of the  number of  people of the  oldest old.  She continued                                                                    
that  each cohort  of the  senior  population had  different                                                                    
needs and  resources. The commission  worked to  do research                                                                    
on  prevailing  trends  and  report data  on  a  variety  of                                                                    
indicators. The  commission convened stakeholder  groups and                                                                    
met with  seniors around the  state to ask for  their input.                                                                    
The commission  developed the Alaska  State Plan  for Senior                                                                    
Services,  a 4  year comprehensive  state plan,  and was  in                                                                    
charge of its implementation.                                                                                                   
Ms. Daniello  also spoke  of doing  a significant  amount of                                                                    
education,  advocacy, and  planning efforts.  The commission                                                                    
provided  guidance to  other  agencies  of state  government                                                                    
that were also  targeting how to address  the growing senior                                                                    
population within  their planning efforts. She  detailed the                                                                    
loss of  the administrative assistant  who took care  of the                                                                    
day-to-day  business transactions  for  the commission.  The                                                                    
position also helped provide board  meeting packets and many                                                                    
other administrative duties. She  reviewed the duties of the                                                                    
Planner 2  position that  would be  lost; the  person worked                                                                    
with the  executive director to  develop the state  plan for                                                                    
senior services  satisfying the requirement under  the Older                                                                    
Americans Act  to draw down  the $11 million in  funding. If                                                                    
the fiscal  note was approved the  commission would continue                                                                    
to do  its best to  satisfy its mandatory  requirements. She                                                                    
mentioned having  done much  more over  the past  years. She                                                                    
noted  hosting senior  housing summits,  the power  of aging                                                                    
symposium  and  working  with   partners  to  develop  other                                                                    
planning  efforts. She  reiterated  that the  loss of  staff                                                                    
would affect the commission greatly.                                                                                            
9:41:54 AM                                                                                                                    
Co-Chair Thompson asked  if the commission would  be able to                                                                    
fulfill  its statutory  requirements. Ms.  Daniello answered                                                                    
that the  commission had a year  to prepare for the  loss of                                                                    
the Planner 2 position. She  relayed that the commission was                                                                    
very  good  at partnering.  She  assured  the committee  she                                                                    
would  do  her  pest  to  fulfill  the  mandatory  statutory                                                                    
Co-Chair Neuman asked what  positions were currently filled,                                                                    
their duties, and their salaries.                                                                                               
Ms.   Daniello  relayed   that   currently   there  was   an                                                                    
administrative assistant  position responsible for  the day-                                                                    
to-day  business activities  of the  commission. She  worked                                                                    
with  that  person  to develop  financial  projections.  The                                                                    
administrative assistant was  also responsible for procuring                                                                    
all  travel, doing  financial reports  required for  travel,                                                                    
procuring office supplies,  answering phones, handling mail,                                                                    
and other miscellaneous duties.                                                                                                 
Ms.  Daniello   identified  the   second  position   at  the                                                                    
commission,  the Planner  1 position,  funded by  the Alaska                                                                    
Mental Health  Trust Authority using the  trust's authorized                                                                    
receipts.  She  furthered  that  because  the  position  was                                                                    
funded by the trust the  person was responsible for focusing                                                                    
on the  needs of senior trust  beneficiaries including older                                                                    
people  with  behavioral  health needs,  depression,  mental                                                                    
illness,  and specifically  Alzheimer's disease  and related                                                                    
dementias. Additionally,  there was a growing  population of                                                                    
people with intellectual  and developmental disabilities who                                                                    
were aging as well as their caregivers.                                                                                         
Ms. Daniello  moved on to  describe the duties of  the third                                                                    
position  in  her  office,  the  Planner  2  position.  This                                                                    
position  was very  important to  the commission  conducting                                                                    
day-to-day  research and  assembling information  to compile                                                                    
graphs   and  charts   used  in   PowerPoint  presentations,                                                                    
reports,  and position  papers. The  position also  provided                                                                    
assistance  to the  executive director  in developing  needs                                                                    
assessment activities and provided  different types of needs                                                                    
analysis used  to collect information  from the  public that                                                                    
informed advocacy  and the state  plan for  senior services.                                                                    
The  position  also  supported  the  executive  director  in                                                                    
coordinating the  state planned advisory  committee meetings                                                                    
and provided  support in developing  the plan  including the                                                                    
goals,  strategies, and  performance measures.  The position                                                                    
also  helped with  organizing efforts  for the  commission's                                                                    
newsletter and other responsibilities.                                                                                          
Ms.  Daniello  reviewed  her own  duties  as  the  Executive                                                                    
Director for the commission. She  oversaw all of the work of                                                                    
the commission including  planning, advocacy, and education.                                                                    
The   position  also   prepared   all   of  the   PowerPoint                                                                    
presentations,  position papers,  and formal  correspondence                                                                    
from  the commission  to legislators,  the governor,  public                                                                    
members, state  agencies, and non-profit  organizations. The                                                                    
Executive  Director  was  responsible for  making  sure  the                                                                    
state plan  was developed  according to the  requirements of                                                                    
the U.S.  Administration on Community Living  and much more.                                                                    
She  relayed that  she took  direction from  the commission,                                                                    
particularly the commission chair.                                                                                              
9:46:34 AM                                                                                                                    
Co-Chair Neuman asked about the salary schedules.                                                                               
Ms.  Daniello  deferred to  Ms.  Ziegenfuss  to provide  the                                                                    
salary information.                                                                                                             
JACQELLI ZIEGENFUSS,  ADMINISTRATIVE OPERATIONS  MANAGER II,                                                                    
SENIOR  DISABILITIES  SERVICES,  DEPARTMENT  OF  HEALTH  AND                                                                    
SOCIAL SERVICES,  asked if she  should provide  the salaries                                                                    
or the total costs including benefits.                                                                                          
Co-Chair Neuman asked for both.                                                                                                 
Ms. Ziegenfuss  reviewed the salary schedule.  The Executive                                                                    
Director was a  range 23, at a salary of  $112,000 per year,                                                                    
a  benefits  package  of  $56   thousand,  for  a  total  of                                                                    
$169,441.  The Administrative  Assistant  2  position was  a                                                                    
range  14, at  a salary  of  $58,296, a  benefit package  of                                                                    
$37,835, for a total of  $96,130. The Planner 2 position was                                                                    
a range  19, at a salary  of $68,801, a benefits  package of                                                                    
$41,623, for  a total  of $110,424.  The Planner  1 position                                                                    
was a range  17, at a salary of $73,809,  a benefits package                                                                    
of $43,429, for a total of $117,238.                                                                                            
Co-Chair Neuman  asked that the  information be  provided in                                                                    
writing.  He thought  the salaries  were high  and he  would                                                                    
like Ms. Curtis' input.                                                                                                         
Representative Gara  asked Ms. Daniello to  elaborate on the                                                                    
duties related  to accessing $11 million  in federal funding                                                                    
that currently rested  with one of the  positions slated for                                                                    
Ms. Daniello  responded that the funds  were granted through                                                                    
the  Older Americans  Act to  provide services  for seniors.                                                                    
Also,  in  Alaska Title  3  funds  were available  providing                                                                    
nutrition, transportation, and support  services. It was one                                                                    
of  the largest  senior  grant programs  the  state had  for                                                                    
seniors.  The  program  also  include  the  National  Family                                                                    
Caregiver  Support Program.  The amount  of federal  funding                                                                    
was  over   $5.8  million.   Additionally,  there   was  the                                                                    
Nutrition Services Incentive  Program which provided funding                                                                    
used to  purchase food for  senior meals  totaling $467,080.                                                                    
There was also Title 7  funding for elder protection for the                                                                    
Adult Protective  Services and  the Office of  the Long-Term                                                                    
Care Ombudsman totaling $103,193.  There was federal funding                                                                    
for Title 6 programs for  tribal organizations in the amount                                                                    
of $4.4  million. The  funding went  directly to  the tribes                                                                    
because  of their  direct relationship  with the  government                                                                    
and the services mirrored services  provided through Title 3                                                                    
funding. The federal  funding she spoke of  totaled over $11                                                                    
9:51:40 AM                                                                                                                    
Representative Gara  assumed that  Department of  Health and                                                                    
Social  Services  had  access  to the  funds.  Ms.  Daniello                                                                    
answered that the money did  not come through the commission                                                                    
but  rather through  DHSS. The  commission did  the work  in                                                                    
partnership  with the  Division of  Senior and  Disabilities                                                                    
Services to satisfy certain  requirements ensuring the State                                                                    
of Alaska  received funding. She  relayed that the  DHSS was                                                                    
the   sole   state   agency  on   aging   in   Alaska.   The                                                                    
responsibilities  were spelled  out in  the Older  Americans                                                                    
Act.  The administration  of federal  and state  funding for                                                                    
senior  programs went  through  the Division  of Senior  and                                                                    
Disabilities  Services and  they  managed  the funds  rather                                                                    
than the commission.                                                                                                            
Representative  Gara  asked  about  the  volume  of  traffic                                                                    
received  through  the  commission's  office.  Ms.  Daniello                                                                    
responded that  the amount of calls  the commission received                                                                    
was  significant.   She  furthered  that  the   office  also                                                                    
directed  people  to the  Aging  and  Disability Center  for                                                                    
follow-up  as well  as talking  with them.  Often times  the                                                                    
commission  received calls  from care  givers who  were very                                                                    
stressed out.                                                                                                                   
Representative  Wilson   wondered  if  the   commission  was                                                                    
helping to bring federal funds  to Alaska. She also wondered                                                                    
why a portion  of the funding was not  being reinvested into                                                                    
the  commission. Ms.  Daniello  responded that  there was  a                                                                    
small  amount   of  money  that  came   to  the  commission,                                                                    
approximately $72 thousand. The rest  of the funding for the                                                                    
commission came from the General  Fund with the exception of                                                                    
the  Mental  Health   Trust  Authority  Authorized  Receipts                                                                    
(MHTAAR) fund for the Planner 1 position.                                                                                       
Representative  Wilson  wanted   to  better  understand  the                                                                    
criterial  for  determining  how  much  money  went  to  the                                                                    
commission. She mentioned that she  did not see $72 thousand                                                                    
on the fiscal note.                                                                                                             
9:55:00 AM                                                                                                                    
Vice-Chair Saddler  mentioned hearing about  the possibility                                                                    
of  obtaining  additional  waivers.   He  wondered  how  the                                                                    
operations  of   the  commission   would  change   with  the                                                                    
potential  cuts being  proposed. Ms.  Daniello relayed  that                                                                    
the  commission  had  advocated   to  have  waiver  services                                                                    
available  to people  with cognitive  impairments who  might                                                                    
not meet the level of  care requirements. The commission was                                                                    
pleased  with   and  had  been  actively   involved  in  the                                                                    
development  and  educational  efforts  having  to  do  with                                                                    
Medicaid 1915(i).  The commission would be  staying involved                                                                    
with the state plan options.                                                                                                    
Representative Gattis drew attention  to the commission only                                                                    
receiving  a small  portion of  the $11  million in  federal                                                                    
funding. She  had heard Ms. Daniello  discuss the commission                                                                    
working  in tandem  with  the DHSS.  She  wondered why  more                                                                    
money did not flow directly  to the commission. Ms. Daniello                                                                    
explained   that  the   Commission   on   Aging  worked   in                                                                    
partnership with  the DHSS  to satisfy  the responsibilities                                                                    
of  a  state  unit   on  aging.  The  responsibilities  were                                                                    
described in the Older Americans  Act in Section 3056ad. The                                                                    
Older Americans Act  specified that the state  unit on aging                                                                    
was  responsible   for  having   fiduciary  responsibilities                                                                    
administering  the  federal  and state  funding  for  senior                                                                    
programs and  services, developing  a state plan  for senior                                                                    
services, and serving as a  visible advocate for elders. The                                                                    
commission  also provided  significant education.  She spoke                                                                    
of a series  of educational forums. She offered  to send Co-                                                                    
Chair Thompson opinions from seniors on Medicaid reform.                                                                        
Co-Chair   Thompson   requested   that   she   provide   the                                                                    
information to his staff.                                                                                                       
9:59:53 AM                                                                                                                    
Representative  Guttenberg  asked  if the  planners  on  her                                                                    
staff  were also  grant writers.  He wondered  if they  were                                                                    
writing grants that brought federal dollars to Alaska.                                                                          
Ms.  Daniello  explained  that the  state  plan  for  senior                                                                    
services was the  source of the draw down  of federal money.                                                                    
By having  that plan the  state remained in  compliance with                                                                    
the Older Americans Act. The  4 year state plan was approved                                                                    
by the  DHSS, the governor,  and the U.S.  Administration on                                                                    
Community  Living.  There  was an  advisory  council  mostly                                                                    
comprised of  public members of  senior age.  The commission                                                                    
wrote grant applications  and employees worked as  a team to                                                                    
gather and  compile information. She cited  an example where                                                                    
her  staff   submitted  an   application  to   the  National                                                                    
Alzheimer's   Association  for   funding   to  include   the                                                                    
perceived cognitive impairment model  in the behavioral risk                                                                    
factor  surveillance  survey  to  gather  information  about                                                                    
people with  cognitive impairment.  She mentioned  the state                                                                    
never  before  having  the opportunity  to  receive  certain                                                                    
information  from Alaskans  directly. She  relayed that  the                                                                    
commission's plan for the following  year was to work with a                                                                    
couple of  funders to  include a module  that would  look at                                                                    
the needs of family care givers.                                                                                                
Representative  Guttenberg  asked  whether  the  ability  to                                                                    
maintain federal  funding was in  jeopardy with the  loss of                                                                    
two  positions being  cut. Ms.  Daniello was  uncertain. She                                                                    
relayed that the  commission would do its best  to develop a                                                                    
4 year state plan and to  be an active and physical activist                                                                    
for elders.                                                                                                                     
Co-Chair Thompson invited Ms. Curtis to the table.                                                                              
10:03:33 AM                                                                                                                   
KRIS  CURTIS,   LEGISLATIVE  AUDITOR,  ALASKA   DIVISION  OF                                                                    
LEGISLATIVE AUDIT,  reported that the division  did a sunset                                                                    
review of  the Commission on  aging. They looked  at whether                                                                    
the  commission should  be extended  and  whether they  were                                                                    
serving the public's interest.  Overall, the audit concluded                                                                    
that  the  Alaska  Commission   on  Aging  (commission)  was                                                                    
serving  the public's  interest  by  helping older  Alaskans                                                                    
lead  dignified,  independent,   and  useful  lives  through                                                                    
advocacy,   outreach,   and  education.   Furthermore,   the                                                                    
commission  served  as the  advisory  council  to advise  on                                                                    
matters on  the development, administration,  and operations                                                                    
related to  the state plan.  The commission met  the federal                                                                    
requirement that  each state  establish an  advisory council                                                                    
to  advise   the  state  on  aging   matters.  The  division                                                                    
recommend the  maximum extension  in statute  of 8  years to                                                                    
June 30, 2024.                                                                                                                  
Ms.  Curtis  relayed  that there  were  two  recommendations                                                                    
resulting from  the audit. The  first was for  the executive                                                                    
director   to    implement   and   follow    public   notice                                                                    
requirements.  There had  been some  meetings that  were not                                                                    
public noticed  as required.  The second  recommendation was                                                                    
to the  chair person to  review and approve  the legislation                                                                    
watch   list   prior   to   distribution.   The   commission                                                                    
periodically  held teleconferences  to  gather public  input                                                                    
and  discuss legislation  affecting  seniors. She  explained                                                                    
that  to facilitate  the feedback  the commission  published                                                                    
watch lists  of bills relevant  to senior matters.  When the                                                                    
auditors looked  at the watch  lists they  found legislation                                                                    
that  was  not  applicable  to their  duties.  The  auditors                                                                    
recommended   that  in   order   to   efficiently  use   the                                                                    
commission's resources  that they  limit the watch  lists to                                                                    
only bills affecting seniors.                                                                                                   
10:05:19 AM                                                                                                                   
Representative  Wilson  asked  if  a  consideration  of  the                                                                    
number of  staff was part  of the audit process.  Ms. Curtis                                                                    
was asked by the Senate  Finance Committee her opinion about                                                                    
whether the  commission's staff  could do  its job  and meet                                                                    
responsibilities without  jeopardizing federal  funding with                                                                    
the loss of  a position. She answered that  the auditors did                                                                    
not  explicitly  enter  into  a  sunset  review  looking  at                                                                    
whether the level of positions  was adequate or whether they                                                                    
were compensated  appropriately. There  were upwards  of 200                                                                    
boards and commissions. The Commission  on Aging was given a                                                                    
higher level  of scrutiny  because it was  up for  sunset in                                                                    
the current year. She suggested that  it could be time for a                                                                    
legislative  audit  of  all   boards  and  commissions.  She                                                                    
reported  that the  Senate Finance  Committee  seemed to  be                                                                    
interested in her suggestion. A  similar audit was conducted                                                                    
in  1992. At  the time  there  was a  governor's council  on                                                                    
boards  and  commissions  that did  a  holistic  review  and                                                                    
suggested  merging  some   boards  and  providing  different                                                                    
compensation. She  was aware there was  interest and thought                                                                    
it might  be a good  time for  such an audit.  However, what                                                                    
she stated  specifically related to the  Commission on Aging                                                                    
was  that the  auditors did  not believe  that a  loss of  a                                                                    
position would impact  its ability to produce  a state plan,                                                                    
key to maintaining federal funding.                                                                                             
Co-Chair  Thompson  clarified that  in  the  fiscal note  it                                                                    
indicated that in  2018 a second position would  be lost. He                                                                    
wondered  if that  loss would  have any  affect. Ms.  Curtis                                                                    
answered that  undeniably when  positions were  cut services                                                                    
were cut as  well. In talking with the  staff that conducted                                                                    
the  audit  they believed  there  would  be a  reduction  in                                                                    
services provided.  It would come down  to prioritization of                                                                    
services.  She  thought  the  state  plan  would  be  a  top                                                                    
priority. She  was unsure  whether the  quality of  the plan                                                                    
would be  compromised. She  thought the  level of  work with                                                                    
less workforce would be much  more difficult. It was hard to                                                                    
say if  the level  of work would  lead to  obtaining federal                                                                    
funding. The  judgement would  have to be  made in  2 years.                                                                    
The auditors thought  the commission could absorb  a cut but                                                                    
would likely result in reduced services.                                                                                        
Representative  Wilson asked  about  the  amount of  federal                                                                    
funding  the commission  received  versus the  goals of  the                                                                    
commission. She wondered if the  auditors ever weighed in on                                                                    
whether  the DHSS  should provide  more funding.  Ms. Curtis                                                                    
replied   that  the   auditors   did   not  scrutinize   the                                                                    
commission's funding mechanisms.  She thought that obtaining                                                                    
additional federal  funding would  depend on  its activities                                                                    
in the current year. The  audit and background material laid                                                                    
out   information  about   the  federal   program  and   the                                                                    
commission's role  in coordination  with the  department. It                                                                    
was  a  joint  process  but  the  programs  themselves  were                                                                    
administered  by the  Division  of  Senior and  Disabilities                                                                    
Services.  They  had the  federal  and  state programs  that                                                                    
served seniors. The commission was  the planning entity. The                                                                    
appropriate funding would be left up to the department.                                                                         
10:09:42 AM                                                                                                                   
Representative Pruitt asked  about the second recommendation                                                                    
from the  auditors. He understood  the concern was  that the                                                                    
commission would  not want the issue  to become politicized.                                                                    
He asked if there had been  follow-up in order to ensure the                                                                    
commission was  staying within the scope  of senior services                                                                    
when  tracking legislation.  Ms. Curtis  answered that  once                                                                    
the  audit  was released  there  was  no mechanism  for  the                                                                    
auditors  to go  back in.  There was  no type  of review  or                                                                    
evidence to support any changes.                                                                                                
Representative  Pruitt asked  if  Ms.  Curtis was  satisfied                                                                    
with the  responses from the commission.  Ms. Curtis relayed                                                                    
that  the   commission  as  well  as   the  department  were                                                                    
receptive  and responsive  to the  audit. She  was satisfied                                                                    
with the audit.                                                                                                                 
Representative Guttenberg  referred to  the letter  from the                                                                    
commission  in response  to the  audit recommendations.  The                                                                    
commission  concurred  with  the   audit  findings  and  was                                                                    
addressing   them.  He   was   aware   the  commission   was                                                                    
responsible for  developing a state  plan, but  wondered who                                                                    
was responsible  for implementing  it. Ms.  Curtis responded                                                                    
that much  of the  plan was  implemented by  the department.                                                                    
However,  the commission  was responsible  for outreach  and                                                                    
education which was part of the plan.                                                                                           
Representative  Guttenberg  asked  if the  commission  staff                                                                    
oversaw the  department to  make sure  it complied  with the                                                                    
plan. Ms. Curtis responded that  one of the functions of the                                                                    
commission was  to receive feedback from  the people served.                                                                    
She thought the  commission was well aware of  the degree to                                                                    
which  services were  provided. She  thought it  was a  more                                                                    
indirect   absorption  of   information   rather  that   the                                                                    
commission   overseeing   as    a   hierarchical   type   of                                                                    
relationship within the department.                                                                                             
Representative  Guttenberg was  trying to  better understand                                                                    
the relationship  between the commission and  the department                                                                    
and whether  it was  scrutinized as part  of the  audit. Ms.                                                                    
Curtis  reported  conducting  a survey  of  stakeholders  to                                                                    
understand   the  degree   to  which   the  commission   was                                                                    
successful. The  survey responses and questions  were in the                                                                    
back  of the  state plan.  In general,  the feedback  on the                                                                    
commission was  very positive. The  plan was redone  every 4                                                                    
years. The degree to which  the plan was successful would be                                                                    
reevaluated when developing the  next goals. She thought the                                                                    
executive director  of the  Commission on  Aging would  be a                                                                    
better person  to answer  his question.  In response  to the                                                                    
question   about  the   recommendations   provided  by   the                                                                    
auditors, every time  the auditors did a  sunset review they                                                                    
familiarized   themselves    with   the    previous   report                                                                    
recommendations.  In  the   introduction  paragraph  to  the                                                                    
findings and  recommendations the auditors  always addressed                                                                    
the  prior  sunset  audit recommendations.  In  the  sunsets                                                                    
audits  there was  a mechanism  to  come back  in a  certain                                                                    
amount of time.                                                                                                                 
10:15:25 AM                                                                                                                   
Representative  Guttenberg  understood  requesting  feedback                                                                    
and getting  feedback. As far  as implementing the  plan and                                                                    
its success, he  wondered if she had looked  at any feedback                                                                    
from   the   federal   government   on   how   the   state's                                                                    
Ms. Curtis responded  that the auditors did  not contact the                                                                    
federal   oversight   agency    to   inquire   about   their                                                                    
Co-Chair Thompson OPENED public testimony.                                                                                      
10:16:44 AM                                                                                                                   
MARIE DARLIN,  AARP, JUNEAU, indicated that  AARP frequently                                                                    
worked  with  the  Commission  on  Aging.  The  organization                                                                    
represented  the  aging  population and  encouraged  younger                                                                    
people to join  also because they would become  part of that                                                                    
population in  the future.   She  was also  a member  of the                                                                    
commission for  several years. She told  of the commission's                                                                    
previous  audit  which  she opined  had  good  results.  The                                                                    
recommendations  that  were  made   at  the  time  were  all                                                                    
addressed by  the commission. She  was also the  chairman of                                                                    
the legislative  committee for the  Commission on  Aging and                                                                    
affirmed  that as  advocates they  watched legislation.  The                                                                    
commission  had   a  watch  list   containing  all   of  the                                                                    
legislation introduced  relating to the aging  population in                                                                    
whatever way.  There might have  been a couple of  pieces of                                                                    
legislation on the list that could  not be tied to the topic                                                                    
of the aging.  The commission had taken  measures to rectify                                                                    
the  list.  The  watch  list  was signed  off  by  both  the                                                                    
chairman  of the  commission and  herself. She  believed the                                                                    
concerns  resulting from  the audit  had been  addressed. In                                                                    
discussing  a reduction  in staff,  she commented  that once                                                                    
the 4  year plan  was put  together, then it  was up  to the                                                                    
commission to look at the  implementation of the plan and be                                                                    
able to report  and keep track of it. She  reported that the                                                                    
commission consisted of 11 members.  She emphasized that the                                                                    
commission  made very  sure that  it represented  the entire                                                                    
State of  Alaska from the  smaller communities to  the urban                                                                    
communities.  When it  came to  looking  at legislation  and                                                                    
other  issues the  commission made  sure to  have the  input                                                                    
from  different areas  of the  state about  where it  should                                                                    
place  its  energies  and focus.  The  commission  hopefully                                                                    
represented all  of the issues and  concerns from throughout                                                                    
the state.                                                                                                                      
10:22:02 AM                                                                                                                   
Co-Chair Thompson CLOSED public testimony.                                                                                      
Co-Chair  Thompson  indicated he  would  be  setting SB  124                                                                    
SB  124  was  HEARD  and   HELD  in  committee  for  further                                                                    
Vice-Chair  Saddler commended  the board  for its  good work                                                                    
and thanked the bill sponsor.                                                                                                   
Co-Chair Thompson  indicated that the balance  of the agenda                                                                    
would be rescheduled for another time.                                                                                          
10:23:19 AM                                                                                                                   
The meeting was adjourned at 10:46 a.m.                                                                                         

Document Name Date/Time Subjects
SB 124 Backup Document - ACoA Alaska Senior Resource Guide 2016.pdf HFIN 3/31/2016 8:30:00 AM
SB 124
SB 124 Backup Document - ACoA Fact Sheet.pdf HFIN 3/31/2016 8:30:00 AM
SB 124
SB 124 Backup Document - ACoA Roster of Members.pdf HFIN 3/31/2016 8:30:00 AM
SB 124
SB 124 Backup Document - ACoA State Plan FY16-FY19.pdf HFIN 3/31/2016 8:30:00 AM
SB 124
SB 124 Backup Document - Sunset Review of the Alaska Commission on Aging Report #06-20090-15.pdf HFIN 3/31/2016 8:30:00 AM
SB 124
SB 124 Sponsor Statement (HFIN).pdf HFIN 3/31/2016 8:30:00 AM
SB 124
SB 124 Support Document - 19 Consolidated Letters of Support & Index - 03-24-2016.pdf HFIN 3/31/2016 8:30:00 AM
SB 124
HB319 Sectional Analysis.pdf HFIN 3/31/2016 8:30:00 AM
HB 319
HB319 Snowmobile registration fees hearing request.pdf HFIN 3/31/2016 8:30:00 AM
HB 319
HB319 Sponsor Statement.pdf HFIN 3/31/2016 8:30:00 AM
HB 319
HB319 Supporting Documents - AS 28.10.421 - Snowmobile registration fee statute.pdf HFIN 3/31/2016 8:30:00 AM
HB 319
HB319 Supporting Documents - AS 28.39 - Snowmobile law.pdf HFIN 3/31/2016 8:30:00 AM
HB 319
HB319 Supporting Documents - Governor's FY 17 Request for Snowmobile Trail Development Program and Grants.pdf HFIN 3/31/2016 8:30:00 AM
HB 319
HB319 Supporting Documents - Snowmobile Registrations by Community, 8 March 2016.pdf HFIN 3/31/2016 8:30:00 AM
HB 319
HB319 Supporting Documents - Snowmobile Trail Development Program $250,000, SB 26 of 2015.PDF HFIN 3/31/2016 8:30:00 AM
HB 319
SB 26
HB319 Supporting Documents - Snowmobile Trails Program FAQ with attribution.pdf HFIN 3/31/2016 8:30:00 AM
HB 319
HB319 Supporting Documents - Snowmobile Trails Program FAQ.pdf HFIN 3/31/2016 8:30:00 AM
HB 319
HB319 Supporting Documents - Snowmobile Trails Program.pdf HFIN 3/31/2016 8:30:00 AM
HB 319
HB319 Supporting Documents - SnowTRAC Grooming Pool Trail Maps.pdf HFIN 3/31/2016 8:30:00 AM
HB 319
HB319 Supporting Documents - SnowTRAC Resolution of Support, 15-001, 26 August 2015.pdf HFIN 3/31/2016 8:30:00 AM
HB 319
HB249 Sectional Analysis.pdf HFIN 3/31/2016 8:30:00 AM
HB 249
HB249 Sponsor Statement - Governor's Transmittal Letter.pdf HFIN 3/31/2016 8:30:00 AM
HB 249
HB249 Supporting Document - DOR & DOT Response to House Transportation - 2.4.16.pdf HFIN 3/31/2016 8:30:00 AM
HB 249
HB250 Sponsor Statement - Governor's Transmittal Letter.pdf HFIN 3/31/2016 8:30:00 AM
HB 250
HB 373 Supporting Document Report to Alaska Legislature.pdf HFIN 3/31/2016 8:30:00 AM
HB 373
HB 373 Supporting Document Resolutions for Tesoro RIK Contract 2016.pdf HFIN 3/31/2016 8:30:00 AM
HB 373
HB 373 Supporting Document TesoroRIKContractBIF.pdf HFIN 3/31/2016 8:30:00 AM
HB 373
HB 373 Transmittal Letter.pdf HFIN 3/31/2016 8:30:00 AM
HB 373
DNR PPT HB 373 - H.Finance - 03.31.16.pdf HFIN 3/31/2016 8:30:00 AM
HB 373
HB319 Supporting Documents - Big Lake Snowmachine Trails Page 2.pdf HFIN 3/31/2016 8:30:00 AM
HB 319
HB319 Supporting Documents - Big Lake Snowmachine Trails Page 1.pdf HFIN 3/31/2016 8:30:00 AM
HB 319
Tax presentation INCOME HB 250 3-30-16.pdf HFIN 3/31/2016 8:30:00 AM
HB 250
Tax presentation MOTOR FUEL 3-30-16 final.pdf HFIN 3/31/2016 8:30:00 AM
HB 249
DNR PPT HB 373 - H.Finance - 03.31.16.pdf HFIN 3/31/2016 8:30:00 AM
HB 373
Testimony on HB 250.pdf HFIN 3/31/2016 8:30:00 AM
HB 250