Legislature(2017 - 2018)ADAMS ROOM 519

04/10/2018 01:30 PM House FINANCE

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
<Bill Hearing Canceled>
<Pending Referral>
-- Public Testimony --
Heard & Held
-- Public Testimony --
Moved HCS SB 97(FIN) Out of Committee
<Bill Hearing Canceled>
+ Bills Previously Heard/Scheduled TELECONFERENCED
Moved SB 107 Out of Committee
-- Public Testimony --
Moved CSHB 316(FIN) Out of Committee
<Bill Hearing Canceled>
SENATE BILL NO. 107                                                                                                           
     "An Act relating to the Alaska capital income fund."                                                                       
3:14:35 PM                                                                                                                    
Co-Chair Foster indicated the committee  heard SB 107 by the                                                                    
Senate Finance Committee on May  2, 2017. He invited Senator                                                                    
McKinnon to speak to the bill.                                                                                                  
SENATOR  ANNA MACKINNON,  SPONSOR,  had  discussed with  the                                                                    
House co-chairmen  the use of  the capital income  fund. The                                                                    
fund  did  not  sweep  into  the  general  fund.  Typically,                                                                    
capital  budget chairmen  swept  projects  that had  already                                                                    
been utilized  for other capital projects  around the state.                                                                    
It was money  that remained after the allotted  time and was                                                                    
still sitting  unused. The legislature  had two  choices for                                                                    
those  funds. First,  the legislature  could  place it  back                                                                    
into  the  general  fund  and  spend  it  like  GF  dollars.                                                                    
Instead, what SB 107 proposed  to do was dedicate the Alaska                                                                    
capital  income  fund  to  deferred  maintenance.  In  other                                                                    
words, the  money that was  being rolled into the  fund from                                                                    
lapsing projects  would be designated  for a higher  use and                                                                    
prioritized  deferred  maintenance  spending to  extend  the                                                                    
life of  state assets.  She read  from the  prepared sponsor                                                                    
     The  State of  Alaska maintains  over 2,200  facilities                                                                    
     which span  over 14 entities, including  the University                                                                    
     of Alaska and the  Court system. These facilities total                                                                    
     19 million  square feet  of space  and have  a combined                                                                    
     replacement value of $8.6 billion.                                                                                         
     The  State's current  outstanding deferred  maintenance                                                                    
     backlog  totals over  $1.84  billion,  which peaked  in                                                                    
     FY2012  at $2.3  billion. With  current funding  levels                                                                    
     and   no  consistent   funding  source,   the  deferred                                                                    
     maintenance backlog  is expected  to trend  up, causing                                                                    
     our facilities to fall into disrepair.                                                                                     
     The Alaska capital income fund  was created in 2006 and                                                                    
     receives  an annual  deposit of  the earnings  from the                                                                    
     Amerada  Hess  Settlement  invested  by  the  Permanent                                                                    
     Senate  Bill 107  envisions  using  these funds,  which                                                                    
     cannot  be  used  for dividends,  to  provide  reliable                                                                    
     annual   funding   for    preventative   and   deferred                                                                    
     maintenance. It  is important we set  up this mechanism                                                                    
     to  continue  to  preserve   our  investment  in  these                                                                    
     facilities  as the  infrastructure  ages  and cost  for                                                                    
     repairs and replacement increases.                                                                                         
Co-Chair Seaton  commented that part  of the  capital income                                                                    
fund money came from the Amerada  Hess fund. He asked if the                                                                    
money  had  already  been appropriated.  He  was  trying  to                                                                    
determine  whether  the  swept  money  would  be  designated                                                                    
general   funds.   He   asked   about   keeping   track   of                                                                    
reappropriated funds. He was  concerned with the duplication                                                                    
of funds.  Co-Chair MacKinnon  did not  know the  answer and                                                                    
deferred to Mr. Carpenter.                                                                                                      
3:18:29 PM                                                                                                                    
ROB  CARPENTER,   ANALYST,  LEGISLATIVE   FINANCE  DIVISION,                                                                    
replied that  the bill  was structured  to take  the revenue                                                                    
stream from  the Amerada Hess Settlement,  about $28 million                                                                    
per year,  to the  Alaska capital  income fund  for deferred                                                                    
maintenance projects.  Historically, the funds were  used in                                                                    
the  budget   for  deferred  maintenance  and   all  capital                                                                    
projects. However, when the  legislature started to consider                                                                    
using the earnings reserve account  as general fund revenue,                                                                    
it was  discovered that the  Alaska capital income  fund was                                                                    
not  a  designated  fund  source.  The  money  went  to  the                                                                    
unrestricted  general fund.  The amendment  would make  it a                                                                    
designated  fund source.  Furthermore,  to  the question  of                                                                    
about putting  reapropriations inside the fund,  there would                                                                    
not  be  a  problem  with  funds  being  mixed  because  the                                                                    
reappropriations  had  been  counted in  prior  sessions  in                                                                    
prior fiscal years.                                                                                                             
Co-Chair  Seaton  indicated  that the  legislature  received                                                                    
reports  on   duplicated  funds  and   regular  undesignated                                                                    
general funds.  He was trying  to figure out how  to account                                                                    
for spending each of the funds  that were mixed. He asked if                                                                    
it  would be  difficult  to tract  how  duplicated and  non-                                                                    
duplicated funds were spent from an accounting aspect.                                                                          
Mr.  Carpenter  responded that  to-date  the  state had  not                                                                    
reappropriated   funding  to   the   capital  income   fund.                                                                    
Currently,  the state  would operate  with the  Amerada Hess                                                                    
funds.   Conceptually,   if   the   state   were   to   send                                                                    
reappropriations  into  the  capital income  fund  and  then                                                                    
spend from  it, he did  not think  there would be  a problem                                                                    
with duplication  only in  regard to  how the  state counted                                                                    
the  general   fund  revenue.   The  state   always  equated                                                                    
designated general  fund revenues to the  designated general                                                                    
fund expenditures. They were  always equal, therefore, there                                                                    
would not be a duplication.                                                                                                     
Co-Chair  Seaton  suggested  that  if  the  legislature  put                                                                    
reapporpriations  into the  capital  income  fund, they  had                                                                    
already   been   appropriated.  Mr.   Carpenter   responded,                                                                    
"Correct."  Co-Chair Seaton  wondered, if  they were  spent,                                                                    
whether the  state would be  reappropriating them  again. He                                                                    
wanted to make  sure things were accounted for  if the state                                                                    
mixed duplicated and non-duplicated  funds. He was fine with                                                                    
the bill  but wanted to  make the committee aware  of mixing                                                                    
two types of fund sources. He wanted to raise the issue.                                                                        
Representative  Guttenberg  understood   that  part  of  the                                                                    
Amerada  Hess Settlement  was the  agreement that  the funds                                                                    
could  not be  used for  dividends. The  projected lapse  of                                                                    
time for  that specification to  change was 15 to  20 years.                                                                    
He believed that  theoretically the funds could  be used for                                                                    
dividends in the future.                                                                                                        
Mr. Carpenter thought  Representative Guttenberg was correct                                                                    
that the settlement  timeline had passed and  that the funds                                                                    
could  be redirected  for any  use. He  noted that  in prior                                                                    
versions of Percent  of Market Value (POMV)  bills there was                                                                    
a  provision getting  rid  of the  capital  income fund  and                                                                    
rolling the  funds into the  Permanent Fund.  However, there                                                                    
was  nothing precluding  the  legislature  from keeping  the                                                                    
capital income  fund and the Amerada  Hess Settlement monies                                                                    
set aside.                                                                                                                      
3:24:20 PM                                                                                                                    
Vice-Chair Gara  understood the Amerada Hess  portion of the                                                                    
capital  income fund.  He wondered  if  the legislature  had                                                                    
placed funds in  the capital income fund in  addition to the                                                                    
Amerada Hess funds. He wondered  if the bill being discussed                                                                    
would  govern  whatever  other funds  were  in  the  capital                                                                    
income fund.                                                                                                                    
Mr. Carpenter believed  in the past the  legislature had put                                                                    
other money in the capital  income fund. He could not recall                                                                    
the  time or  amount.  The bill  specifically  spoke to  the                                                                    
revenue shrink from the Amerada  Hess going into the capital                                                                    
income fund. It did not  indicate that the legislature could                                                                    
not  appropriate  additional money  in  the  fund. It  could                                                                    
create a burden in terms of counting the funds.                                                                                 
Vice-Chair  Gara  thought  it  governed  the  whole  capital                                                                    
income fund.  He did  not see anything  in the  bill talking                                                                    
about  only the  Amerada Hess  income stream.  Mr. Carpenter                                                                    
responded  that unless  the  legislature appropriated  money                                                                    
into the fund  it would only be the amount  flowing into the                                                                    
fund which was about $28 million.                                                                                               
Vice-Chair  Gara  did   not  need  to  know   if  there  was                                                                    
additional money in the fund. He forgot his question.                                                                           
3:26:20 PM                                                                                                                    
Co-Chair Foster OPENED public testimony.                                                                                        
3:26:44 PM                                                                                                                    
Co-Chair Foster CLOSED public testimony.                                                                                        
Co-Chair  Foster  directed  Vice-Chair Gara  to  review  the                                                                    
fiscal note.                                                                                                                    
Vice-Chair Gara  read the zero  fiscal note for SB  107. The                                                                    
fiscal  note assumed  that there  were  no additional  funds                                                                    
inside the  capital income  fund. It  stated that  the funds                                                                    
from   the  Amerada   Hess  settlement   would  now   become                                                                    
designated general funds as  opposed to undesignated general                                                                    
funds. It relabeled the $28 million income stream.                                                                              
Co-Chair  Seaton MOVED  to report  SB 107  out of  Committee                                                                    
with individual recommendations  and the accompanying fiscal                                                                    
There being NO OBJECTION, it was so ordered.                                                                                    
SB  107 was  REPORTED  out  of committee  with  a "do  pass"                                                                    
recommendation and with a new  zero fiscal note by the House                                                                    
Finance Committee.                                                                                                              
Co-Chair Foster reviewed the agenda  for the meeting at 5:00                                                                    
Representative  Wilson  had   heard  from  a  superintendent                                                                    
earlier  in  the  day  who  was  also  a  principal  and  an                                                                    
elementary teacher.  He was short  a special  needs teacher.                                                                    
She  wondered where  the  retired teacher  bill  was in  the                                                                    
legislative  process. Co-Chair  Foster  indicated that  both                                                                    
bills  were in  the  House Finance  Committee  and he  would                                                                    
determine  when the  bills  would  be heard.  Representative                                                                    
Pruitt clarified that  the Senate had its  version in Senate                                                                    
Finance  and  the  House  version   was  in  House  Finance.                                                                    
Representative  Wilson  relayed  she had  heard  there  were                                                                    
teacher  openings because  of positions  being difficult  to                                                                    
fill and that  some of those positions could  be filled with                                                                    
retirees. She thanked Co-Chair Foster for the update.                                                                           
Co-Chair  Foster indicated  there were  no further  comments                                                                    
from members.                                                                                                                   

Document Name Date/Time Subjects
HB 385 - Additional Documents - Diagram.pdf HFIN 4/10/2018 1:30:00 PM
HB 385
HB 385 - Additional Documents - FAQ's.pdf HFIN 4/10/2018 1:30:00 PM
HB 385
HB 385 - Additional Documents - HR 582.pdf HFIN 4/10/2018 1:30:00 PM
HB 385
HR 582
HB 385 - Additional Documents - Research.pdf HFIN 4/10/2018 1:30:00 PM
HB 385
HB 385 - Letter of Support - Alaska Fire Chief's Association.pdf HFIN 4/10/2018 1:30:00 PM
HB 385
HB 385 - Letter of Support - Alaska Firefighters Association.pdf HFIN 4/10/2018 1:30:00 PM
HB 385
HB 385 - Summary of Changes from Ver. A to D.pdf HFIN 4/10/2018 1:30:00 PM
HB 385
HB 385 - Letter of Support - AML.PDF HFIN 4/10/2018 1:30:00 PM
HB 385
HB 385 - Sponsor Statement.pdf HFIN 4/10/2018 1:30:00 PM
HB 385
HB 385 - Letter of Support - Fairbanks North Star Borough.pdf HFIN 4/10/2018 1:30:00 PM
HB 385
HB 385 - Reso 4829 in Support of HB 385 SB215.pdf HFIN 4/10/2018 1:30:00 PM
HB 385
SB 215
HB 385 - Amendment #1.pdf HFIN 4/10/2018 1:30:00 PM
HB 385
SB 97 - Amendment #1.pdf HFIN 4/10/2018 1:30:00 PM
SB 97
HB 316 - Amendment #1.pdf HFIN 4/10/2018 1:30:00 PM
HB 316
HB 316 Explanation of CS Changes_.pdf HFIN 4/10/2018 1:30:00 PM
HB 316
HB 316 Bill version N.pdf HFIN 4/10/2018 1:30:00 PM
HB 316