Legislature(2015 - 2016)SENATE FINANCE 532

02/05/2015 09:00 AM Senate FINANCE

Audio Topic
09:02:20 AM Start
09:03:48 AM Overview: Governor's Fy 15 Supplemental Request
10:12:39 AM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Presentation: Overview FY17 Operating Budget TELECONFERENCED
Departments: Environmental Conservation and
Scheduled but Not Heard
<Pending Referral>
Bills Previously Heard/Scheduled
                 SENATE FINANCE COMMITTEE                                                                                       
                     February 5, 2015                                                                                           
                         9:02 a.m.                                                                                              
9:02:20 AM                                                                                                                    
CALL TO ORDER                                                                                                                 
Co-Chair Kelly  called the Senate Finance  Committee meeting                                                                    
to order at 9:02 a.m.                                                                                                           
MEMBERS PRESENT                                                                                                               
Senator Anna MacKinnon, Co-Chair                                                                                                
Senator Pete Kelly, Co-Chair                                                                                                    
Senator Peter Micciche, Vice-Chair                                                                                              
Senator Click Bishop                                                                                                            
Senator Mike Dunleavy                                                                                                           
Senator Lyman Hoffman                                                                                                           
Senator Donny Olson                                                                                                             
MEMBERS ABSENT                                                                                                                
ALSO PRESENT                                                                                                                  
Pat  Pitney,  Director,  Office of  Management  and  Budget,                                                                    
Office of the Governor.                                                                                                         
SB 30     MARIJUANA REG;CONT. SUBST;CRIMES;DEFENSES                                                                             
          SB 30 was SCHEDULED but not HEARD.                                                                                    
OVERVIEW: GOVERNOR'S FY 15 SUPPLEMENTAL REQUEST                                                                                 
^OVERVIEW: GOVERNOR'S FY 15 SUPPLEMENTAL REQUEST                                                                              
9:03:48 AM                                                                                                                    
PAT  PITNEY,  DIRECTOR,  OFFICE OF  MANAGEMENT  AND  BUDGET,                                                                    
OFFICE  OF  THE  GOVERNOR,  stated  that  the  overview  was                                                                    
related to SB 40. The total  UGF amount was $50 million, but                                                                    
there were both increases and  decreases in the budget bill.                                                                    
There  were   some  significant   components  to   the  bill                                                                    
including  the  Medicaid  payment  from 2014  that  was  not                                                                    
recorded  in   2014  because  of  accounting   rules  and  a                                                                    
recommendation by Legislative  Audit to move it  to 2015 for                                                                    
completion. There  was a  corresponding lapse  in 2014  of a                                                                    
slightly  higher amount  of $92  million.  The second  major                                                                    
component  of  the  bill  was the  repeal  of  the  one-time                                                                    
education funding  from 2015  of approximately  $100 million                                                                    
in K-12 education funding over three years.                                                                                     
Senator  Dunleavy queried  the number  of dollars  that were                                                                    
already encumbered.  Ms. Pitney replied  that she knew  of a                                                                    
few that  were encumbered,  and others  she was  unsure. The                                                                    
$92 million was committed in  2014, because of the intention                                                                    
of   the  accounting.   There   were   some  judgments   and                                                                    
settlements that were committed  encumbered items. The items                                                                    
that  were available  to  go without  spending  did not  get                                                                    
included in the supplemental budget.                                                                                            
9:07:18 AM                                                                                                                    
Senator   Dunleavy  wondered   what  would   occur  if   the                                                                    
legislature  denied the  supplemental  requests. Ms.  Pitney                                                                    
agreed to  provide that  information. She  felt it  would be                                                                    
extremely detrimental.                                                                                                          
Senator Dunleavy  requested a list of  the encumbered items,                                                                    
and would like  to see the impact on the  agencies would the                                                                    
legislature deny the requests.                                                                                                  
Senator  Olson  wondered  which  department  would  be  most                                                                    
affected by  the budget reductions. Ms.  Pitney replied that                                                                    
the Department  of Health and  Social Services  (DHSS) would                                                                    
see the greatest impact.                                                                                                        
Ms.   Pitney   stated   that  another   component   of   the                                                                    
supplemental budget was  the reappropriations of unobligated                                                                    
amounts on  community, sewer, and  water projects  that were                                                                    
already  completed.  She explained  that  there  could be  a                                                                    
project with  a $2.5  million allocation,  and there  may be                                                                    
$100,000  remaining.  There  were several  small  community,                                                                    
sewer,  and  water  projects with  small  amounts  in  their                                                                    
project balance, so they were  consolidated for an amount of                                                                    
money  for the  Spill  Prevention and  Response (SPAR)  fund                                                                    
necessary to complete operations in the current year.                                                                           
Co-Chair Kelly  wondered if  the SPAR  amount was  net zero.                                                                    
Ms. Pitney responded in the affirmative.                                                                                        
Senator  Dunleavy  queried  the   result  of  declining  the                                                                    
Department of Environmental  Conservation (DEC) transfer for                                                                    
Co-Chair  Kelly  wondered  what   document  Ms.  Pitney  was                                                                    
working from. Ms. Pitney referred to the spreadsheet.                                                                           
Co-Chair Kelly queried the page of the spreadsheet.                                                                             
9:12:15 AM                                                                                                                    
AT EASE                                                                                                                         
9:14:35 AM                                                                                                                    
9:14:47 AM                                                                                                                    
Co-Chair  Kelly directed  the  committee to  page  6 of  the                                                                    
Vice-Chair  Micciche  wondered  if the  municipalities  were                                                                    
contacted to  determine the finalization of  their projects,                                                                    
and  the availability  of the  reappropriation  to the  SPAR                                                                    
fund.   Ms.  Pitney   responded  that,   traditionally,  the                                                                    
community was  allowed to reappropriate any  funds that were                                                                    
left over  after a project's completion.  The current fiscal                                                                    
situation  in Alaska  propelled the  administration to  take                                                                    
back the funds to cover the SPAR budget shortfall.                                                                              
Vice-Chair Micciche  wondered if  there were  other projects                                                                    
in  the state  that may  possibly have  leftover funds.  Ms.                                                                    
Pitney replied  that she understood  that the  projects were                                                                    
as many as were complete in the state.                                                                                          
Vice-Chair Micciche  surmised that  it was every  project in                                                                    
the state with unexpended dollars. Ms. Pitney agreed.                                                                           
Co-Chair Kelly  stated that any  other project would  not be                                                                    
included in the supplemental budget.                                                                                            
In response  to a  question from Senator  Dunleavy regarding                                                                    
the SPAR  fund source, she  stated that  there was a  5 cent                                                                    
per  barrel  fee for  oil  in  Trans-Alaska Pipeline  System                                                                    
(TAPS).  The SPAR  fund was  adequate at  a time  when there                                                                    
were 2 million barrels in TAPS.  The 5 cent fee had not been                                                                    
adjusted  in  20 years.  She  pointed  out that  there  were                                                                    
currently only 500,000  barrels of oil per day  in TAPS. The                                                                    
SPAR  fund  program  needed to  be  structurally  corrected,                                                                    
because  of  the  lower  number   of  barrels  of  oil.  The                                                                    
supplemental  budget allowed  the  SPAR fund  to get  funded                                                                    
through  2016  without  correcting  the  5  cent  structural                                                                    
deficit. A  policy discussion regarding  the level  of state                                                                    
responsibility in  SPAR, and how  would SPAR be  funded. The                                                                    
supplemental  budget allowed  SPAR to  manage through  FY 15                                                                    
and FY  16, but  FY 17 required  a structured  solution. She                                                                    
remarked that  she and Commissioner  Hartig would  provide a                                                                    
recommendation  later in  the current  session, in  order to                                                                    
have  a   conversation  regarding  the   structural  changes                                                                    
necessary. The  supplemental budget allowed for  time within                                                                    
the  existing  program,  through a  pending  settlement  and                                                                    
reappropriation to maintain the program through FY 16.                                                                          
9:20:01 AM                                                                                                                    
Co-Chair   Kelly  wondered   why  FY   16  related   to  the                                                                    
supplemental budget.  Ms. Pitney replied that  the SPAR fund                                                                    
required  a  minimum of  $800,000  to  complete the  current                                                                    
fiscal year. She remarked that  the reappropriation was $3.2                                                                    
million into SPAR,  which would allow $2 million  for FY 16.                                                                    
There  was also  a  pending settlement  at approximately  $5                                                                    
million,  which  would be  deposited  into  SPAR. Those  two                                                                    
components plus the  5 cents per barrel fee  would allow for                                                                    
the management of SPAR through FY 16.                                                                                           
Co-Chair Kelly wondered why money  for FY 16 was included in                                                                    
the supplemental  budget. Ms. Pitney agreed  to provide that                                                                    
Ms.  Pitney  explained  that there  were  two  more  program                                                                    
repeals:   $750,000   in   the   Alaska   Digital   Teaching                                                                    
9:22:02 AM                                                                                                                    
AT EASE                                                                                                                         
9:25:37 AM                                                                                                                    
9:25:44 AM                                                                                                                    
Ms. Pitney  referred to the spreadsheet  in the supplemental                                                                    
budget request folder (copy on  file). She looked at page 1,                                                                    
line  6,  and looked  at  the  request  of $785,000  to  the                                                                    
Alcohol Beverage and Control  (ABC) Board for implementation                                                                    
of the Marijuana  sale and use law. She  remarked that there                                                                    
were other smaller items on the page.                                                                                           
9:26:37 AM                                                                                                                    
Co-Chair MacKinnon  looked at line 7  on page 1, and  the $2                                                                    
million for the  1066 Public School Trust  Fund. She queried                                                                    
the  asset  value in  the  trust.  She understood  that  the                                                                    
legislature  could  only remove  in  excess  amounts of  the                                                                    
actual value of the fund,  based on statute. She wondered if                                                                    
there was  any additional  revenue in  the fund.  Ms. Pitney                                                                    
agreed to provide that information.                                                                                             
Ms.  Pitney looked  at page  2, and  noted the  three listed                                                                    
items in  Department of Health  and Social  Services (DHSS).                                                                    
Two  components  were  related  to  the  growing  number  of                                                                    
children  in   foster  care   and  subsidized   adoption  or                                                                    
Co-Chair Kelly  wondered if  the $1.7  million was  only for                                                                    
foster   parent  payments.   Ms.  Pitney   replied  in   the                                                                    
affirmative.  She explained  that the  request was  based on                                                                    
the number of children in care.                                                                                                 
Co-Chair MacKinnon  remarked that  nearly $7 million  was in                                                                    
the  supplemental  budget  to support  a  recently  modified                                                                    
program. She  queried the fiscal  note projections  from the                                                                    
change,  as  compared to  the  current  budget request.  She                                                                    
stressed  that her  inquiry was  not an  examination of  the                                                                    
need, but  rather a comparison  of the previous  fiscal note                                                                    
versus  the current  request. Ms.  Pitney agreed  to provide                                                                    
that information.                                                                                                               
Ms.  Pitney  looked  at  page  2, line  8,  the  Wood  Bison                                                                    
Transport, which  was a  primarily federally  funded program                                                                    
that would  transport bison through  Department of  Fish and                                                                    
Game (DFG)                                                                                                                      
Senator  Bishop  wondered  if the  state  had  received  the                                                                    
federal receipt for the Wood Bison Transport.                                                                                   
Co-Chair  MacKinnon  remarked  that   there  had  been  some                                                                    
concern  regarding  the  federal  government's  approval  of                                                                    
reintroducing bison  to an area that  contained hydrocarbons                                                                    
or  other minerals  that Alaskans  may want  to access.  She                                                                    
wanted to  ensure that the  reintroduction would  not create                                                                    
an entitlement or  trigger on the Endangered  Species Act to                                                                    
preclude  Alaska  from  developing  its  natural  resources.                                                                    
There  was  a  recent  letter  of  inquiry  to  the  federal                                                                    
government to ensure  that the state would  not be penalized                                                                    
for ensuring the animal is returned to its natural habitat.                                                                     
9:31:29 AM                                                                                                                    
Senator Dunleavy  remarked that  there was a  federal waiver                                                                    
that would allow  the bison transport. Ms.  Pitney agreed to                                                                    
provide further information.                                                                                                    
Ms.  Pitney looked  at page  3,  line 12,  and the  Medicaid                                                                    
payment. The $92 million request  was for payments that were                                                                    
made  in 2014.  At  the request  of  Legislative Audit,  the                                                                    
payments should be put into the 2015 budget.                                                                                    
Co-Chair Kelly wondered why the  payment was moved from 2014                                                                    
to 2015. Ms. Pitney agreed to provide that information.                                                                         
Senator Dunleavy shared  that the term for the  term for the                                                                    
Bison  Transplant was  accepted as  "experimental", and  the                                                                    
bison would be moved to the Innoko River.                                                                                       
Co-Chair Kelly asked for clarification.                                                                                         
Senator Dunleavy announced that the  bison would be moved to                                                                    
the Innoko River area.                                                                                                          
Ms.  Pitney looked  at page  3, lines  13 through  15, which                                                                    
were related  to fund management  costs, and  fee associated                                                                    
with managing  the funds.  She stated that  line 16  was for                                                                    
investment management fees. The  current calendar year saw a                                                                    
good  return,  so the  management  fees  were based  on  the                                                                    
returns. She  could not  speak to the  return levels  in the                                                                    
upcoming year. The                                                                                                              
Co-Chair  MacKinnon wondered  if the  fees on  line 16  were                                                                    
related to  the Public  Employees' Retirement  System (PERS)                                                                    
and   Teachers'  Retirement   System  (TRS)   one-time  cash                                                                    
infusion  of  $3  billion   from  the  previous  legislative                                                                    
session.  Ms. Pitney  replied that  the deposits  were timed                                                                    
over  the course  of three  periods. She  agreed to  provide                                                                    
further information.                                                                                                            
Co-Chair  Kelly noted  that there  were various  topics that                                                                    
Ms. Pitney would address at a later date.                                                                                       
9:37:02 AM                                                                                                                    
Vice-Chair Micciche  looked at line  9, which related  to HB
126.  He stated  that HB  126  would increase  the age  that                                                                    
children  would stay  in  care from  age 20  to  age 21.  He                                                                    
wondered  if the  state could  afford the  $2.3 million.  He                                                                    
felt  that  there  needed  to be  an  analysis  of  previous                                                                    
legislation to determine their current affordability.                                                                           
Co-Chair Kelly  surmised that the  request was  from various                                                                    
funds. Vice-Chair  Micciche added his concern  whether there                                                                    
were  additional requests,  or  fund  transfers. Ms.  Pitney                                                                    
replied that the  request was from a fund, but  did not know                                                                    
if there was  a fee associated with the fund.  She agreed to                                                                    
provide further information.                                                                                                    
Ms. Pitney looked at page  4, explained that there were some                                                                    
net zero technical  adjustments on lines 18  through 20. The                                                                    
Municipal Bond  Bank on line  17 was an additional  cost due                                                                    
to the  regulatory oversight.  She shared  that line  22 was                                                                    
related to  a statute  that provided for  a grant,  if there                                                                    
was a  change in a  community organization. She  stated that                                                                    
Edna  Bay had  changed their  community organization,  so it                                                                    
required the $75 million.                                                                                                       
Ms.  Pitney  looked  at  page  5,  line  25,  which  was  an                                                                    
outsourcing of the  single audit for the  DHSS major federal                                                                    
programs like  Medicaid. The single audit  was traditionally                                                                    
conducted by Legislative Audit, but  it was requested that a                                                                    
third party provider conduct future  audits. The request was                                                                    
for a tree-year contract for an external audit.                                                                                 
Co-Chair  MacKinnon wondered  if  the administration  worked                                                                    
with  the   department  to   ensure  that   its  information                                                                    
technology  system  was  working  properly.  She  felt  that                                                                    
current  system  was  not functioning  as  anticipated.  She                                                                    
pointed  out   that  the  information  extraction   must  be                                                                    
ensured,  before funding  the audit.  She stressed  that the                                                                    
system  must  be repaired  to  access  the information.  Ms.                                                                    
Pitney  replied   that  the   system  needed   dramatic  and                                                                    
immediate improvement, and was  the highest priority for the                                                                    
current administration to improve  the system. She felt that                                                                    
an improved system may provide  the opportunity for auditing                                                                    
responsibilities to revert back to Legislative Audit.                                                                           
9:43:16 AM                                                                                                                    
Co-Chair MacKinnon stressed that  she was not requesting the                                                                    
responsibility  return  to  Legislative  Audit,  though  she                                                                    
recognized  the  additional  funding requests  for  a  third                                                                    
party  audit.   She  noted  that  the   DHSS  was  sometimes                                                                    
unwilling  or unable  to respond  to auditing  requests from                                                                    
Legislative Audit.  She hoped  that the  independent auditor                                                                    
would  be able  to  pull all  the data  from  the system  to                                                                    
provide the necessary information  for the completion of the                                                                    
Ms. Pitney  looked at  line 26, which  was a  settlement for                                                                    
the correctional  officers. She  explained that line  27 was                                                                    
additional federal  receipts that were available  for Alaska                                                                    
Energy  Authority  (AEA)  programs,  if  the  authority  was                                                                    
available  to  accept  those  receipts.   The  line  28  was                                                                    
connected  to   the  reappropriation   of  the   Mount  Spur                                                                    
projection the DGF. The capital  budget appropriation in the                                                                    
capital budget was  reappropriated to cover some  of the AEA                                                                    
programs, so  the supplemental request  was a repeal  of the                                                                    
DGF portion of the project into the Renewable Energy Fund.                                                                      
Senator  Bishop  stressed that  he  wanted  to evaluate  the                                                                    
Mount  Spur request,  in order  to prevent  future redundant                                                                    
requests.  Co-Chair  Kelly  replied  that  the  concern  was                                                                    
related to previous administration.                                                                                             
Co-Chair  Kelly asked  that  the  Department of  Corrections                                                                    
(DOC)  connected   with  Senator   Bishop  to   address  the                                                                    
redundancy  concern.  Ms.  Pitney  agreed  to  provide  that                                                                    
Co-Chair Kelly  requested a discussion regarding  the future                                                                    
of  the SPAR  fund. He  stressed that  there was  not enough                                                                    
money to sustain  the program, and the  mechanism to provide                                                                    
money was  connected to  oil production.  He noted  that oil                                                                    
production had  decreased, and also remarked  that there was                                                                    
no benefit  at higher oil  prices. He felt that  a half-hour                                                                    
discussion would be sufficient.                                                                                                 
Vice-Chair  Micciche echoed  Co-Chair  Kelly's concerns.  He                                                                    
explained that there  were entities that paid  into the fund                                                                    
who  had their  own  spill  response program,  supplementing                                                                    
many other  industries that  did not pay  into the  fund. He                                                                    
felt  that  other  industries  should  share  the  cost.  He                                                                    
remarked that he was not against raising the SPAR fee.                                                                          
Co-Chair Kelly  suggested that a  subcommittee be  formed to                                                                    
discuss the issue.                                                                                                              
9:48:30 AM                                                                                                                    
Senator Dunleavy remarked that  the subcommittee for DEC had                                                                    
addressed  the  SPAR  fund issue  during  recent  years.  He                                                                    
remarked that the original mission  of the SPAR fund must be                                                                    
Ms.  Pitney  looked  at  page  6, line  29,  which  was  the                                                                    
reappropriation that  opened the scope for  the Interior Gas                                                                    
Project  to allow  for purchase  of instate  versus strictly                                                                    
North  Slope assets,  for facilitation  of the  Interior Gas                                                                    
Co-Chair Kelly  wondered if the  item should be  included in                                                                    
the  budget  rather  than legislation.  He  noted  that  the                                                                    
original appropriation was a statute from SB 23.                                                                                
Vice-Chair Micciche shared that  he had offered an amendment                                                                    
to  SB  23  to  provide for  statewide  potential,  but  the                                                                    
amendment  was  not  accepted. He  felt  that  a  discussion                                                                    
should occur  in a committee  setting, rather  than included                                                                    
in the supplemental budget.                                                                                                     
Ms. Pitney  addressed page 7.  She stated that lines  33 and                                                                    
34 were judgments  and settlements; and line 35  was a scope                                                                    
change  for  existing  funds  to  be  used  for  information                                                                    
technology beyond  the safety  and information  network. She                                                                    
stated  that line  36 was  an estimate  for the  anticipated                                                                    
fire  suppression  activities   for  Department  of  Natural                                                                    
Resources  (DNR) for  $3 million.  She stated  that line  38                                                                    
would repeal  funding for  the redistricting  board, because                                                                    
it had completed its work.                                                                                                      
Ms.  Pitney looked  at page  8,  line 39  through 43,  which                                                                    
outlined  the  repeals. She  stated  that  line 39  was  the                                                                    
school  debt  reimbursement  reduction,  which  reduced  the                                                                    
overall required debt service.                                                                                                  
9:53:22 AM                                                                                                                    
Co-Chair Kelly remarked that  one-time funding for education                                                                    
from the  previous year,  had dollars  specifically targeted                                                                    
to  policy. The  bill had  an increase  to the  base student                                                                    
allocation (BSA), and the other  dollars were related to the                                                                    
policy  initiatives.   He  requested   an  analysis   of  an                                                                    
adjustment,  if the  BSA-increase were  removed, instead  of                                                                    
the  policy initiatives'  funding.  He  wondered what  would                                                                    
occur, if there was a reduction to the BSA.                                                                                     
Vice-Chair   Micciche   remarked   that  there   should   be                                                                    
transparent conversations regarding  policy adjustments. The                                                                    
SPAR fund required important  discussions, because there was                                                                    
$7 million into the SPAR  fund for emergency management. The                                                                    
open  discussions  should  occur regarding  what  the  state                                                                    
could afford.  The SPAR fund  should be utilizing  fees from                                                                    
the  individuals that  take advantage  of its  services. The                                                                    
state could  not afford  to continue to  cover the  costs of                                                                    
many  programs.  He  appreciated  the  creative  efforts  to                                                                    
manage the  shortfall, but reiterated  that the  cost should                                                                    
be shared by those who use the benefits of the program.                                                                         
Co-Chair Kelly  restated that he  would set aside  some time                                                                    
for committee discussion.  He encouraged Vice-Chair Micciche                                                                    
to organize a task force related to the SPAR fund.                                                                              
Ms.  Pitney stated  that page  8, lines  47 through  line 63                                                                    
were  ratifications,   which  were  prior   year  accounting                                                                    
9:58:14 AM                                                                                                                    
Co-Chair   Kelly  surmised   that  the   ratifications  were                                                                    
essentially bills that required payment. Ms. Pitney agreed.                                                                     
Co-Chair  Kelly  appreciated  the  work of  Ms.  Pitney.  He                                                                    
remarked  that  there were  no  assistants  in Ms.  Pitney's                                                                    
presence.  He cautioned  against using  the budget  to shape                                                                    
policy that  was already designated  by the  legislature. He                                                                    
looked  at the  one-time funding  repeal, and  stressed that                                                                    
the previous  year's education discussion was  impactful and                                                                    
important,  and did  not  feel that  the  funding should  be                                                                    
Co-Chair MacKinnon  remarked that each  administration could                                                                    
draft  a  supplemental  budget   as  they  work  to  resolve                                                                    
financial  challenges. She  noted that  Alaska was  facing a                                                                    
financial  challenge,  and  remarked  that it  was  a  great                                                                    
challenge to find $2.4 billion.  She remarked that education                                                                    
was bearing  the cost of paying  a bill from 2014  that once                                                                    
had   a  positive   revenue.  She   pointed  out   that  the                                                                    
legislature  was   facing  difficult  choices.   There  were                                                                    
students in  Alaska that were  seeking a  quality education,                                                                    
and  the legislature  had  worked  to specifically  allocate                                                                    
some various  resources to enhance education.  She furthered                                                                    
that  there  were many  in  the  state that  were  accessing                                                                    
current Medicaid services,  and the state needed  to pay $92                                                                    
million  to Medicaid.  She noted  that there  was an  intent                                                                    
from  the current  administration  to  expand Medicaid.  She                                                                    
looked forward  to the conversations  to determine  the cost                                                                    
to Alaskans  in perpetuity.  She stressed  that the  cost of                                                                    
Medicaid  services  would be  weighed  against  the cost  of                                                                    
education.  She announced  that Alaska's  education used  28                                                                    
cents of  every dollar in  the general fund, and  another 28                                                                    
cents was spent on health and human services in the state.                                                                      
Co-Chair Kelly  remarked that  there was  a large  amount of                                                                    
money that needed to be removed from government.                                                                                
Vice-Chair  Micciche cautioned  against "short-cutting"  the                                                                    
system. He  stressed that policy discussions  were important                                                                    
to the  process, and  budget issues could  not be  solved by                                                                    
discounting recently enacted policy.                                                                                            
10:05:04 AM                                                                                                                   
Co-Chair  Kelly  expressed  opposition to  most  new  budget                                                                    
requests because  Alaska had a  bonded indebtedness  bill of                                                                    
$228 million per year in  the operating budget. He felt that                                                                    
the  bond debt  should  be in  the  capital budget  instead,                                                                    
because  it   effected  the  actual  size   of  the  capital                                                                    
expenditures. The  capital budget  should reflect  the total                                                                    
capital  expenditures.  The  capital   budget  was  used  to                                                                    
balance  the needs  of different  communities in  the state,                                                                    
but  the  $228 million  provided  a  skewed perspective.  He                                                                    
noted that  the current year's capital  budget was unusually                                                                    
small,   but  encouraged   the  inclusion   of  the   bonded                                                                    
indebtedness in the capital budget in future years.                                                                             
10:07:08 AM                                                                                                                   
Senator   Dunleavy  hoped   that   the  administration   was                                                                    
composing  methods to  work with  the legislature  to reduce                                                                    
the   size  of   government.  He   understood  that   budget                                                                    
reductions were  imperative in this  time of  fiscal crisis,                                                                    
but  felt that  laws must  be made  to limit  the growth  of                                                                    
government. He  stressed that the cost  drivers would always                                                                    
require  funding.  He felt  that  many  of his  constituents                                                                    
understood the  budget issues, but  understood that  it will                                                                    
be   devastating  to   some   people.   He  encouraged   the                                                                    
administration to  eliminate some  regulations to  lower the                                                                    
cost to  specific industries, non-profits, etc.  He remarked                                                                    
that  there would  be continual  budget reductions,  and the                                                                    
legislature  may violate  its own  laws and  regulations. He                                                                    
shared that  the education  system bureaucrats  were trained                                                                    
to continue to ask for  more funding for programs. He feared                                                                    
that Alaskans may wait for the  cost of oil to increase, and                                                                    
felt  that  waiting  would  be  a  devastating  mistake  for                                                                    
Alaska. Ms. Pitney appreciated Senator Dunleavy's comments.                                                                     
Co-Chair Kelly felt the  Senator Dunleavy adequate described                                                                    
the direction of Alaska.                                                                                                        
10:12:39 AM                                                                                                                   
The meeting was adjourned at 10:12 a.m.                                                                                         

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