Legislature(2019 - 2020)SENATE FINANCE 532

02/20/2019 09:00 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
Download Video part 1. <- Right click and save file as

Audio Topic
09:03:06 AM Start
09:07:19 AM Departmental Review: Military and Veterans' Affairs
09:23:39 AM Departmental Review: Court System
09:41:05 AM Departmental Review: Transportation and Public Facilities
10:27:16 AM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+= SB 20 APPROP: OPERATING BUDGET/LOANS/FUNDS TELECONFERENCED
Heard & Held
+ Departmental Review Continued: TELECONFERENCED
<Items Below Added to Agenda>
- Department of Military & Veterans' Affairs
- Court System
- Transportation & Public Facilities
+ Bills Previously Heard/Scheduled TELECONFERENCED
<Items Below Removed from Agenda>
- Fish & Game
- Natural Resources
- Environmental Conservation
SENATE BILL NO. 20                                                                                                            
                                                                                                                                
     "An  Act making  appropriations for  the operating  and                                                                    
     loan  program  expenses  of state  government  and  for                                                                    
     certain   programs;    capitalizing   funds;   amending                                                                    
     appropriations;  making appropriations  under art.  IX,                                                                    
     sec. 17(c),  Constitution of the State  of Alaska, from                                                                    
     the constitutional  budget reserve fund;  and providing                                                                    
     for an effective date."                                                                                                    
                                                                                                                                
^DEPARTMENTAL REVIEW: MILITARY and VETERANS' AFFAIRS                                                                          
                                                                                                                                
9:07:19 AM                                                                                                                    
                                                                                                                                
DONNA  ARDUIN, DIRECTOR,  OFFICE OF  MANAGEMENT AND  BUDGET,                                                                    
introduced herself.                                                                                                             
                                                                                                                                
LACEY  SANDERS, BUDGET  DIRECTOR, OFFICE  OF MANAGEMENT  AND                                                                    
BUDGET,  discussed  the   presentation,  "State  of  Alaska;                                                                    
Office of Management and Budget;  FY 2020 Governor's Amended                                                                    
Budget;  Presentation  to   the  Senate  Finance  Committee;                                                                    
February 19, 2019; Director Donna Arduin" (copy on file).                                                                       
                                                                                                                                
Ms. Sanders looked  at slide 10, "Department  of Military of                                                                    
Veterans' Affairs."                                                                                                             
                                                                                                                                
Ms. Sanders  discussed slide 11, "FY2020  Budget: Department                                                                    
of  Military and  Veterans' Affairs,"  which showed  two bar                                                                    
graphs. She  detailed that the total  Department of Military                                                                    
and  Veteran's   Affairs'  (DMVA)  budget  for   the  FY  19                                                                    
Management  Plan  was  $58,126,500. The  governor's  amended                                                                    
total budget for FY 20  was $58,674,100; an increase overall                                                                    
of  $547,000.  The  Unrestricted General  Funds  (UGF)  were                                                                    
reduced by  $940,100. She continued that  Designated General                                                                    
Funds (DGF)  did not  change, and  equaled $28,400  for both                                                                    
years. Other  Funds increased  by $1,136,300.  Federal funds                                                                    
increased from $30,942,900 to $31,294,300.                                                                                      
                                                                                                                                
Ms. Sanders addressed the bar  graphs on the right-hand side                                                                    
of slide  11, "Budgeted  Position Comparison."  She observed                                                                    
that the  graphs reflected a  change of  permanent full-time                                                                    
positions going  from 277  to 278.  Permanent part  time and                                                                    
non-permanent positions both decreased by two.                                                                                  
                                                                                                                                
Ms. Sanders  spoke to slide  12, "FY2020  Budget: Department                                                                    
of Military and Veterans' Affairs Snapshot ($ Thousands)":                                                                      
                                                                                                                                
      ? Additional funding for Funeral Honor Support for                                                                        
     Alaska Veterans (+$50.0 GF)                                                                                                
     ? Delete funding for non-statutory/volunteer programs                                                                      
          ? Local Emergency Planning Committee (-$300.0 GF)                                                                     
         ? Alaska State Defense Force (-$210.9 GF)                                                                              
     ? Delete Special Assistant to the Commissioner (-                                                                          
     $161.2 GF & -1 PFT)                                                                                                        
     ? Statewide Support  Executive Branch 50% Travel                                                                           
     Reduction (-$103.3 GF)                                                                                                     
                                                                                                                                
Ms.  Sanders  commented  that the  slide  was  a  high-level                                                                    
summary of  the changes to  the DMVA budget. She  noted that                                                                    
the travel  reduction was applied  to all agencies,  and the                                                                    
Homeland  Security Emergency  Management  was excluded  from                                                                    
the reduction.                                                                                                                  
                                                                                                                                
9:11:04 AM                                                                                                                    
                                                                                                                                
Senator Wielechowski  referenced the reduction to  the Local                                                                    
Emergency  Planning Committee.  He  thought  there were  two                                                                    
statutes that required  the state to have  such a committee.                                                                    
He  thought  there  was  also  a  federal  requirement  that                                                                    
stipulated  that funding  for disasters  go through  a local                                                                    
emergency  planning committee.  He  wondered  how the  state                                                                    
would manage if the committee was eliminated.                                                                                   
                                                                                                                                
Ms.  Sanders   stated  that  the  funding   was  subject  to                                                                    
appropriation, and  the Department of Homeland  Security and                                                                    
Emergency  Management could  still continue  to support  the                                                                    
local  emergency   planning  committees  as   they  received                                                                    
funding through other sources.                                                                                                  
                                                                                                                                
Co-Chair Stedman  asked about funding for  the funeral honor                                                                    
support for  Alaska veterans,  and asked if  it was  for the                                                                    
Fairbanks Cemetery.                                                                                                             
                                                                                                                                
Ms.  Sanders stated  that the  item was  not related  to the                                                                    
Fairbanks Cemetery,  but rather for the  coordinating travel                                                                    
and attendance for veterans at funerals.                                                                                        
                                                                                                                                
Senator  Hoffman asked  if there  were any  programs in  the                                                                    
DMVA budget that were non-statutory and were funded.                                                                            
                                                                                                                                
Ms.  Sanders mentioned  the  Alaska  Military Youth  Academy                                                                    
(AMYA).                                                                                                                         
                                                                                                                                
Senator Hoffman  asked how  much the  state was  spending on                                                                    
the program.                                                                                                                    
                                                                                                                                
Ms. Sanders  did not  have the exact  amount but  offered to                                                                    
provide the information at a later time.                                                                                        
                                                                                                                                
Co-Chair   Stedman  asked   Ms.  Sanders   to  provide   the                                                                    
information along with a historical outlook on the program.                                                                     
                                                                                                                                
Senator  Hoffman considered  that  the  academy did  provide                                                                    
good  things for  the state,  but  thought it  needed to  be                                                                    
weighed  against things  that were  required in  statute. He                                                                    
mentioned   the   recent   earthquake   in   Anchorage   and                                                                    
surrounding areas.                                                                                                              
                                                                                                                                
Ms. Sanders  found that  the total budget  for the  AMYA for                                                                    
the FY  20 proposed budget  was $9.4 million. She  agreed to                                                                    
provide additional historical information.                                                                                      
                                                                                                                                
9:14:01 AM                                                                                                                    
                                                                                                                                
Co-Chair Stedman  asked if Senator  Hoffman wanted  a policy                                                                    
discussion  focused on  spending prioritization  in DMVA  to                                                                    
ensure  the state  was taking  care  of potential  emergency                                                                    
needs.                                                                                                                          
                                                                                                                                
Senator Hoffman answered in the affirmative.                                                                                    
                                                                                                                                
Co-Chair   Stedman  assumed   that   OMB   would  submit   a                                                                    
prioritized  list  from  departments  for  the  subcommittee                                                                    
process.                                                                                                                        
                                                                                                                                
Ms. Sanders stated that prioritized  spending lists would be                                                                    
provided to subcommittees by the agencies.                                                                                      
                                                                                                                                
Co-Chair  Stedman asked  Senator  Shower to  follow up  with                                                                    
Senator Hoffman on the issue.                                                                                                   
                                                                                                                                
Co-Chair von Imhof  observed that in UGF, the  AMYA was $4.6                                                                    
million  for FY  19, and  proposed  FY 20  funding was  $4.5                                                                    
million, for a roughly $100,000  decrease. She asked for OMB                                                                    
to  include  rationale for  decreases  in  the reporting  to                                                                    
subcommittees.                                                                                                                  
                                                                                                                                
Ms. Sanders spoke  to the reduction and noted that  it was a                                                                    
fund source change from UGF  to statutory designated program                                                                    
receipts. The AMYA  would be reaching out  to other entities                                                                    
such as non-profits and tribal  corporations to see if there                                                                    
were donations available to fill the funding.                                                                                   
                                                                                                                                
Senator  Hoffman asked  if the  administration was  going to                                                                    
submit the statutory requirements for the AMYA.                                                                                 
                                                                                                                                
Ms.  Sanders  stated  that  was not  one  of  the  statutory                                                                    
changes that would be submitted.                                                                                                
                                                                                                                                
Senator Wilson  asked about the  Alaska State  Defense Force                                                                    
and the  Local Emergency Planning Committee  and inquired if                                                                    
the department would be seeking statutory changes.                                                                              
                                                                                                                                
Ms.  Sanders  stated that  there  were  no proposed  statute                                                                    
changes for the programs.                                                                                                       
                                                                                                                                
Senator   Wilson   explained    that   the   United   States                                                                    
Constitution allowed  for states to establish  militias that                                                                    
could  be  called up  for  disasters  and other  issues.  He                                                                    
wondered if OMB was looking  to fund a defense force through                                                                    
emergency  funding  the  state  had available  or  by  other                                                                    
means.  He wondered  about the  upkeep of  the Alaska  State                                                                    
Defense Force.                                                                                                                  
                                                                                                                                
Ms. Sanders  stated that  DMVA would  be equipped  to answer                                                                    
the question. She knew that  the Alaska Active Defense Force                                                                    
was  a   component  of  the  department.   When  there  were                                                                    
disasters,  the department  was able  to collect  revenue to                                                                    
pay for members  to be called in for active  duty to respond                                                                    
to disasters or emergencies.                                                                                                    
                                                                                                                                
9:17:29 AM                                                                                                                    
                                                                                                                                
^DEPARTMENTAL REVIEW: COURT SYSTEM                                                                                            
                                                                                                                                
DOUG WOOLIVER, DEPUTY  ADMINISTRATIVE DIRECTOR, ALASKA COURT                                                                    
SYSTEM, displayed slide 7, "Judiciary."                                                                                         
                                                                                                                                
Mr. Wooliver turned to slide  8, "FY2020 Budget: Judiciary,"                                                                    
which showed two bar graphs.  He pointed out that the graphs                                                                    
on the  left showed  that neither federal  receipt authority                                                                    
nor other  categories had changed.  He noted that  the court                                                                    
system received about $380,000 in  federal receipts, most of                                                                    
the  federal  receipts  went  towards  a  court  improvement                                                                    
project  which  went   towards  improving  child  protection                                                                    
cases.   Another   $80,000   went   towards   supporting   a                                                                    
therapeutic  court in  Palmer. The  $2.2 million  in 'Other'                                                                    
funds  shown  on  the  graph  was  made  up  of  interagency                                                                    
receipts and  program receipts are  was unchanged.  He noted                                                                    
that  every year  the Alaska  Mental Health  Trust Authority                                                                    
(AMHTA)  helped  to  sponsor therapeutic  court  costs,  but                                                                    
every year the  money came out of the budget  then came back                                                                    
in. The funds were unchanged from the previous year.                                                                            
                                                                                                                                
Mr. Wooliver  continued to  address slide  8. He  noted that                                                                    
the  court system  was primarily  funded with  GF, including                                                                    
$518,000 in  DGF received through  the alcohol tax  and used                                                                    
in  some treatment  in therapeutic  courts.  He pointed  out                                                                    
that there were two main  increments that the department had                                                                    
requested,  including increased  lease  costs  and funds  to                                                                    
reopen on  Friday afternoons. The  first increment  was just                                                                    
below $400,000 for increased lease  costs. The lease for the                                                                    
court facility in  Bethel had recently expired,  and the re-                                                                    
negotiated lease cost increased  by $164,000. The other part                                                                    
of  the lease  increase was  for the  Diamond Courthouse  in                                                                    
Juneau, which had increased by about $116,000.                                                                                  
                                                                                                                                
Mr. Wooliver summarized  that there was a  total of $393,000                                                                    
in  increased lease  costs. The  second increment  requested                                                                    
was $3.1 million  to reopen courts on  Friday afternoons. He                                                                    
reminded that in  FY 17 the court system had  opted to close                                                                    
courts  on Friday  afternoons  as  a way  to  save about  $2                                                                    
million  in personnel  costs.  There had  been  a 4  percent                                                                    
reduction in time  worked, as well as a  4 percent reduction                                                                    
in  pay. The  closure had  not  proven to  be a  significant                                                                    
bottleneck  in  the  justice system.  The  closure  provided                                                                    
advantages  such  as  bench  time  for  judges  to  complete                                                                    
administrative  work, as  well as  free time  for the  other                                                                    
regular participants in court.                                                                                                  
                                                                                                                                
9:23:39 AM                                                                                                                    
                                                                                                                                
Mr. Wooliver  continued to  discuss the  requested increment                                                                    
for  reopening courts  on Friday  afternoons. He  identified                                                                    
the  disadvantages of  the closure;  including  the loss  of                                                                    
hearing  time, which  added up  to 26  days per  year. There                                                                    
were some  administrative problems such as  delayed mail and                                                                    
other  administrative  processes. The  department  supported                                                                    
the increase.  After hearing  the governor's  state address,                                                                    
the  department  had  met  with OMB,  which  said  it  would                                                                    
support  a request  to include  the  increase totaling  $3.1                                                                    
million.                                                                                                                        
                                                                                                                                
Mr.  Wooliver  showed  slide 9,  "FY2020  Budget:  Judiciary                                                                    
Snapshot ($Thousands):                                                                                                          
                                                                                                                                
         Trial Court - Re-Open Courts on Friday Afternoons                                                                   
           (+$3,098.0 GF & + 15 PFT)                                                                                            
                                                                                                                                
Mr. Wooliver  noted the increased  employee count  that went                                                                    
with the request for additional  funding to reopen courts on                                                                    
Friday afternoons.                                                                                                              
                                                                                                                                
Senator Wilson  asked if the  budget reflected  two Superior                                                                    
Court judges proposed  in SB 41 [legislation  passed in 2019                                                                    
pertaining to  superior court judges  in the  third judicial                                                                    
district].                                                                                                                      
                                                                                                                                
Mr.  Wooliver answered  in the  negative and  explained that                                                                    
the amount was  in a fiscal note attached  to the associated                                                                    
bill.                                                                                                                           
                                                                                                                                
Senator  Hoffman noted  that the  budget was  reduced by  $2                                                                    
million by closing the courts  on Friday afternoons, yet the                                                                    
request to reopen  courts was for $3.1 million.  He asked if                                                                    
Mr.  Wooliver  could  explain what  was  additionally  being                                                                    
requested.                                                                                                                      
                                                                                                                                
Mr. Wooliver stated  that there were two  parts to consider.                                                                    
The  $2 million  reflected the  four percent  pay reduction;                                                                    
additional   funds  were   for   reinstatement  of   fifteen                                                                    
employees.                                                                                                                      
                                                                                                                                
Senator  Hoffman  asked about  the  Bethel  court and  asked                                                                    
about potential plans if the  department did not receive the                                                                    
requested $165,000 increase for the facility.                                                                                   
                                                                                                                                
Mr. Wooliver  stated that in  the negotiated lease  with the                                                                    
City of  Bethel, there was an  option to reduce the  size of                                                                    
the court facility. The department  would have to absorb the                                                                    
difference in funding.                                                                                                          
                                                                                                                                
9:27:36 AM                                                                                                                    
                                                                                                                                
Co-Chair von  Imhof understood the  rationale to  reopen the                                                                    
courts on  Friday afternoons. She suspected  that during the                                                                    
last year, time  was utilized well despite  the courts being                                                                    
closed.  She asked  how staff  would make  up for  lost time                                                                    
with the courts reopen.                                                                                                         
                                                                                                                                
Mr.  Wooliver  reiterated   that  there  were  unanticipated                                                                    
benefits  of the  closure, but  the biggest  impact was  the                                                                    
loss of  hearings. He  pointed out  that judges  worked long                                                                    
hours  including  weekends.  By reopening  on  Fridays,  the                                                                    
public  would  benefit. He  explained  that  here were  some                                                                    
efficiencies   with  closing   on  Friday   afternoons,  but                                                                    
reopening would move cases along more quickly.                                                                                  
                                                                                                                                
Senator  Wielechowski thought  employees  might like  Friday                                                                    
afternoons off  and asked Mr.  Wooliver to  discuss employee                                                                    
morale. He understood that the  reopening would have minimal                                                                    
impact  on   public  safety  hearings.  He   knew  emergency                                                                    
hearings were already being done.                                                                                               
                                                                                                                                
Mr.  Wooliver stated  that the  department had  never polled                                                                    
employees as  to whether they  liked Friday  afternoons off.                                                                    
He reminded that employees had  taken a four percent pay cut                                                                    
and  thought  getting  a  full  paycheck  was  important  to                                                                    
employees.  He  affirmed  there  were  still  activities  on                                                                    
Fridays such  as emergency hearings,  criminal arraignments,                                                                    
continuation of  trials in  certain locations,  and issuance                                                                    
of search and arrest warrants.                                                                                                  
                                                                                                                                
Mr.  Wooliver continued  to  address Senator  Wielechowski's                                                                    
questions.  He  stated  that the  department  had  tried  to                                                                    
mitigate the effects  of Friday closures. The  past year had                                                                    
the  largest  amount  of  felony   filings  in  the  state's                                                                    
history. He acknowledged  that the cases would  be coming to                                                                    
trial in  FY 20 and  the courts  would need hearing  time to                                                                    
address them.                                                                                                                   
                                                                                                                                
9:32:07 AM                                                                                                                    
                                                                                                                                
Senator Shower  noted that  there were  four crime  bills in                                                                    
the legislature.  He anticipated  that passage of  the bills                                                                    
would  increase  workload.  He   asked  if  there  had  been                                                                    
consideration of  the potential increased workload  based on                                                                    
how the crime bills were structured.                                                                                            
                                                                                                                                
Co-Chair  Stedman  added  that  there had  been  concern  in                                                                    
previous  hearings that  the budget  would be  sufficient to                                                                    
address tightening  of the statutes  and crime  package. The                                                                    
committee  wanted  assurances from  the  court  that it  was                                                                    
prepared to handle the increased workload.                                                                                      
                                                                                                                                
Mr. Wooliver  stated there would  likely be a  fiscal impact                                                                    
on  the  bills,  and  there   would  be  fiscal  notes  with                                                                    
additional   workload  information.   He  stated   that  the                                                                    
proposed  Friday   afternoon  re-opening   was  a   part  of                                                                    
anticipated workload.  The department  anticipated increased                                                                    
criminal   proceedings  and   wanted  to   be  open   Friday                                                                    
afternoons to address the matter.                                                                                               
                                                                                                                                
Senator  Micciche  asked  if  the  committee  could  receive                                                                    
information  as  to  how  decisions were  made  as  to  what                                                                    
required legislation  was included in the  budget. He wanted                                                                    
to understand how the decisions were made at OMB.                                                                               
                                                                                                                                
Co-Chair Stedman thought Senator  Micciche could address the                                                                    
question to OMB after the testifier was done.                                                                                   
                                                                                                                                
Mr. Wooliver added  that the Court system did  not build its                                                                    
budget  around legislation  that had  yet to  be introduced.                                                                    
Any increased cost would be shown in fiscal notes.                                                                              
                                                                                                                                
Co-Chair  Stedman  informed  that  the  committee  would  be                                                                    
keeping  tabs on  the  matter to  ensure  a balance  between                                                                    
troopers, Village  Public Safety Officers (VPSOs),  and jail                                                                    
staff. He wanted to ensure  that there no gaps. He mentioned                                                                    
public outrage.                                                                                                                 
                                                                                                                                
9:35:25 AM                                                                                                                    
                                                                                                                                
Senator Micciche  observed that the crime  packages were not                                                                    
included in the budget and  would likely cause a substantial                                                                    
increase.  He mentioned  the oil  and gas  property tax.  He                                                                    
asked  how  the  decisions  were made  and  asked  about  an                                                                    
expected addition to the budget if key bills were passed.                                                                       
                                                                                                                                
Ms.  Arduin asked  if Senator  Micciche was  referencing the                                                                    
governor's anti-crime bills.                                                                                                    
                                                                                                                                
Co-Chair Stedman answered in the affirmative.                                                                                   
                                                                                                                                
Ms. Arduin stated that the  governor had submitted a package                                                                    
of legislation  dealing with the state's  crime problem. The                                                                    
pieces of legislation had fiscal  notes, which were included                                                                    
in the fiscal summary as part of the budget.                                                                                    
                                                                                                                                
Co-Chair Stedman  stated that the  items would  be extracted                                                                    
and listed  under fiscal impacts  to help  committee members                                                                    
track the funds.                                                                                                                
                                                                                                                                
Co-Chair   Stedman  wondered   how  many   more  pieces   of                                                                    
legislation   the   committee   should   expect   from   the                                                                    
administration.                                                                                                                 
                                                                                                                                
Ms. Arduin asked for assistance from her staff.                                                                                 
                                                                                                                                
9:37:29 AM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
9:39:24 AM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                
Co-Chair  Stedman   stated  that  the   Legislative  Finance                                                                    
Division  was  also working  on  a  list of  the  governor's                                                                    
proposed  bills and  fiscal impacts,  and he  hoped to  hear                                                                    
information  in  committee  soon.  He  thought  clarity  was                                                                    
important.  He   requested  that   OMB  help   with  Senator                                                                    
Micciche's question.                                                                                                            
                                                                                                                                
Ms.  Arduin stated  that  the Department  of  Law was  still                                                                    
working on  a number  bills. She  estimated that  there were                                                                    
approximately 16 bills, 4 of  which had been introduced. The                                                                    
bills  had  fiscal  notes  and  were  not  included  in  the                                                                    
appropriation  bill that  was  submitted.  The fiscal  notes                                                                    
were  included in  the fiscal  summary,  and OMB  considered                                                                    
them part of the budget.                                                                                                        
                                                                                                                                
^DEPARTMENTAL REVIEW: TRANSPORTATION and PUBLIC FACILITIES                                                                    
                                                                                                                                
9:41:05 AM                                                                                                                    
                                                                                                                                
Ms. Arduin noted that she  had been joined by the management                                                                    
director for  OMB, who had recently  been the Administrative                                                                    
Services Director  for the Department of  Transportation and                                                                    
Public Facilities (DOT).                                                                                                        
                                                                                                                                
AMANDA  HOLLAND, MANAGEMENT  DIRECTOR, OFFICE  OF MANAGEMENT                                                                    
AND BUDGET,  showed slide 19, "Department  of Transportation                                                                    
& Public Facilities."                                                                                                           
                                                                                                                                
Ms. Holland  discussed slide 20, "FY2020  Budget: Department                                                                    
of Transportation  & Public Facilities," which  depicted two                                                                    
bar graphs showing  a summary of the budget.  She noted that                                                                    
the DOT total  operating budget for FY  19 was $593,349,600.                                                                    
The  total  proposed  budget  with  the  governor's  amended                                                                    
budget  for  FY 20  was  $533,126,500  for a  difference  of                                                                    
$60,223,000. The  GF difference between the  two budgets was                                                                    
$96,050,300.                                                                                                                    
                                                                                                                                
Ms. Holland  continued to discuss  slide 20. For FY  19 that                                                                    
there was $179,988,800 in UGF, and  the DGF amount for FY 19                                                                    
was $98,821,000. The FY 20  proposed budget was $122,788,000                                                                    
UGF, and $59,971,500  DGF. The difference in  UGF between FY                                                                    
19  and FY  20 was  $57,200,800. The  difference in  DGF was                                                                    
$38,849,500.                                                                                                                    
                                                                                                                                
Ms. Holland pointed  out the green portion of  the column on                                                                    
the graphs, which  represented other funds. In  FY 19, other                                                                    
funding  totaled $312,404,700;  and  in the  proposed FY  20                                                                    
budget other  funds totaled $348,757,000  - for  an increase                                                                    
of  $36,352,000.  The  majority  of  the  increase  was  for                                                                    
interagency receipts  for the newly established  Division of                                                                    
Facilities Services.  Federal funding totaled  $2,135,100 in                                                                    
FY  19,  and  $1,610,000  in  FY  20  for  a  difference  of                                                                    
$525,100.                                                                                                                       
                                                                                                                                
Ms. Holland  discussed budgeted positions as  shown on slide                                                                    
20. She  specified that there  was four full  time permanent                                                                    
positions  and three  permanent part-time  positions removed                                                                    
from  the  budget.  There  was  an  increase  of  five  non-                                                                    
permanent  positions.  She  pointed  out that  most  of  the                                                                    
position movement  reflected positions moving in  and out of                                                                    
the department, primarily DOT positions  that were moving to                                                                    
Department of  Administration to  the Office  of Information                                                                    
Technology  as  part  of   consolidation.  There  were  some                                                                    
positions moving  into DOT  from other  agencies as  part of                                                                    
the facilities service's consolidation.                                                                                         
                                                                                                                                
9:46:08 AM                                                                                                                    
                                                                                                                                
Co-Chair   Stedman   expressed   confusion.   He   mentioned                                                                    
functions  of  the department.  He  asked  how the  position                                                                    
count  was  the  same  when  the  department  had  budgetary                                                                    
implications  of  terminating   the  Alaska  Marine  Highway                                                                    
System (AMHS) and employees.                                                                                                    
                                                                                                                                
Ms. Holland  stated that  at the  time, the  budget proposed                                                                    
that AMHS would continue to  operate, and the summer sailing                                                                    
schedule required  vessels to be fully  staffed. There would                                                                    
be AMHS  positions throughout 2020.  She continued  that the                                                                    
plan for  the entire run of  FY 20 was being  worked on. The                                                                    
governor had issued  a directive the previous  week, and DOT                                                                    
and the governor's office would  be working together with an                                                                    
economic and  marine consultant to identify  options for how                                                                    
to  reshape   AMHS.  The  budget  reflected   the  positions                                                                    
necessary  to continue  the  sailing  schedule as  currently                                                                    
scheduled.                                                                                                                      
                                                                                                                                
Co-Chair Stedman understood that  the current schedule would                                                                    
terminate October 1, 2019.                                                                                                      
                                                                                                                                
Ms.  Holland stated  that the  schedule  planned to  operate                                                                    
through the  summer and  then with  reduced service  for the                                                                    
month  of   September,  and  potentially  with   no  service                                                                    
starting  in October.  However,  AMHS continued  to look  at                                                                    
options of how it might readjust the sailing schedule.                                                                          
                                                                                                                                
Co-Chair  Stedman asked  if the  committee  could expect  an                                                                    
amendment to come  forward to keep the sailing  of AMHS from                                                                    
October till the end of June.                                                                                                   
                                                                                                                                
Ms. Holland  did not have an  exact answer but did  not rule                                                                    
out the possibility.                                                                                                            
                                                                                                                                
Co-Chair  Stedman  estimated  that there  were  roughly  318                                                                    
employees. He asked  how to rectify the  position count with                                                                    
potential  termination  of  employees   October  1.  He  was                                                                    
puzzled that  the position count  did not reflect  the month                                                                    
of December.                                                                                                                    
                                                                                                                                
Ms.  Holland  stated  that  AMHS  operated  on  a  regularly                                                                    
scheduled reduction  in force. In October  many vessels went                                                                    
into   layup  or   overhaul  status,   and  many   employees                                                                    
experienced a  reduction in force.  She stated that  OMB did                                                                    
not presently have the makeup  of the reduction in force for                                                                    
October.                                                                                                                        
                                                                                                                                
Co-Chair  Stedman  asked when  to  expect  the reduction  in                                                                    
force to be presented to  the committee for consideration in                                                                    
the budgetary process.                                                                                                          
                                                                                                                                
Ms. Holland  stated that the  department and  the governor's                                                                    
office  would have  a report  to the  governor for  the AMHS                                                                    
plan,  which  was  due  August 1,  2019.  The  budget  being                                                                    
considered  ensured budget  for all  AMHS positions  for the                                                                    
next three  to six months.  It was anticipated  that through                                                                    
the plan there would be  clear direction as to whether there                                                                    
would  be  a  reduction  in   force  or  an  elimination  of                                                                    
positions.                                                                                                                      
                                                                                                                                
9:50:31 AM                                                                                                                    
                                                                                                                                
Co-Chair  Stedman   stated  he   would  work   with  Senator                                                                    
Wielechowski  and had  many questions.  He pointed  out that                                                                    
his district was affected by AMHS.                                                                                              
                                                                                                                                
Co-Chair  Stedman recalled  that in  the end  of territorial                                                                    
days and the early days of  statehood there was work done on                                                                    
transportation. One of the  first statewide bond initiatives                                                                    
was  the implementation  of the  marine  highway system  for                                                                    
coastal Alaska.  The marine highway was  launched with ships                                                                    
that were still presently running.  He discussed the lack of                                                                    
roadbuilding  and AMHS  serving as  the main  transportation                                                                    
corridor  in  coastal  Alaska.   He  asserted  that  from  a                                                                    
statewide policy  perspective, the state  wanted development                                                                    
of shoreside  infrastructure improvements such  as shipyards                                                                    
and boat  repair. He discussed  the history  of shipbuilding                                                                    
in Alaska.                                                                                                                      
                                                                                                                                
Co-Chair  Stedman continued  discussing  the provenance  and                                                                    
history  of  maritime  infrastructure in  Alaska,  including                                                                    
AMHS. He  emphasized that the  shipyard was owned  by Alaska                                                                    
Industrial  Development  and   Export  Authority  (AIDEA)and                                                                    
therefore  the  people), and  employed  roughly  120 to  130                                                                    
employees, with  AMHS being the cornerstone  of business. He                                                                    
asked  if   there  had  been  dialogue   with  the  shipyard                                                                    
regarding potential termination of AMHS.                                                                                        
                                                                                                                                
9:54:15 AM                                                                                                                    
                                                                                                                                
Ms. Holland had conversations with  DOT but was not aware of                                                                    
conversations  between  the  department  and  AIDEA  or  the                                                                    
shipyard. She deferred the conversation  to the shipyard and                                                                    
the department.                                                                                                                 
                                                                                                                                
Co-Chair  Stedman noted  that there  was near  completion of                                                                    
two new ships for the AMHS  fleet, funded with mostly GF. He                                                                    
commented that there was substantial  funding that came from                                                                    
federal  highways  each year  to  maintain  and operate  the                                                                    
ships and build and  maintain shoreside operations. He asked                                                                    
about  the budgetary  impact on  return  request of  federal                                                                    
funds for  ceasing operation  of AMHS  ships. He  added that                                                                    
the question also applied to any funds for the shipyard.                                                                        
                                                                                                                                
Ms.  Holland was  not aware  of costs  incurred through  the                                                                    
shipyard.  If vessels  were not  operating, vessels  were in                                                                    
layup and  were still staffed  by crew for  maintenance. She                                                                    
understood that  as long as  vessels were in  the possession                                                                    
of the  state, there  was no  federal payback  required. She                                                                    
stated that  the intricacies of the  federal highway payback                                                                    
process were not in her area of expertise.                                                                                      
                                                                                                                                
Co-Chair  Stedman stated  he  would make  a  request of  the                                                                    
department for further information.  He mentioned two marine                                                                    
terminals   built  in   Coffman  Cove   and  one   in  South                                                                    
Petersburg. The run had not  been financially successful and                                                                    
had been  terminated, leaving  the infrastructure  in place.                                                                    
The  federal government  had wanted  funds returned  and had                                                                    
proposed to deduct the funds from federal highway funding.                                                                      
                                                                                                                                
Co-Chair Stedman  continued discussing the  marine terminals                                                                    
and  federal highway  funds payback.  For several  years the                                                                    
state consulted with federal highways  to add periodic stops                                                                    
to  the  facilities so  that  funds  would  not have  to  be                                                                    
returned.  He  wanted  the administration  to  consider  and                                                                    
provide  information  about  the federal  fiscal  impact  of                                                                    
termination of AMHS. He questioned  whether there was a plan                                                                    
for  a special  session in  the  fall to  implement an  AMHS                                                                    
operational budget from Oct. 1 to June 1.                                                                                       
                                                                                                                                
Co-Chair Stedman  mentioned the removal of  a fuel component                                                                    
from  $20,600,000  down  to  $4   million.  He  thought  the                                                                    
reduction alone would terminate  the existence of the marine                                                                    
highway.                                                                                                                        
                                                                                                                                
9:58:31 AM                                                                                                                    
                                                                                                                                
Senator Wielechowski  stated that his district  was impacted                                                                    
by  AMHS,  and he  represented  many  military members  that                                                                    
moved to and  from Alaska. He was curious if  there would be                                                                    
ferry  tickets sold  after October  1, 2019;  or if  refunds                                                                    
would be issued.                                                                                                                
                                                                                                                                
Ms. Holland  had not checked  with the department as  to how                                                                    
it was advertising a schedule  beyond September. She offered                                                                    
to provide more information at a later time.                                                                                    
                                                                                                                                
Senator  Wielechowski was  curious  how OMB  had enlisted  a                                                                    
qualified  marine consultant.  He wondered  if there  was an                                                                    
appropriation in  the budget,  what was  the scope  of work,                                                                    
what directive  was given from  the administration,  and how                                                                    
the work would be paid going forward.                                                                                           
                                                                                                                                
Co-Chair  Stedman  asked  for Ms.  Holland  to  broaden  the                                                                    
answer to  Senator Wielechowski's question to  include why a                                                                    
new study  was required  versus using  existing information.                                                                    
He thought  it seemed  that there  were numerous  studies on                                                                    
AMHS and wondered why a new study was required.                                                                                 
                                                                                                                                
Ms.  Holland acknowledged  that  numerous  studies had  been                                                                    
done  addressing AMHS,  which often  had addressed  specific                                                                    
topics. She  referenced a 2016  study by the  McDowell Group                                                                    
that addressed one aspect of  AMHS operations. She mentioned                                                                    
a  white  paper  crafted  with the  help  of  the  Southeast                                                                    
Conference.  She   asserted  that   such  studies   did  not                                                                    
necessarily  look at  the  system  as a  whole  and did  not                                                                    
consider all available modes of  transport in Alaska and all                                                                    
options for operation of AMHS.                                                                                                  
                                                                                                                                
Ms.   Holland  continued   to  address   Co-Chair  Stedman's                                                                    
question. She understood that  department and the governor's                                                                    
office  would  be  working   to  identify  the  competencies                                                                    
necessary for the qualified  economic marine consultant. The                                                                    
consultant would  be looking at  all the  options available,                                                                    
what was possible to reshape  AMHS to a more sustainable and                                                                    
affordable system. She pondered that  the finding could be a                                                                    
public-private partnership which  could address some federal                                                                    
funding  issues,  or  a different  type  of  marine  highway                                                                    
system.                                                                                                                         
                                                                                                                                
10:02:31 AM                                                                                                                   
                                                                                                                                
Senator  Wielechowski did  not see  funding for  a qualified                                                                    
marine  consultant. He  asked for  a copy  of a  Request for                                                                    
Proposal (RFP) for the consultant.                                                                                              
                                                                                                                                
Ms. Holland stated that an RFP  had not yet been issued. She                                                                    
stated that  RFPs were public,  and she would share  it with                                                                    
the committee when developed.                                                                                                   
                                                                                                                                
Co-Chair von  Imhof referenced the studies  that Ms. Holland                                                                    
had  described  as  not being  comprehensive  to  the  whole                                                                    
system.  She asked  Ms. Holland  if  the administration  had                                                                    
used any portion  of the studies to help  guide the decision                                                                    
to  reduce   funding  for  AMHS.   She  wondered   what  the                                                                    
administration used if it had not used the studies.                                                                             
                                                                                                                                
Ms. Holland stated that AMHS  experts in the department were                                                                    
consulted when  considering the possible budget  changes for                                                                    
the FY  20 budget. The  individuals were much  more familiar                                                                    
with   the   results   of  the   studies   than   she.   The                                                                    
administration  had worked  with the  department to  discuss                                                                    
potential  impacts  of  moving  forward  with  the  proposed                                                                    
budget.                                                                                                                         
                                                                                                                                
Co-Chair  von  Imhof thought  it  was  unfortunate that  the                                                                    
individuals were not present.                                                                                                   
                                                                                                                                
Co-Chair von  Imhof asked why there  was a rush to  cut tens                                                                    
of millions from  AMHS rather than making  reductions over a                                                                    
number  of years,  particularly to  allow the  consultant to                                                                    
finish the work.                                                                                                                
                                                                                                                                
Ms. Holland  shared that when  the state's  fiscal situation                                                                    
was  considered; OMB  had talked  with the  department about                                                                    
its priority  programs, core services,  and how  funding was                                                                    
split. It  was found  that DOT  had over  90 percent  of UGF                                                                    
residing  in   AMHS  or  in  the   Highways,  Aviation,  and                                                                    
Facilities  Results  Delivery  Unit.  In  working  toward  a                                                                    
sustainable  affordable budget,  AMHS  was  identified as  a                                                                    
system that  was less efficient  and effective in  using its                                                                    
UGF.  She considered  that in  1992, the  financial recovery                                                                    
rate for  AMHS was a  little over  60 percent. In  2018, the                                                                    
recovery rate was  33.3 percent. She thought  that there had                                                                    
been a steady trend of recovery rate decline.                                                                                   
                                                                                                                                
Ms.  Holland pointed  out  that AMHS  had  reached its  peak                                                                    
ridership  in   the  early  1990s,  at   just  over  450,000                                                                    
passengers. In  2016, ridership  averaged just  over 250,000                                                                    
passengers.  The  trend  line for  passenger  ridership  had                                                                    
consistently declined. She  continued that vehicle ridership                                                                    
had remained consistent since 1988,  at roughly 100,000. She                                                                    
relayed that it was necessary  to examine if the state could                                                                    
afford to keep AMHS in  its current state with large vessels                                                                    
serving 35 communities year-round.                                                                                              
                                                                                                                                
10:08:05 AM                                                                                                                   
                                                                                                                                
Co-Chair Stedman stated that AMHS  roughly grossed about $50                                                                    
million  per   year.  He  thought   there  had  been   a  GF                                                                    
appropriation at  the table for  considerably more  than $50                                                                    
million.   He  thought   currently  the   appropriation  was                                                                    
somewhere  close  to $70  million.  He  recalled working  to                                                                    
increase  efficiencies of  the  system  while balancing  the                                                                    
cost of  maintaining older ships while  trying to accelerate                                                                    
the construction  of new ships.  He mentioned two  new ships                                                                    
tied  to  the  dock  and  almost  completed  and  ready  for                                                                    
delivery.                                                                                                                       
                                                                                                                                
Co-Chair Stedman  continued his remarks. He  opined that the                                                                    
state was  faced with a  budgetary proposal  for elimination                                                                    
of  AMHS. He  thought  the administration  was proposing  an                                                                    
entirely   different  discussion   than   bringing  the   GF                                                                    
appropriation  amount  down  to  the fair  box  return.  The                                                                    
historic target  had always  been dollar  for dollar  to the                                                                    
fair  box. He  thought  it  was possible  to  run a  reduced                                                                    
schedule    while    keeping    vessel    maintenance    and                                                                    
certifications  intact while  going  through the  analytical                                                                    
process of policy decisions.                                                                                                    
                                                                                                                                
Co-Chair   Stedman  mentioned   that   there   had  been   a                                                                    
transportation  struggle  on  Prince  of  Wales  Island.  He                                                                    
recounted  that the  state had  helped subsidized  a private                                                                    
operator of  two ships  that ran a  route from  Ketchikan to                                                                    
Hollis. The  state had been subsidizing  the operation about                                                                    
$250,000 per year.  He wanted to see  the budgetary position                                                                    
for  dealing with  the inter-island  ferry.  He thought  the                                                                    
model would be an easy  example of what privatization looked                                                                    
like.                                                                                                                           
                                                                                                                                
Co-Chair  Stedman  recounted  that  several  years  ago  the                                                                    
committee had requested the  delivery of financial documents                                                                    
so that the  OMB director could monitor  the fiscal position                                                                    
of  the  inter-island  ferry and  use  the  information  for                                                                    
budget considerations.                                                                                                          
                                                                                                                                
10:12:54 AM                                                                                                                   
                                                                                                                                
Ms. Holland  knew that  the department  had factored  in the                                                                    
Inland  Ferry  Authority  in its  analysis  of  all  options                                                                    
regarding reshaping AMHS.                                                                                                       
                                                                                                                                
Co-Chair Stedman believed that if  the state had not stepped                                                                    
in, the  inter-island ferry transportation system  would not                                                                    
exist.                                                                                                                          
                                                                                                                                
Senator Bishop  asked if OMB  had anticipated the  amount of                                                                    
ticket refunds  that would be  necessary because  of advance                                                                    
bookings.  He discussed  the importance  of published  ferry                                                                    
schedules,  and  wondered  about  the  notification  of  the                                                                    
travelling public.                                                                                                              
                                                                                                                                
Ms.  Holland  knew  the  department   had  factored  in  its                                                                    
published  sailing schedule  and existing  reservations into                                                                    
its plan for  how it would operate under the  proposed FY 20                                                                    
budget.                                                                                                                         
                                                                                                                                
Co-Chair Stedman  added that reservations and  marketing for                                                                    
FY 19  was around  $2.52 million,  while the  current budget                                                                    
proposed  $631,000.  He  asserted  that  the  marketing  cut                                                                    
alone, combined with the  fuel adjustment; communicated that                                                                    
there would  be termination of  AMHS on October 1.  He asked                                                                    
how the reservation system would  be rejuvenated if AMHS was                                                                    
shut down.                                                                                                                      
                                                                                                                                
Ms. Holland understood that the  department had converted to                                                                    
an  online reservation  system and  had gradually  increased                                                                    
the amount  of online reservation passengers,  which did not                                                                    
require as much staff. She  stated that AMHS was considering                                                                    
all  options.  She thought  it  was  entirely possible  that                                                                    
sailings  would  continue  but  were  more  infrequent.  She                                                                    
thought the  consultant would consider  how to best  use the                                                                    
resources allocated.                                                                                                            
                                                                                                                                
10:17:02 AM                                                                                                                   
                                                                                                                                
Co-Chair  Stedman  had a  concept  problem  and thought  the                                                                    
budget proposal  looked like a termination  and liquidation.                                                                    
He did  not conceive of  how the system would  be reinstated                                                                    
if the analytics showed it would  be better to run a reduced                                                                    
system and  privatize portions of  service. He  pondered how                                                                    
to get the system up and  running if the legislature was not                                                                    
in session.  He thought  there would  be many  questions for                                                                    
the commissioner of DOT, and  thought it was likely that the                                                                    
subcommittee meetings  for DOT would  be live on  camera. He                                                                    
wondered how to change the  system to have a skeleton system                                                                    
without a  special session for an  appropriation. He thought                                                                    
it would be  difficult to have an item of  such magnitude in                                                                    
the supplemental budget.                                                                                                        
                                                                                                                                
Ms. Holland deferred the question  to DOT. She asserted that                                                                    
the department  had a much  more in-depth knowledge  of AMHS                                                                    
operation particulars.                                                                                                          
                                                                                                                                
Senator  Bishop noted  that constituents  were watching  the                                                                    
meeting.   He  mentioned   Senator  Wielechowski's   earlier                                                                    
comment and emphasized that Interior  Alaska relied on AMHS.                                                                    
He reiterated that AMHS was  important and he wanted to help                                                                    
to try and find the best resolution.                                                                                            
                                                                                                                                
Senator  Wielechowski reported  that  he had  looked up  the                                                                    
AMHS  reservations system  on the  internet, and  the system                                                                    
showed no runs after September 30, 2019.                                                                                        
                                                                                                                                
Senator Wielechowski recalled that  the governor had been in                                                                    
Ketchikan 11 days before the  gubernatorial election and had                                                                    
said categorically that he did  not support cutting AMHS. He                                                                    
wondered what had changed in the previous three months.                                                                         
                                                                                                                                
Co-Chair Stedman thought the question  was best posed to the                                                                    
governor himself.  He referenced  an editorial  with several                                                                    
quotes in the Ketchikan paper.                                                                                                  
                                                                                                                                
10:20:56 AM                                                                                                                   
                                                                                                                                
Senator  Shower  had  an  email   in  which  the  department                                                                    
specifically  stated it  planned zero  ferry transport  from                                                                    
October to June.                                                                                                                
                                                                                                                                
Co-Chair Stedman asked for the date of the email.                                                                               
                                                                                                                                
Senator Shower  stated that  the email  was from  earlier in                                                                    
the day.                                                                                                                        
                                                                                                                                
Senator Shower relayed that the  final exercise he completed                                                                    
before  retiring  from  the  military  had  been  a  Federal                                                                    
Emergency  Management Agency  (FEMA) exercise.  The exercise                                                                    
had  demonstrated  that  without  ports,  people  would  die                                                                    
because of  lack of access to  goods. He thought it  was not                                                                    
possible  to  live with  airports  alone.  He mentioned  the                                                                    
Berlin airlift as  a means of comparison. He  had brought up                                                                    
the   matter  because   he  observed   that  rural   airport                                                                    
evaluation had  been cut.  He thought  it seemed  very clear                                                                    
that it was  not possible to keep a  community alive without                                                                    
heavy  transport such  as  a ferry.  He  thought shutting  a                                                                    
ferry down  for the  winter was  stranding people.  He asked                                                                    
about  the  proposed study,  and  wondered  about the  rural                                                                    
airport evaluation  and airport support for  communities. He                                                                    
thought  the  study  should  consider  the  availability  of                                                                    
supply service through airports.                                                                                                
                                                                                                                                
Co-Chair Stedman  thanked Senator  Shower for  his comments.                                                                    
He  discussed the  importance of  food and  medical supplies                                                                    
being available.  He suggested discussion of  rural airports                                                                    
when the commissioner was present.                                                                                              
                                                                                                                                
10:24:49 AM                                                                                                                   
                                                                                                                                
Senator Micciche felt that the  state was on hold. He wanted                                                                    
to  support dramatic  reductions in  the budget  but thought                                                                    
there  was  a lack  of  planning.  He  used the  analogy  of                                                                    
jumping from  a plane  without a  parachute. He  needed much                                                                    
more   information  in   order  to   support  the   proposed                                                                    
reductions. He did not hear a plan being presented.                                                                             
                                                                                                                                
Co-Chair Stedman  discussed the  schedule for  the following                                                                    
day. He would  work with Senator Micciche to  help support a                                                                    
slight  tweak of  the  budget to  ensure  AMHS had  skeletal                                                                    
operations through the winter.                                                                                                  
                                                                                                                                
Co-Chair Stedman thanked  OMB for coming to  the meeting. He                                                                    
acknowledged  the difficult  topic. He  was concerned  about                                                                    
collateral damage  to shipyards  when dealing with  AMHS. He                                                                    
thought  the  governor  was equally  concerned  because  the                                                                    
state wanted to expand its job base.                                                                                            
                                                                                                                                
SB  20  was   HEARD  and  HELD  in   committee  for  further                                                                    
consideration.                                                                                                                  
                                                                                                                                

Document Name Date/Time Subjects