The department shall adopt regulations specifying the types of services and program costs eligible for state participation. These regulations must include (1) a provision excluding capital expenditures as eligible costs; and
(2) a requirement that the community entity contractor or applicant agrees as a condition of contract approval that it will not supplant existing local fund support of community mental health services with funds received under AS 47.30.520 — 47.30.620 and that it will continue local funding support of community mental health services, in any year in which it contracts with the department, at a level that is at least equal to the local funding support in the previous year.