Legislature(2015 - 2016)BUTROVICH 205
03/31/2016 09:00 AM Senate STATE AFFAIRS
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| Audio | Topic |
|---|---|
| Start | |
| SB144 | |
| SB171 | |
| SB194 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | SB 194 | TELECONFERENCED | |
| += | SB 171 | TELECONFERENCED | |
| += | SB 144 | TELECONFERENCED | |
| + | TELECONFERENCED |
SB 171-DOA PAYMENTS; REPEAL OTHER DOA DUTIES
9:13:15 AM
CHAIR STOLTZE called the committee back to order and announced
the consideration of SB 171. He noted that the committee had
previously adopted the committee substitute (CS) as the working
document. He noted that the Alaska Department of Administration
(DOA) had four days to a week to look at SB 171 as well as the
University of Alaska and the Alaska Court System. He asserted
that the committee's intent was to have an open and deliberative
process. He revealed that two possible amendments were on the
table and people wanted to see them. He specified that he did
not want to offer amendments until after the committee had heard
from the Alaska Court System regarding their exclusion from the
bill.
9:14:15 AM
SHELDON FISHER, Commissioner, Alaska Department of
Administration, Juneau, Alaska, announced that he would walk
through the bill as currently structured to reflect some of the
original requests DOA made as well as some of the additions from
the committee.
He explained that Section 1 was part of DOA's original request.
He detailed Section 1 as follows:
Section 1 is really intended to adopt language which
reflects the way we currently do business.
Historically or at least at some point in the past,
these court actions would come to the Department of
Administration for processing. Today the clerk of the
court sends the judgement to the attorney of record;
that attorney of record will then work directly with
the department that is impacted by it to decide
whether it's appropriate to appeal that or to pay
that, unless this is an issue for the Department of
Administration. We are really not in the loop and so
it's really an intent to clean up the language to
reflect how we currently do business.
He specified that Section 2 was added by the committee to
mandate the University of Alaska use DOA's managed travel
program to make their travel arrangements. He stated that rather
than working directly with DOA, the University of Alaska would
leverage DOA's contract and establish their own arrangements
with carriers as well as a third party.
CHAIR STOLTZE specified that the committee's intent was to
increase the volume and the efficiencies and not to micro-
manage. He stated that the committee would be deferential to
DOA's suggestions to make the travel program work.
9:16:26 AM
SENATOR WIELECHOWSKI asked that Commissioner Fisher explain
DOA's managed travel program. He inquired how online travel
websites differed from the managed travel program. He inquired
if DOA needed a managed travel program.
COMMISSIONER FISHER explained that the managed travel program
was important because DOA negotiates savings with the carriers.
He detailed that DOA reaches out to Alaska Airlines and Delta
Air Lines on travel with any material amount of volume and
negotiate a concession.
CHAIR STOLTZE asked if a concession was negotiated for the
Anchorage to Juneau route.
COMMISSIONER FISHER explained that DOA gets a concession on the
Anchorage to Juneau route. He conceded that getting concessions
on noncompetitive carrier routes was tough. He asserted that the
savings from carrier concessions was more advantageous than from
online travel websites. He added that one of the challenges any
large organization has in managing travel is how to deal with
changes, particularly tickets from cancelled trips. He stated
that the centralized managed travel program allows DOA to reduce
costs and capture some opportunities.
9:18:33 AM
SENATOR WIELECHOWSKI asked if DOA's managed travel program has
the ability to take advantage of sales. He noted that Alaska
Airlines has weekly sales as well as their Permanent Fund
Dividend (PFD) sale. He pointed out that conferences negotiate
hotel room rates, but travel websites have much cheaper rates.
COMMISSIONER FISHER answered yes and detailed that DOA
negotiated discounts off of its promotional rate during sales.
He revealed that DOA was doing an audit to confirm the savings
that the department believed it was receiving.
COMMISSIONER FISHER specified that DOA submitted a request to
make two minor changes to the definition of the managed travel
program. He detailed that the request asks that "approving and
reimbursing" be deleted. He specified that DOA's online managed
travel program was a research and purchasing system that does
not include approval or reimbursement.
9:20:16 AM
He explained that Section 3 was parallel to Section 2, but
rather than applying to the University of Alaska, the section
applied to the Alaska Court System. He said to DOA's knowledge,
the University of Alaska did not give any comment, but the
Alaska Court System did suggest that the managed travel program
would increase their travel costs. He set forth that DOA
believes that after analysis the savings that DOA negotiated
were an advantage to the state as compared to using miles. He
reiterated that the managed travel program also provides the
ability to track cancelled tickets and other travelers'
behavior. He noted that DOA received the Alaska Court System's
fiscal note the previous day. He stated that DOA did not
completely agree with the Alaska Court System's assumptions, but
DOA was not in a position to comment on the purported savings.
He admitted that the Alaska Court System did have a different
travel profile with extensive travel to rural locations and
disclosed that DOA's ability to negotiate savings on rural
routes was more limited. He said DOA would work with the Alaska
Court System to understand whether or not the managed travel
program has value to them.
9:21:49 AM
He detailed that Section 4 was DOA's original request. He noted
that there had been questions regarding Section 4 on why the
department would eliminate the need to audit. He set forth that
DOA's goal was not to change the notion of having adequate
financial controls over the payment system.
He explained that DOA was attempting to modernize the statutory
language to the department's financial system and the way it
does business. He revealed that the sections dated back to the
1950s when everything was brought centrally to DOA as part of
the process of processing an invoice for payment. He detailed
that DOA would look at the approval authority and then the
department would audit those as one of the steps to paying a
bill. He revealed that DOA currently uses the Integrated
Resource Information System (IRIS) to largely decentralize the
previous noted functions into a straight-through processing of
invoices; for example, a vendor goes online and wins a contract,
an administrator goes into the same system and places an order,
a purchase order is generated, after receiving the order a
receipt is recorded online and the invoice goes into an accounts
payable process where the payment is made by the same people who
are closest to the transaction.
COMMISSIONER FISHER summarized that Section 4 would allow DOA to
modernize the department's financial controls around processing
payments with the important elements of appropriate
authorization and segregation of duties so that people are not
both.
9:24:09 AM
DANIEL GEORGE, Staff, Senator Stoltze, Alaska State Legislature,
Juneau, Alaska, noted that the question of financial controls
was raised in a previous hearing on SB 171 and Commissioner
Fisher addressed the query with a letter that will be
distributed to committee members and be part of the legislative
record.
COMMISSIONER FISHER explained that Section 5 was added by the
committee and would require the central accounting system to be
placed on the website. He said DOA thinks that placing the
central accounting system on the website was appropriate and the
department had no concerns.
CHAIR STOLTZE announced that he would have to excuse himself to
address a bill in another committee.
9:25:08 AM
VICE-CHAIR COGHILL announced that he would chair the committee.
COMMISSIONER FISHER disclosed that DOA submitted a fiscal note
associated with Section 6. He stated that as a matter of
principal, DOA would embrace and agree with the requirements
established in Section 6. He detailed that Section 6 would
enhance disclosure and financial information for Alaskans to
have easier access.
He explained that there are two requirements in order for DOA to
meet the language in Section 6:
1. Purchase a software system.
2. Personal services are required to meet the schedule.
He specified that DOA started disclosing financial information
in 2008 in a fairly rudimentary way where PDF or Excel documents
were posted on a website. He noted that the state received a "C
grade" for transparency at the time, but the state currently
receives an "F grade." He explained that the current
transparency grade was due to increased expectations and
standards, not for a change in disclosures. He detailed that the
software licensing program would cost $81,000 a year. He said
DOA thinks the software would provide the search ability,
graphing capabilities and information that has become expected
by the public. He noted that the fiscal note includes the cost
of the software.
COMMISSIONER FISHER said the second requirement was personal
services to meet the schedule. He explained that the Division of
Finance was in the midst of implementing IRIS and DOA was
working on a human resources (HR) system module. He stated that
DOA cannot meet the schedule in Section 6 without additional
resources. He revealed that the combined cost for FY17 and FY18
would be approximately $460,000 and $463,000. He said after FY17
and FY18, the cost trails off to a couple of hundred thousand
dollars on a longer term basis.
9:28:26 AM
SENATOR WIELECHOWSKI noted that the governor said he was going
to be working on updating the system after the state received
the "F rating." He asked if the updating would use current
resources or has the governor put in a request for increased
resources.
COMMISSIONER FISHER explained that when DOA first launched IRIS,
the financial information that the department historically
disclosed was removed in order to facilitate getting the system
up. He added that DOA has returned to posting the financial
information. He detailed that the software DOA was talking about
has three modules and each module is roughly $28,000: one is for
expenses, on is for human resources, and one is for revenue. He
reported that DOA believes that moving from an "F rating" to a
"C rating" would be achieved by merely implementing the expense
module that would result in better interface that is more
searchable and graphical. He said DOA believes that the
department can absorb the $28,000 cost for one module within its
budget, but to go beyond with the required appropriation and
personnel information in addition to the added work would
require the additional [resources.]
9:30:56 AM
SENATOR WIELECHOWSKI noted that exactly the same provision went
through the Senate and House in 2008. He detailed that the
provision was highly vetted by both finance committees, but the
provision literally died on the last day of the session. He
pointed out that the exact same provision in 2008 had a zero
fiscal note, but DOA's current fiscal note was $400,000.
COMMISSIONER FISHER speculated that the 2008 implementation was
done by merely posting PDF or Excel files on a website. He
explained that the search ability and graphical interphases are
what is expected. He added that if DOA could take on the
additional work, then the bill would not be burdened with a
fiscal note; however, due to a combination of departmental cuts
and the IRIS launch, DOA cannot meet the schedule with its
current resources. He stated that he was willing to have a
conversation on what DOA could do with its resources with a
pushed out schedule; but, DOA was not in a position to schedule
the work without impacting the IRIS and human resources
projects.
9:33:37 AM
SENATOR WIELECHOWSKI stated that Commissioner Fisher was
obviously aware of the state's fiscal situation. He surmised
that the committee would try and lower the fiscal note as low as
possible. He asked that Commissioner Fisher meet with committee
members afterwards to address how to dramatically lower the
fiscal note.
COMMISSIONER FISHER replied that he would be happy to oblige
Senator Wielechowski's request.
SENATOR COGHILL asked when the IRIS project started, what was
the cost, and did DOA contemplate adding modules at that time.
COMMISSIONER FISHER replied that DOA did not contemplate adding
the modules as part of the IRIS project. He revealed that the
IRIS project was on time and on budget. He added that DOA should
start seeing increased benefits from the value of IRIS.
CO-CHAIR COGHILL asked that Commissioner Fisher address the
fiscal note.
9:35:37 AM
COMMISSIONER FISHER admitted that he did not think DOA could get
away from the software. He detailed that the fiscal note that
DOA proposes would implement the modules in three successive
years as follows:
1. July 1, 2017: expenditure module's transactions would be up
and functioning, FY17: $27,000.
2. January, 2019: employee-payroll module, FY18: $54,000.
3. 2020: revenue-transactions module, FY19: $81,000.
COMMISSIONER FISHER pointed out that the $81,000 starting in
FY19 would continue to be ongoing. He said DOA would work hard
to strive and beat the projected dates, but the department was
confident with its current resources that the changes could be
implemented. He believed that getting the expenditures up with
the new software module would move the state from an "F rating"
to a "C rating." He added that he was not proud of a "C rating,"
but a "C rating" was better than kind of being the worst in the
country. He added that the changes would move the state on a
path of improving going forward.
VICE-CHAIR COGHILL pointed out that the State Affairs Committee
was not the Senate Finance Committee, but the committee would
still have to deal with the fiscal note.
9:37:40 AM
COMMISSIONER FISHER reported that Section 7 and Section 8 were
originally submitted by DOA. He added that there was no longer a
"tourist class" designation and the language would be revised to
"lowest fare available."
He detailed that DOA was repealing some sections in Section 9.
He explained that DOA used to facilitate the purchase of U.S.
Savings Bonds by employees, but the federal government had moved
to an electronic system and the state no longer facilitates the
purchase of U.S. Savings Bonds.
He noted that a pending amendment would address sections that
minimize the fiscal note by pushing dates out. He added that
pushing the dates out could help DOA reduce the need for
personnel in the near term. He informed that DOA proposed some
amendments consistent with the fiscal note that the department
previously presented, but a broader conversation ought to occur
regarding the dates for a revised fiscal note.
VICE-CHAIR COGHILL asked Mr. George to address amendments that
Chair Stoltze proposed.
9:39:34 AM
MR. GEORGE explained that one of the amendments would extend the
implementation of the online checkbook by three months. He
detailed the date changes in sections 10 and 11 as follows:
1. Section 10: changes from October 1, 2016 to January 1,
2017.
2. Section 11: changes from October 1, 2017 to January 1,
2018.
MR. GEORGE stated that he believed Commissioner Fisher said the
date changes from the amendment more aligns with the
Comprehensive Annual Financial Report (CAFR). He noted that
committee members expressed a desire to know the statutes'
origin that were being repealed and their historical
significance when they were enacted. He explained that a
document was prepared by the committee that details the statute
information.
He said another document specifically addressed the repeal in
Section 9 of AS 37.10.088. He revealed that the bill that
enacted AS 37.10.088 dealt with putting the university system
under the Executive Budget Act and the Fiscal Procedures Act.
The bill was signed by Steve Cooper, House Finance chair at the
time about the importance of putting the university under the
state's fiscal management systems. He opined that the document
was timely given the other provisions that were added to the
bill in the CS regarding the university and the travel system.
He summarized that the committee has fiscal notes from DOA and
the Alaska Court System, but the university system did not
submit a fiscal note. He noted that the president of the
university system had submitted a letter to the committee.
9:41:37 AM
SENATOR HUGGINS remarked that he saw SB 171 as a bill from the
governor. He noted that had heard that the [online checkbook]
was down. He asked Commissioner Fisher to confirm that the
"checkbook" was consciously taken down and not due to a
malfunction to the system.
COMMISSIONER FISHER replied that the "checkbook" was taken down
during the IRIS implementation and the decision was conscious.
SENATOR HUGGINS asked if the "checkbook" was down for a period
of time for a malfunction.
COMMISSIONER FISHER answered that the only time DOA was aware
that the "checkbook" was down was the period after the IRIS
implementation due to the financial system having to be moved.
COMMISSIONER FISHER specified that DOA was making sure that
confidential information was not exposed.
SENATOR HUGGINS reiterated that the SB 171 was a governor's
bill. He pointed out that the state's enterprising agencies have
separated themselves over time further and further. He asked if
he was being unreasonable in requesting that in the spirit of
cooperation that something substantive be done while the
committee had the governor's bill.
COMMISSIONER FISHER answered no. He said there was nothing in
the bill that, as a matter of principal, DOA was opposed to. He
added that DOA even supported the issues around Section 6. He
asserted that DOA thinks that the issues around Section 6 was
exactly where the state should go and DOA would work with
Senator Huggins to find a way to get there.
VICE-CHAIR COGHILL opened public testimony.
9:44:40 AM
MYRON DOSCH, Controller, University of Alaska, Fairbanks,
Alaska, stated that his comments pertained to the language in SB
171 where the university would be required to use DOA's managed
travel program. He said in principal, the university does not
disagree with using State of Alaska contracts to garner savings
and efficiency. He pointed out that the bill's intent was to
save money and noted that the president for the University of
Alaska sent committee members a letter that detailed the
university's efforts over the last several years to decrease
travel. He detailed that the university has reduced travel by
$3.6 million or 20 percent since FY12.
He said the university respectfully requests for the opportunity
to evaluate and decide on the best options for its travel
program. He stated that the university believes that using the
State of Alaska contracts, specifically the negotiated
contracts, would be better for the university.
He opined that there were three pieces to the managed travel
program: negotiated contracts with the airlines; contact with a
travel agency, U.S. Travel, with the use of a booking-tool
interface; and travel expense management. He noted that the
university agreed with Commissioner Fisher regarding the
amendment to remove the words "approving" and "reimbursing" from
the travel expense management side.
MR. DOSCH disclosed that the university started a working group
in January 2016 to evaluate booking-tool options between the
state's booking-tool systems and some other third party. He
detailed that the evaluation would be based on the university's
needs. He revealed that a report was forthcoming within the next
month. He added that a legislative audit was going on for both
the state and the university as well.
He remarked that his concern pertained to the unintended
consequences that could occur if the language within the bill
stayed the same. He pointed out that one issue may occur if the
university was required to use the same corporate card system as
the State of Alaska. He noted that the university has existing
contracts for its corporate card. He added that connectivity may
be an issue if the university was required to use the state's IT
system.
He summarized that the university was on the same page with
regard to saving money. He declared that the university would
look at using the State of Alaska contracts. He reiterated that
the university would want the opportunity to evaluate the
booking-tool aspect, needs assessment, procurement process, and
the travel and expense reporting. He added that the university
would look at the state's system as well.
9:50:51 AM
VICE-CHAIR COGHILL commented that one of the questions would be
how to dovetail the managed travel program with the university.
He asked Commissioner Fisher if he had any comments.
COMMISSIONER FISHER answered no. He stated that DOA agreed with
Mr. Dosch's assessment on different financial systems regarding
different corporate cards. He said having the university manage
its own travel made sense by leveraging DOA's contracts. He set
forth that DOA would be pleased to work with the university to
explain how the program works and what they need to do to take
advantage of it.
SENATOR HUGGINS reiterated that SB 171 was a governor's bill. He
asked Commissioner Fisher to confirm his perception that there
was not a lot of connectivity between what he was reading in the
bill and the parties involved. He remarked that the maturation
was occurring at a slow rate.
9:52:35 AM
COMMISSIONER FISHER confirmed that SB 171 was a governor's bill,
but pointed out that the sections on travel were added by the
committee. He asserted that DOA did not have an objection to the
sections that the committee had added. He stated that DOA would
be happy to take the sections and work with the university to
ensure that the pieces fit together. He pointed out that the
sections that the most time was spent on were added by the
committee. He said DOA was trying to be responsive to the
committee's desire and the department supported the direction.
SENATOR HUGGINS responded that Commissioner Fisher's statement
made his point perfectly where the committee asking for
something has lots of ramifications. He asserted that his
preference 100 percent of the time was the university knows
what's best for them and DOA knows what best for the state from
the administration standpoint. He said integration should not be
left up to the people sitting in the committee to say, "We have
a good idea too," so that the committee was not spending an
inordinate amount of time to just integrate a system a little
bit. He set forth that processing tickets, but not proving them
was pretty simple and not rocket science. He requested that
travel management not be belabored for a long time if the number
of implications were not thought through.
VICE-CHAIR COGHILL commented that part of the committee's
process was trying to get the integration information in front
of everyone and testimony was important. He asked that the
Alaska Court System testify before the committee. He thanked the
university and noted their willingness to work, but admitted
that there were some "gears" that need to work together for the
integration to get done.
9:55:04 AM
NANCY MEADE, General Counsel, Alaska Court System, Anchorage,
Alaska, stated that her intent was to explain their fiscal note.
She said the Alaska Court System did a cost-comparison analysis
of using the state travel office versus the current system, and
they found that using the state travel office would cost the
Alaska Court System over $43,000 more.
She explained that the Alaska Court System travels differently
from what the executive branch does. She set forth that the
Alaska Court System has controls in place that provide better
travel-dollar value than using the state travel office. She
stated that the financial staff tries to ensure that the court
system was doing is most cost effective. She added that much of
the court system's travel was juror travel to remote locations
that are not covered by the state office. She informed that DOA
does have a contract with Raven Air where some juror travel
would be covered, but about two thirds would not be covered.
MS. MEADE detailed that the Alaska Court System was small with
only 750 employees and only 200 that travel with approximately
50 that travel more than once a year. She noted that a clerk may
travel once a year to a conference and judges may travel more
often to cover hearings in remote places.
She explained that the Alaska Court System does use the DOA's
programs for other things to be cost effective like supply
issues, leasing copiers and other things like that when using
IRIS; however, she reiterated that the court system confirmed
that their best travel value was attained without using the
state's travel office.
She disclosed that lower travel costs were attributed to the use
of PFD fares that were not covered by the state travel office,
charging all tickets through EasyBiz, and using the court's
Alaska Airlines Visa card. She detailed that the court system
was earning three air-miles for every dollar spent on Alaska
Airlines. She specified that tickets over $800 use the mileage
account to cover the difference above $800. She added that
people are required to go through the court system's sole travel
person.
She summarized that the fiscal noted detailed that the fees the
court system would pay the state travel office offsets almost
completely and almost an exact wash with what might be saved by
getting the negotiated Alaska Airlines fares. She remarked that
Alaska Court System's main impact was the $40,000 savings
realized from the mileage program.
10:00:04 AM
VICE-CHAIR COGHILL commented that the Court System has been very
frugal.
SENATOR WIELECHOWSKI pointed out to Commissioner Fisher that the
Alaska Court System may have a better plan than DOA.
COMMISSIONER FISHER reiterated that he was not prepared to talk
about the nuances of what the Alaska Court System does and how
it related to DOA. He said DOA believes that some of the court
system's assumptions were different than DOA's practice
experience. He pointed out that a change occurred during the
current year where PFD fares were included by the travel
management program. He remarked that he does not necessarily
disagree with anything that the Alaska Court System said. He
concurred that the court system had a different travel profile
with more trips to rural markets. He pointed out that rural
destinations were places that DOA did not have a lot of value to
add. He disclosed that DOA had found in its analysis that the
managed travel program does better with negotiated discounts
than miles. He said he would be pleased to review his remarks
and provide examples.
VICE-CHAIR COGHILL pointed out that the State of Alaska travel
budget was about $19 million with the court system at $1.7
million. He stated that he was surprised that the court system
could run the $1.7 million through a singular credit card.
MS. MEADE explained that the court system's credit card limit
was $50,000 and payments were made weekly. She admitted that
making weekly credit card statements may not be a realistic
option for the executive branch.
VICE-CHAIR COGHILL remarked that Ms. Meade's remarks provided a
good explanation. He said an amendment was on the table that may
include the university, but not the court system for the reasons
that Ms. Meade explained.
10:02:42 AM
MS. MEADE reiterated that the court system was able to confirm
that through comparison analysis that their own travel program
was more cost effective than DOA's managed travel program.
SENATOR HUGGINS asked if DOA's managed travel program tracked
individual travel that provided an alert if someone was
traveling too much.
COMMISSIONER FISHER explained that DOA did not necessarily
monitor whether a person was traveling too much. He specified
that DOA has a set of rules around fares; for example, booking
fares that were not the lowest-class fare would result in a
notice. He remarked that DOA does publically report travel by
the commissioners and the governor's office. He added that DOA
also provides departmental reports. He noted that unused ticket
notices were sent out on a regular basis as well.
10:04:44 AM
VICE-CHAIR COGHILL announced that SB 171 would be held in
committee. He added that two amendments to the bill would be
addressed the next time the bill was heard.