Legislature(2011 - 2012)HOUSE FINANCE 519
03/16/2011 01:30 PM House FINANCE
| Audio | Topic |
|---|---|
| Start | |
| HB166 | |
| HB110 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| += | HB 166 | TELECONFERENCED | |
| += | HB 110 | TELECONFERENCED | |
| + | TELECONFERENCED |
HOUSE BILL NO. 166
"An Act relating to performance reviews and audits of
executive branch agencies, the University of Alaska,
and the Alaska Court System; and providing for an
effective date."
1:41:34 PM
Vice-chair Fairclough MOVED to ADOPT workdraft CS HB 166
(FIN) (27-LS0492\X, Kirsch, 3/14/11) as a working document
in front of the committee.
Hearing no objection it was so ordered.
[NOTE: The bill version used can be located on BASIS under
the Documents section and is titled: "HB 166 Comparison
version I to X.pdf"]
JAMES ARMSTRONG, STAFF FOR REPRESENTATIVE BILL STOLTZE,
discussed that Sharon Kelly, Staff to Representative Mike
Chenault had been the lead staff on the legislation. He
noted that there had been a meeting on March 3, 2011 that
included Representative Hawker, staff from the Office of
Management and Budget, and other offices. He thanked Lisa
Kirch in Legislative Legal for her hard work on the CS and
all of the workdrafts that came before it. He relayed that
the committee was in possession of the workdraft, the
comparison, and new fiscal note. He added that the agencies
had been reordered and bracketed in the legislation.
REPRESENTATIVE MIKE CHENAULT, SPONSOR, thanked the
committee for hearing the bill. During the March 3rd
meeting approximately 20 issues had been reviewed and the
current CS was based on the consensus of the work team. He
asked his staff to discuss the changes of the bill.
SHARON KELLY, STAFF, REPRESENTATIVE MIKE CHENAULT,
highlighted several of the major items in the CS. She
discussed that the review team would operate under the
Legislative Audit Division instead of the Budget and Audit
Committee. She explained that the order of department
reviews had been changed slightly to group "like"
departments together. Additionally, the Budget and Audit
Committee had the authority to accelerate audits and at the
request of the review team the legislature and the Office
of the Governor were added to the list. Lastly, the timing
of the process was changed slightly to accommodate the
legislative process and the review process would sunset
after the first round of reviews to ensure that the
legislature's desired results were accomplished.
Co-Chair Thomas asked why the legislation would have a
sunset versus a continuous review. Ms. Kelly responded that
Legislative Audit had requested the sunset to make certain
that the process was working correctly.
Representative Doogan asked whether it was possible to
speed the process up to receive reviews sooner than 10 or
11 years out. Ms. Kelly responded that it was a ten-year
cycle but that the Budget and Audit Committee could choose
to accelerate the process if they wished.
Representative Doogan wondered whether the entire process
could be accelerated. Ms. Kelly replied in the affirmative.
Representative Doogan was concerned about the length of
time it would take to complete the process given that
institutional knowledge within the legislature could be
lost during the ten-year period.
Co-Chair Stoltze suspected that it could be a dynamic that
was in the purview. He noted that there were routine eight-
year audits and that some boards, commissions, and agencies
had experienced the problem.
Vice-chair Fairclough remarked that it was possible to
include more money in the fiscal note in order to advance a
project. She believed that the proposed CS would allow the
legislature to look at the numbers in the first few years
to determine what could be accomplished with the allocated
funds. She noted that the legislature could revisit the
fiscal note at anytime to advance things to a more rapid
pace. She supported the ten-year outlook and the ability to
learn from the first departments that would go through the
process.
Representative Hawker relayed that the work team had
discussed at length whether the ten-year review cycle was
frequent enough. The solution incorporated in the bill on
Page 3, Lines 15-17 included language that would
specifically provide the legislature the statutory
authority to conduct reviews prior to the ten-year date at
the discretion of the Legislative Budget and Audit
Committee.
Co-Chair Stoltze remarked that the agencies could not be
eliminated through the sunset provision.
Representative Edgmon voiced his support of the
legislation. He asked whether the bill would help the
process regarding the scrutiny of agency budgets and
provide a better understanding of division activities and
court duties. Ms. Kelly responded in the affirmative. She
relayed that as part of the requirements Legislative
Finance and Legislative Audit would provide the review team
and finance subcommittees with an in depth report of issues
that had arisen during the process.
Representative Edgmon wondered how the timing of the
process worked with the governor's budget that was released
annually on December 15 and with the legislative session
that began January. Ms. Kelly replied that beginning in
2012 Legislative Audit would receive information from
departments throughout the year and that the audit would
then go to the Budget and Audit Committee about the same
time that the governor's budget was released every
December. The departments would continue to have
approximately one month to respond and the information
would then be available for the finance subcommittees when
their work began every January.
Representative Guttenberg referred to Page 3, Lines 14-17.
He was concerned about how to handle multiagency
relationships with programs, such as the Departments of
Law, Public Safety, Corrections, and the Court System that
were interrelated in the work that they did. He wondered
whether there was a way that the integration of a justice
system could work in the process. Ms. Kelly replied in the
affirmative. She referred to Page 3, Lines 11-13 and
explained that overlapping services between departments
would be recognized as Legislative Audit developed the
scope of the audit that would be approved by the Budget and
Audit Committee. She stated that it could be more
appropriate for the justice system integration to occur in
2013, while issues related to other departments could be
addressed at the time of the Budget and Audit Committee
review.
Representative Guttenberg wondered how the logistics of the
process would take place. He discussed that the new process
would have significant legislative authority; however, the
final product would have to come before the legislature for
approval. He noted that the bill would allow Legislative
Audit to rewrite missions and measures and wondered whether
a new section of expertise would be required given that an
understanding of exactly what programs were supposed to
accomplish would be necessary. Ms. Kelly responded that the
missions and measures language was the result of a request
by a member of the review team. She believed that
Legislative Audit would look at the missions and measures
to determine whether they appropriately measured work
conducted by state agencies on behalf of the Alaskan
public. She added that the committee would have the ability
to recommend any changes that it would see fit.
Representative Wilson wanted to make certain the reports
would be available to the public. She cited language on
Page 3, Lines 8-10, that read "performance review reports
are confidential unless the report has been approved…" Ms.
Kelly replied the reports would become public. She noted
that Page 3, Section 2 referred to work that would be
completed prior to its transmittal to Legislative Audit.
Currently and continuing forward the information was
confidential during the month-long process and the Budget
and Audit Committee would release the report following the
designated period. She read from the legislation that "one
week before the first day of the regular session of the
legislature in the year following the review [year set out
in AS 44.66.020(a)], the review team shall provide to the
chairs or cochairs of the [senate and house finance]
committees a final report…"(Page 6, Lines 15-18).
Representative Gara wondered about the general fund budget
for the University of Alaska. Ms. Kelly responded that it
was approximately $360 million.
Representative Gara was concerned that the bill included
language that would allow department budget reductions of
at least ten percent when inefficiencies were identified;
however, he agreed with the general concept of the bill, an
external review, and the goal to identify duplicate efforts
and inefficiencies. He believed the ten percent figure was
arbitrary and relayed that it would be his preference to
receive a report that cited inefficiencies, provided
solutions, and recommended ways to save money. He opined
that in some circumstances it could decimate an agency to
take ten percent. He expressed that the figure would equate
to $110 million to $120 million for the Department of
Education and Early Development's (DOEED) budget and that
the significant reduction would only reduce the
effectiveness of the state's education system. He added
that he might introduce an amendment on the House floor
that would change the language for DOEED. Ms. Kelly
responded that it was not mandatory that the legislature
accept the ten percent reduction. She explained that the
sponsor had looked at the "Texas sunset bill" and that the
Texas budget committee was recommending a fifteen percent
cut. Although the bill aimed at a ten percent cut to reduce
inefficiencies, it did not intend agencies to cut ten
percent across the board. She remarked that the legislature
may decide to invest in the infrastructure to increase
savings in the future.
Representative Gara reiterated concern that the bill
required departments to find inefficiencies, duplications,
and things not authorized by statute that equaled at least
ten percent of the budget. He understood that the
legislature had the ultimate appropriation authority;
however, he believed that the standards outlined in the
bill may not exist. He explained that some agencies may cut
fifteen percent and others could be forced to cut ten
percent from areas outside of the bill's standards.
Representative Chenault remarked that without the inclusion
of a set percentage a department may profess that it was
not able to make any cuts. He communicated that the state
was fortunate that it did not have to currently require
cuts of a set percentage; however, that could change in the
future due to issues that were out of its control. He
believed that allowing the departments to review their own
programs to determine the inefficiencies and select areas
that could handle budget reductions would be better than
arbitrary cuts made by the legislature in the future.
Representative Gara believed that their view points on the
bill were not very far apart and that the legislature would
not be required to accept the budget cut recommendations.
He reiterated his concern that a reduction of $110 million
to the DOEED would do nothing but hurt the quality of
education provided to Alaskans.
Representative Chenault agreed; however, he noted that in
order to have the legislative "buy-in" to the budget
process, it was also necessary to have a department "buy-
in."
2:02:58 PM
Vice-chair Fairclough appreciated the ten percent language
and would support it on the House floor. She remarked
during the review of the DOEED and University of Alaska
budgets those involved had worked to make the agencies
aware that oil production was declining, but the increased
oil price had camouflaged the decline for the general
public. Two years earlier she had a conversation with the
University of Alaska President Mark Hamilton who had
reported that 100 new programs had been implemented and 3
had been eliminated in the last decade. She delineated that
the 100 new programs did not necessarily have full
classrooms, but that agencies were leaving them on the
books. She opined that for transparency purposes it was
important to have a prioritization of services and programs
to benefit Alaskans. She explained that the legislature had
worked to communicate to the university for the past six
years that budget cuts may occur in the event of an oil
production decline.
Representative Doogan asked whether there had been
consideration to the idea of ranking the activities and
programs of each agency from most important to least
important. He wondered whether a ranking process in the
audit would help to address the likelihood that priorities
would change over time. Ms. Kelly replied that AS
37.07.050(a)(13) required departments to prioritize every
agency underneath their jurisdiction (Page 7). She
discussed that Representative Hawker's office had located
one of the prioritization lists from 2004 and had
recommended that the language be included in the
legislation.
2:06:12 PM
Co-Chair Stoltze asked whether there were any comments
regarding the fiscal note.
Representative Doogan MOVED a conceptual amendment to shift
the sections that dealt with the legislature and the
governor to the top of the list and to have reviews
conducted for the two agencies every two years.
Vice-chair Fairclough OBJECTED.
Representative Doogan believed that it would be more
effective to begin the review process with the legislature.
He explained that he was not attached to the idea of
conducting the review every two years and that every four
years was another option. He thought that conducting the
review every ten years would not satisfy the people of
Alaska and would not help to road test what would be done
with the budgets.
Co-Chair Stoltze had no objection, but wondered how the
mechanics of the amendment would work.
Vice-chair Fairclough relayed that there had been prior
discussions regarding the order in which the departments
were listed. She was happy to have the legislature go
through the review process at a much earlier year; however,
she believed that until the first audit was conducted there
was no way to know what resources would be required from
the legislative divisions, what administrative resources
would be necessary to support the departments as they went
through the review process, and how much the governor's
budget would be affected.
Representative Hawker was concerned about moving forward
with a conceptual amendment that had not been deliberated
and discussed with those who would be administrating the
audits. He relayed that there were specific reasons to
begin with a single agency and that resources would need to
be put into place and policies and procedures would need to
be established. He remarked that the items could be
accommodated under the amendment; however, it would be
necessary to have the precise language in front of the
committee in order to evaluate exactly what the impact
would be. He added that even though the legislature and the
governor were included in the ten-year rotation, there was
a provision in the bill that would allow the legislature to
accelerate the review schedule at any time.
Representative Edgmon believed that the current department
order should be maintained because oil production was
declining and the intent of HB 166 was to create
efficiencies, prioritization, and to focus on savings. He
opined that in the event of a major decline in oil revenue
a self audit of the legislature and the governor's office
could occur very quickly.
Representative Guttenberg was supportive of the bill but
believed that the legislature should show other agencies
that it was willing to go through the review process first
which would help to eliminate resistance from state
employees. He expressed that other agencies would be able
to see that the legislature was not treated differently and
that problems detected in the initial review process would
be modified and improved prior to audits of other agencies.
Representative Wilson wondered about the possibility of
moving only the legislature to the top of list. She wanted
to make the general public aware that the legislature
believed in the idea and was willing to put itself through
the process first. She was very supportive of the
legislation and believed that agencies, such as DOEED
needed to take a close look at their programs to increase
efficiencies.
Co-Chair Stoltze asked Representative Doogan to restate the
conceptual amendment.
Representative Doogan replied that the proposed amendment
was to move the legislature and the governor to the top of
the list and to require a review for the two groups every
two years.
2:17:24 PM
Representative Gara believed that the amendment maintained
the bill and would add public confidence. He expounded that
the Department of Health and Social Services and DOEED
would be very large audits given the size of each
department and that comparatively it would be easy to
include the legislature, the governor's office, and the
Department of Corrections (DOC) in the first year of the
review given their small size.
Representative Hawker wondered about the intent to "move
[the legislature and the governor's office] to the top of
the list." He asked whether the intent would be to have the
two agencies share the top of the list with DOC or to
appropriately adjust DOC and the remaining agencies to
later years.
Representative Doogan clarified that the intent was for the
legislature and the governor's office to be included in
addition to DOC.
Representative Hawker advised that the committee solicit
the counsel of the audit administrators in regards to the
impact of moving from one to three agencies in the first
year. He explained that the first year was specifically
limited to one agency to account for time to hire
personnel, and outside contracts.
Co-Chair Stoltze opposed the current amendment, but
believed that there was potential to accomplish the goal
with further deliberation on the House floor.
Representative Doogan WITHDREW the conceptual amendment. He
supported the legislation, but would reintroduce a similar
version of the amendment on the House floor.
Co-Chair Stoltze believed that a compromise could be
reached through discussion outside of the committee.
2:22:13 PM
Vice-chair Fairclough hoped that any amendment would be
discussed with the affected bodies as recommended by
Representative Hawker.
Vice-chair Fairclough MOVED to report CS HB 166(FIN) out of
committee with individual recommendations and the
accompanying fiscal notes.
CS HB 166(FIN) was REPORTED out of committee with a "do
pass" recommendation and with new fiscal notes from the
Office of the Governor and the Legislature.
2:23:02 PM
AT EASE
2:30:21 PM
RECONVENED
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB166NEW FN LEG 030711 fiscal note.pdf |
HFIN 3/16/2011 1:30:00 PM |
HB 166 |
| HB166 CS WORKDRAFT 27LSO492X.pdf |
HFIN 3/16/2011 1:30:00 PM |
HB 166 |
| HB 166 Comparison version I to X.pdf |
HFIN 3/16/2011 1:30:00 PM |
HB 166 |
| HB110 DOR-Response 1 to HFIN 02-18-2011.pdf |
HFIN 3/16/2011 1:30:00 PM |
HB 110 |
| HB110 DOR Response2HFIN 03-14-2011.pdf |
HFIN 3/16/2011 1:30:00 PM |
HB 110 |