Legislature(1999 - 2000)
04/28/1999 01:50 PM FIN
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
CS FOR SENATE BILL NO. 33(FIN) An Act relating to contracts for the performance of certain state functions previously performed by state employees and to the Commission on Privatization and Delivery of Government Services; and providing for an effective date. MARK HODGINS, STAFF, SENATOR JERRY WARD, stated SB 33 is an act relating to contracts of performance of certain state functions. He noted that "privatization" would help to address the budget deficit and would provide a good plan to cut the cost of government while at the same time continuing to deliver services. Mr. Hodgins stated that privatization would allow State government "get out" and then allow private enterprise to pick up. Government should not be based on a for profit concept. There are certain areas of government such as education, protection, health and safety issues, and the transportation of infrastructure for the citizens as indicated in the State Constitution. Mr. Hodgins commented that SB 33 recommends forming a commission to address various aspects of delivery for services by State government and how those services could be redistributed. He listed examples of privatization possibilities: * The sale of government assets, publicly owned facilities or enterprises; * Private development infrastructure; and * Contracting out. Mr. Hodgins spoke to some current trends toward privatization in reshaping government. He emphasized that savings are the most important factor. * Contracting out some health and social service programs; and * Situations within the Department of Corrections. Mr. Hodgins continued, the most likely candidates for privatization are those services readily available in the private sector, such as towing, tree trimming, street repairs, and data processing. There are four key areas which offer immediate opportunity for privatization: * Highway infrastructure of private construction and maintenance; * Corrections facilities by awarding private operating contracts for existing prisons or by private construction of new prisons; * Fleet and highway maintenance. There is a history of contracting out services for road and bridge maintenance; and he added that * Significant cost savings could be achieved if State legislation required local governments to open selected services to competitive bidding. Mr. Hodgins commented that the State and federal government should not compete with the private sector. He stressed that contracting out through the competitive bidding process should be pushed more aggressively. Mr. Hodgins addressed the newly proposed commission. He pointed out that Senator Ward's would like to see that members of the commission are compensated only for travel and per diem costs. Representative Bunde asked if there was anything in State law that would prevent the Legislature from privatizing activities. Mr. Hodgins discussed that feasibility studies need to occur prior to privatization. Representative Austerman commented that SB 33 was "more than" a privatization bill. He advised that in order to undertake the work proposed in this bill will require much time in order to establish a rational plan. He emphasized the magnitude of this job, which will take a lot of input and public hearings. Representative Austerman stressed the importance of the work. He pointed out that there is nothing in the bill which speaks to appointment dates. Because of the size of the job, the public portion of the commission will need to be compensated more than per diem costs. Mr. Hodgins explained that the interest of the legislation is that the privatization will begin with the accumulation of ideas and thoughts, which would then create direction and effort. Senator Ward is adamant that he does not want the plan to be enhanced with compensation; the positions will consist of public volunteers. Representative Austerman questioned what the future intended size of government would be with passage of this legislation. If the information is not available, the State can not plan for the size that the budget should be each year. He reemphasized that the proposed job is bigger than suggested by the legislation. Additionally there is included a sunset clause which would halt the longevity concern. Representative Grussendorf echoed concerns voiced by Representative Austerman. He speculated that the task laid out for this commission is beyond the scope of being accomplished. He questioned why one member from the Local Boundary Commission (LBC) had been included. Mr. Hodgins stated that the bill title indicates that it would be the "delivery of government services". He acknowledged that could mean a lot of different ideas. Representative J. Davies asked a definition of "privatization" and if it meant delivery of governmental services through the private sector. Mr. Hodgins explained that privatization means that some services should only be provided by the State and other services should be totally subsidized by the public sector. Representative Foster voiced concerns that often times newly formed commission's take on a life of there own and become the problem rather than the solution. Representative Austerman pointed out that he supports the concept of the legislation and hoped that the result would be worthwhile. Co-Chair Therriault referenced Page 4, Lines 14-20, questioning why those lines began with "state". He argued that some functions should be transferred to local government. Mr. Hodgins pointed out that those functions have traditionally been provided by the State in delivery of State services. He added that the commission would not be isolated to municipalities but would include the federal government also. Representative J. Davies recommended inserting "funded" following the word "state". PAMELA LABOLLE, PRESIDENT, ALASKA STATE CHAMBER OF COMMERCE (ASCC), JUNEAU, voiced support for SB 33. She noted that the proposal to create a task force to explore privatization opportunities within State government was before the 20th Legislature twice--in 1997 as SB 68 and in 1998 as SB 209. SB 68 passed the Legislature but was vetoed by the Governor. The concept is a familiar one. Ms. LaBolle commented that privatization has been a priority of the ASCC membership for several years. The ASCC believe that the potential exists for many functions and services now provided by state government to be delivered by the private sector at a lower cost, with greater efficiency and with more opportunity for innovation. Ms. LaBolle commented that the reason most often given by the State for continuing to do the work in-house is that private firms are not geared up to handle the work when it needs to be done. She pointed out that the Chamber sent a letter to Alaskan engineering firms throughout the State, to determine the readiness of these firms to provide service needs. About 35% of those contacted responded indicating that there are a lot of firms ready, willing and able to undertake the work. (Tape Change HFC 99 - 102, Side 2). Ms. LaBolle urged Committee members to support SB 33 in creating a commission on privatization and alternative ways for delivering government services. The Chamber membership believes that the work of such a commission would be the key to finding ways to reduce costs. She summarized that it is very important that a study is pursued by this Legislature. Representative Bunde questioned if the proposed commissioner would be a duplicated service within the Legislative Committee. Ms. LaBolle reiterated that the Chamber knows that the State needs to reduce the size of government and that this bill would be of great benefit. Representative Bunde doubted that anyone from the public sector would be willing to donate 12 weeks of their time in order to be a part of the commission unless they had a serious personal interest and hoping to get a contract out of it. Ms. LaBolle disagreed, stating that it was the "civic minded community" statewide that would want to be participating in the proposed commission. She cited that situation had occurred during Governor Hammond years and some corporations donated employees. Representative Kohring voiced his support of the legislation, as it would redefine state government. Representative Moses suggested that it is better to hire experts when making important decisions. He did not believe that the proposed task force could address the concern better than the State economic task force. Representative Foster noted that he agreed with the concept, however, pointed out that the composition of the commission would again be represented by urban concerns and foresaw problems with the legislation for the Bush Alaska. DON ETHERIDGE, DISTRICT COUNCIL, ALASKA LABORERS UNION, JUNEAU, noted that the Labor Union does not oppose the bill with the compromise reached in the State Affairs Committee, however, the Labor Union does not like the bill. He noted that taking jobs away from State employees versus saving money for the State are two very different perspectives of the legislation. In order to do a fair job, each job would need to be addressed individually to determine if the State or private industry could do it cheaper. He strongly recommended that the legislation produce a fair study. Mr. Etheridge emphasized that the Labor Union would support the legislation as long as they continued to have a seat on that commission. Co-Chair Therriault voiced concern with Sections 2 & 3. He understood that the Labor Union currently addresses such concerns through the Administration. Mr. Etheridge noted that information contained in Section #2, mirrors the current contract with the Administration. Co-Chair Therriault stated that he would be more comfortable if that language were struck out, as he understood the language on the Senate side mandated that type of matter could not be negotiated. Mr. Etheridge replied that the Labor Union supports the language in Section #2 because it mirrors the contract language and specifies the procedures needed to privatize. JUANITA HENSLEY, DEPARTMENT OF ADMINISTRATION, stated that the Administration does not oppose SB 33, as it provides for a commission to study how government function could be run more efficiently under the private sector. She continued, the Administration would like to see a change to the membership of the commission leaving the Governor's appointment and at the same time, designating a seat representing Labor. Representative Bunde questioned if that language needed to be included in statute or if a resolution could accomplish the same intent. Ms. Hensley agreed that a resolution could accomplish the same intent and that current contracts with labor agreements do not forbid "contracting out" language. However, the Administration feels strongly that certain steps have to be undertaken which would include a cost effective feasibility study. Co-Chair Therriault MOVED to adopt Amendment #1 which would delete Sections #2 & #3. Representative J. Davies OBJECTED. Co-Chair Therriault advised that the Committee should not be taking negotiated contractual language and putting it into State statute. He recommended that the commission be given that responsibility. Representative J. Davies pointed out that the bill before the Committee was a compromise with the Labor Union. Co- Chair Therriault stated that price of compromise was "too high". Mr. Hodgins advised that removing Sections #2 & #3 would bring the bill back to the original version and that the sponsor would prefer it without the language. Mr. Etheridge explained that Section #2 language was included in all State contracts. He emphasized that the Union would prefer to keep Section #2 in the bill. It would clarify exactly what was intended in privatizing. For the commission to be able to determine whether there was a savings, such information would need to be included. Representative Kohring cautioned that Section 2 of the bill is not relevant to the legislation. Co-Chair Therriault added that the language would give power to the Unions which they currently have to negotiate. He emphasized that the Legislature would be mandating this by statute if the language remained in the bill. He believed that it could invalidate the proposed fiscal note. Representative G. Davis voiced support for inclusion of the language as it would encourage support of the Labor Union. Mr. Hodgins noted that an amendment had been included in the Senate Finance Committee (SFC) which placed a moratorium on any further negotiations for the feasibility study. That had been deleted in the House State Affairs Committee and that the language of Sections #2 and #3 had been added in that Committee. He understood that the Union would still support the bill without that language. Representative Bunde inquired if there had been a sunset clause proposed. Mr. Hodgins acknowledged that there is a sunset clause which would delete Sections #1, #4, & #7, but not Sections #2 & #3. Representative Austerman OBJECTED. He asked why it would remain after the task force. Co-Chair Therriault explained that organized labor wanted to retain Section #2 in statute, which he believed would be worth a lot. Representative Williams recommended amending Section #8, adding Sections #2 & #3, in order that the legislation would have the Union's support. Representative G. Davis indicated that it would be beneficial to have that section included during the duration of the task force. Co-Chair Therriault pointed out that language is already included in contract and reiterated that it would be dangerous to place it in statute. Representative Kohring asked if the amendment were passed, would the Union continue to support the legislation. Mr. Etheridge replied that the Union would support the bill as it came out of the House State Affairs Committee. He indicated that he would need to take any change back to the full Union to determine continued support. Representative Austerman MOVED to AMEND Amendment #1, striking the original language of the amendment and inserting a change in Section #8, clarifying that this act would be repealed on January 1, 2000. Co-Chair Therriault OBJECTED. A roll call vote was taken on the motion. IN FAVOR: Williams, Austerman OPPOSED: G. Davis, Foster, Kohring, Moses, Bunde, Therriault Representatives Grussendorf, J. Davies, and Mulder were not present for the vote. The MOTION FAILED (2-6). Representative Williams OBJECTED to the adoption of the original amendment. A roll call vote was taken on the motion. IN FAVOR: Foster, Kohring, Moses, Austerman, Bunde, Therriault OPPOSED: Williams, G. Davis Representatives Grussendorf, J. Davies and Mulder were not present for the vote. The MOTION PASSED (6-2). (Tape Change HFC 99 - 113, Side 1). Co-Chair Therriault MOVED to adopt Amendment #2, Page 4, Lines 14 - 20. In each of the enumerated sentences, after the word "state" insert the word "funded". There being NO OBJECTION, it was adopted. Representative Kohring MOVED to report HCS CS SB 33 (FIN) out of Committee with individual recommendations and with the accompanying fiscal notes. Representative Foster stated that he did support privatization, however, the bill includes some harmful language. He cited language on Page 4, Line 6, "identify state government functions that should be eliminated". He emphasized that language would place Bush Alaska in jeopardy with no guarantee what the make-up of the commission would consist of. He agreed with the intent of the legislation however, could not support it because it would be harmful to his district. Representative Bunde added that he would be more comfortable with the bill if it were a resolution rather than a proposed statute change. No one wants cuts to their budget districts. Representative Austerman noted that he shared concerns voiced by Representative Foster and agreed that the legislation should be a resolution rather than placed into statute. He indicated that he also would be a no vote. Representative Williams recognized Representative Foster concerns. He asked if there was a way to add a rural community person to the commission. Representative Foster pointed out that with only one rural representative on the commission, Bush Alaska would still be outnumbered by 11 to 1. The meeting RECESSED at 3:45 P.M. to the call of the Chair. The House Finance Committee meeting RECONVENED at 4:45 P.M. Representative Kohring WITHDREW the MOTION to MOVE the bill from Committee. There being NO OBJECTION, it was withdrawn. Representative Foster MOVED to adopt Amendment #3. [Copy on File]. There being NO OBJECTION, it was adopted. Representative Kohring MOVED to report HCS CS SB 33 (FIN) out of Committee with individual recommendations and the accompanying fiscal notes. Representative Austerman OBJECTED. A roll call vote was taken on the motion. IN FAVOR: Kohring, Williams, Bunde, G. Davis, Foster, Therriault, Mulder OPPOSED: Grussendorf, Austerman Representatives Moses and J. Davies were not present for the vote. The MOTION PASSED (7-2). HCS CS SB 33 (FIN) was reported out of Committee with "no recommendation" and with fiscal notes by the Legislative Affairs Agency and the Office of the Governor dated 2/1/99.