Legislature(2017 - 2018)HOUSE FINANCE 519

01/27/2017 01:30 PM FINANCE

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01:32:02 PM Start
01:32:12 PM Fy 18 Budget Overview: Department of Labor and Workforce Development
02:16:31 PM Fy 18 Budget Overview: Department of Environmental Conservation
02:55:49 PM Fy 18 Budget Overview: Department of Administration
03:28:33 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+= HB 57 APPROP: OPERATING BUDGET/LOANS/FUNDS TELECONFERENCED
Heard & Held
+= HB 59 APPROP: MENTAL HEALTH BUDGET TELECONFERENCED
Heard & Held
+ Overviews: FY18 Budget by TELECONFERENCED
- Dept. of Labor & Workforce Development
- Dept. of Environmental Conservation
- Dept. of Administration
+ Bills Previously Heard/Scheduled TELECONFERENCED
                  HOUSE FINANCE COMMITTEE                                                                                       
                     January 27, 2017                                                                                           
                         1:32 p.m.                                                                                              
                                                                                                                                
                                                                                                                                
1:32:02 PM                                                                                                                    
                                                                                                                                
CALL TO ORDER                                                                                                                 
                                                                                                                                
Co-Chair Seaton  called the House Finance  Committee meeting                                                                    
to order at 1:32 p.m.                                                                                                           
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Neal Foster, Co-Chair                                                                                            
Representative Paul Seaton, Co-Chair                                                                                            
Representative Les Gara, Vice-Chair                                                                                             
Representative Jason Grenn                                                                                                      
Representative Scott Kawasaki                                                                                                   
Representative Dan Ortiz                                                                                                        
Representative Lance Pruitt                                                                                                     
Representative Steve Thompson                                                                                                   
Representative Cathy Tilton                                                                                                     
Representative Tammie Wilson                                                                                                    
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Representative David Guttenberg                                                                                                 
                                                                                                                                
ALSO PRESENT                                                                                                                  
                                                                                                                                
Heidi   Drygas,  Commissioner,   Department  of   Labor  and                                                                    
Workforce  Development; Paloma  Harbour, Director,  Division                                                                    
of   Administrative  Services,   Department  of   Labor  and                                                                    
Workforce  Development;  Greg Cashen,  Deputy  Commissioner,                                                                    
Department  of   Labor  and  Workforce   Development;  Larry                                                                    
Hartig,    Commissioner,    Department   of    Environmental                                                                    
Conservation;  Sheldon Fisher,  Commissioner, Department  of                                                                    
Administration;  Cheryl  Lowenstein, Director,  Division  of                                                                    
Administrative Services, Department of Administration.                                                                          
                                                                                                                                
SUMMARY                                                                                                                       
                                                                                                                                
HB 57     APPROP: OPERATING BUDGET/LOANS/FUNDS                                                                                  
                                                                                                                                
          HB 57 was HEARD and HELD in committee for further                                                                     
          consideration.                                                                                                        
                                                                                                                                
HB 59     APPROP: MENTAL HEALTH BUDGET                                                                                          
                                                                                                                                
          HB 59 was HEARD and HELD in committee for further                                                                     
          consideration.                                                                                                        
                                                                                                                                
FY 18 BUDGET OVERVIEWS:                                                                                                         
                                                                                                                                
          DEPARTMENT OF LABOR AND WORKFORCE DEVELOPMENT                                                                         
         DEPARTMENT OF ENVIRONMENTAL CONSERVATION                                                                               
          DEPARTMENT OF ADMINISTRATION                                                                                          
                                                                                                                                
1:32:12 PM                                                                                                                    
                                                                                                                                
Co-Chair Seaton discussed the agenda for the day.                                                                               
                                                                                                                                
^FY 18  BUDGET OVERVIEW:  DEPARTMENT OF LABOR  AND WORKFORCE                                                                  
DEVELOPMENT                                                                                                                   
                                                                                                                                
1:33:22 PM                                                                                                                    
                                                                                                                                
Vice-Chair Gara apologized for tardiness.                                                                                       
                                                                                                                                
HEIDI   DRYGAS,  COMMISSIONER,   DEPARTMENT  OF   LABOR  AND                                                                    
WORKFORCE  DEVELOPMENT   (DLWD),  introduced   a  PowerPoint                                                                    
presentation  titled  "FY2018   Department  Overview,  House                                                                    
Finance Committee"  dated January  27, 2017 (copy  on file).                                                                    
She addressed  the department's mission to  provide safe and                                                                    
legal  working  conditions  and  advance  opportunities  for                                                                    
employment  (slide  2).   The  department  accomplished  its                                                                    
mission through  key program priorities aimed  at protecting                                                                    
Alaska's   workers   through    statutory   and   regulatory                                                                    
consultation   and   enforcement;  developing   an   Alaskan                                                                    
workforce  for Alaska's  jobs;  and  income replacement  for                                                                    
injured, unemployed, or disabled  Alaskan workers. The slide                                                                    
included website  links to the department's  mission and key                                                                    
performance  indicators,  its  proposed FY  18  budget,  and                                                                    
performance measures for its divisions.                                                                                         
                                                                                                                                
Commissioner Drygas  turned to slide  3 and addressed  a 10-                                                                    
year lookback  slide from  the Legislative  Finance Division                                                                    
(LFD),  General Fund  (GF) only  (beginning in  FY 08).  She                                                                    
clarified that GF included  unrestricted general funds (UGF)                                                                    
and  designated general  funds (DGF).  The department's  DGF                                                                    
included the  State Training and Employment  Program (STEP),                                                                    
the Technical  and Vocational Education Program  (TVEP), and                                                                    
revenue  generated  by  fees  for  service  such  as  Alaska                                                                    
Vocational Technical  Center (AVTEC)  tuition and  fees. The                                                                    
department's  increase  of  $5.5  million since  FY  08  was                                                                    
entirely due to increases in DGF.                                                                                               
                                                                                                                                
1:36:02 PM                                                                                                                    
                                                                                                                                
Commissioner Drygas  turned to slide  4 and addressed  a 10-                                                                    
year  lookback  for all  funds.  The  LFD chart  showed  the                                                                    
changes  in   the  department's   budget  since  FY   08  by                                                                    
expenditure  category.  Total   personal  services  expenses                                                                    
increased  by $7  million over  the timeframe;  the increase                                                                    
was  due  to wage  and  benefit  adjustments, which  include                                                                    
increasing   healthcare  benefit   costs.   She  noted   the                                                                    
department had  212 fewer employees (fewer  position control                                                                    
numbers  (PCNs))  in FY  18  than  in  FY 08.  She  directed                                                                    
attention  to  the  significant   reduction  to  grants  and                                                                    
benefits of  $12.8 million, largely  due to  the elimination                                                                    
of   multiple   UGF-funded   workforce   development   grant                                                                    
programs.                                                                                                                       
                                                                                                                                
Commissioner Drygas  moved to slide  5 and addressed  an LFD                                                                    
chart  related to  appropriations within  the department  by                                                                    
division.  The  consolidation  of two  of  the  department's                                                                    
divisions - Business Partnerships  and Employment Security -                                                                    
into  the Employment  and Training  Services Division  in FY                                                                    
17, made  the chart difficult  to follow. She  detailed that                                                                    
AVTEC's GF  increase noted  at the top  right corner  of the                                                                    
chart  was  comprised  of  $1.6  million  in  DGF  and  only                                                                    
$300,000 in  UGF, which represented  a UGF increase  of less                                                                    
than  1 percent  per year.  The department  was implementing                                                                    
the  second of  its  two-year tuition  and  fee increase  at                                                                    
AVTEC  in 2018,  to  reduce the  center's  reliance on  UGF.                                                                    
Cathy  Lacompte  was the  new  AVTEC  director beginning  in                                                                    
November 2016;  the department would  work closely  with Ms.                                                                    
Lacompte to  develop a strategic  plan for AVTEC  that would                                                                    
continue   to   increase  self-sustainability   and   reduce                                                                    
reliance  on UGF,  while continuing  to meet  critical state                                                                    
workforce development needs.                                                                                                    
                                                                                                                                
1:37:54 PM                                                                                                                    
                                                                                                                                
Commissioner Drygas  addressed slide  6, which  included all                                                                    
funds. The  division's consolidation  of two  divisions into                                                                    
one division made the chart  difficult to follow. As LFD had                                                                    
noted on the chart, since  FY 08 the department's budget had                                                                    
increased  by less  than 1  percent.  The chart  on slide  7                                                                    
showed the  department's budget by fund  group. She reported                                                                    
that the department's  UGF had decreased by  $2.3 million or                                                                    
10  percent from  FY 08  levels. The  department's DGF  (the                                                                    
only  fund group  to  see an  increase  over the  timeframe)                                                                    
included  STEP, TVEP,  and fees  for service  such as  AVTEC                                                                    
tuition and fees.                                                                                                               
                                                                                                                                
1:38:53 PM                                                                                                                    
                                                                                                                                
Commissioner Drygas moved to slide  8 and explained that the                                                                    
next  several slides  reflected the  department's budget  by                                                                    
division,  broken   down  by   component  or   program.  The                                                                    
department's rating  of importance to the  mission was based                                                                    
on guidance  received from the co-chairs.  She detailed that                                                                    
"critical"  meant a  program that  was directly  meeting the                                                                    
department's mission; "important"  meant a program providing                                                                    
indirect support  that would  need to  be reassigned  if the                                                                    
program  did not  exist; and  "status quo"  meant a  program                                                                    
that  had historically  been funded  because of  a statutory                                                                    
requirement,  but had  no real  impact  on the  department's                                                                    
mission   or    potentially   hampered    the   department's                                                                    
functioning.  The department  had  not  been given  specific                                                                    
guidance for the rating of  effectiveness; therefore, it had                                                                    
used ratings of high, moderate, and low.                                                                                        
                                                                                                                                
Commissioner  Drygas   continued  that  using   very  strict                                                                    
criteria   for   determining   what   was   constitutionally                                                                    
required,  the Office  of Management  and  Budget (OMB)  had                                                                    
informed the  department that the Commissioner's  Office was                                                                    
the  only  thing  in  the   department  that  was  partially                                                                    
constitutionally  required.  The Commissioner's  Office  and                                                                    
the Administrative  Services Division had  worked tirelessly                                                                    
over  the  past few  years  to  identify significant  budget                                                                    
reductions and  operational efficiencies. The  list included                                                                    
considerable lease consolidation  efforts, resulting in over                                                                    
$1 million saved in UGF from FY 15 to FY 18.                                                                                    
                                                                                                                                
Commissioner  Drygas  turned  to slide  9,  which  reflected                                                                    
programs  within the  Workers' Compensation  Division. While                                                                    
the department  rated the effectiveness  of the  division as                                                                    
high,  it   recognized  there  was  room   for  improvement.                                                                    
Therefore,  the department  had worked  with the  governor's                                                                    
office on  HB 79, which  had been introduced that  week. The                                                                    
department  had rated  the importance  of the  Second Injury                                                                    
Fund as  "status quo" and  the effectiveness of the  fund as                                                                    
moderate. While  the program worked,  many other  states had                                                                    
eliminated their second injury funds  - the goal of the fund                                                                    
was to  facilitate the reemployment  of injured  or disabled                                                                    
workers - because the Americans  with Disabilities Act (ADA)                                                                    
largely  fulfilled the  purpose, prohibiting  discrimination                                                                    
based on  disability. The sunset  of the Second  Injury Fund                                                                    
was  included in  HB  79. One  of  the department's  highest                                                                    
legislative  priorities  was  the  repeal  of  the  Workers'                                                                    
Compensation Appeals  Commission, which would  save $440,000                                                                    
in  DGF annually;  legislation had  also been  introduced in                                                                    
the current session (HB 69).                                                                                                    
                                                                                                                                
1:41:37 PM                                                                                                                    
                                                                                                                                
Commissioner Drygas turned to slide  10 and relayed that the                                                                    
programs  within the  Labor  Standards  and Safety  Division                                                                    
were  critical to  the  department's  mission of  protecting                                                                    
Alaska's  workers and  were highly  effective. According  to                                                                    
statute, the Alaska Safety  Advisory Council was responsible                                                                    
for organizing  the annual  governor's safety  conference in                                                                    
Anchorage. She characterized the  conference as terrific and                                                                    
noted it was held in April.  Members of the council took the                                                                    
responsibility  seriously  and  did  a great  job  with  the                                                                    
conference  every  year.  The council  brought  in  more  in                                                                    
sponsorship money than  necessary to cover the  costs of the                                                                    
conference.   The  department   had  ranked   the  council's                                                                    
effectiveness as  moderate because  it felt the  group could                                                                    
be more effective if privatized.  The council was interested                                                                    
in privatization and was currently  looking to adopt bylaws,                                                                    
which was the first step.                                                                                                       
                                                                                                                                
1:42:29 PM                                                                                                                    
                                                                                                                                
Commissioner  Drygas  addressed   the  programs  within  the                                                                    
Employment and  Training Services Division on  slide 11. The                                                                    
programs  were  critical  to  the  department's  mission  of                                                                    
advancing  employment  opportunities  for Alaskans  and  its                                                                    
core   service  of   income   replacement  for   temporarily                                                                    
unemployed workers. The division  was relatively new and was                                                                    
by   far   the   largest  division   (it   represented   the                                                                    
consolidation of  two divisions). Through  the consolidation                                                                    
effort, the department had eliminated  10 positions or PCNs,                                                                    
reduced  its   UGF  by  over   $300,000,  and   had  reduced                                                                    
administrative  costs,  which  had   put  an  additional  $1                                                                    
million  in STEP  funds on  the  street as  grants to  train                                                                    
Alaskans.                                                                                                                       
                                                                                                                                
Commissioner  Drygas  discussed  the  workforce  development                                                                    
component of  the Employment and Training  Services Division                                                                    
on slide 12.  She relayed the component had  a few different                                                                    
ongoing annual  programs (shown on  slide 12).  The programs                                                                    
were  highly  effective  and critical  to  the  department's                                                                    
mission. In  accordance with FY  17 legislative  intent, the                                                                    
department  had  reduced  the GF  authority  supporting  the                                                                    
Alaska Construction Academies (ACA)  by another $600,000 UGF                                                                    
in  FY  18.  The  remaining  Construction  Academy  training                                                                    
funding  totaled  $1.26  million  UGF;  if  the  legislative                                                                    
intent language  continued, the program would  be eliminated                                                                    
by  FY   21.  The   department  was  very   concerned  about                                                                    
eliminating funding  for the ACA  and believed it  was short                                                                    
sighted,  given  the  state's aging  construction  workforce                                                                    
(particularly  as the  state worked  to advance  a gas  line                                                                    
project). Failure  to train Alaskans  did not mean  the jobs                                                                    
would go away; it meant the jobs would go to outsiders.                                                                         
                                                                                                                                
1:44:14 PM                                                                                                                    
                                                                                                                                
Commissioner    Drygas    spoke   about    the    Vocational                                                                    
Rehabilitation  Division  on  slide  13.  The  division  was                                                                    
focused  on delivering  services to  disabled Alaskans.  She                                                                    
detailed  that   the  federally  and   statutorily  required                                                                    
programs  were   highly  effective   and  critical   to  the                                                                    
department's  mission   of  advancing  employment   for  all                                                                    
Alaskans   and  its   core  service   of  providing   income                                                                    
replacement  for  disabled  Alaskans.  She  highlighted  the                                                                    
bottom  row pertaining  to  special  projects and  explained                                                                    
that it applied  to special federal grants  that enhance the                                                                    
services  provided  through  the  Client  Services  program.                                                                    
Services included  supported employment (allocated  to youth                                                                    
with  the  most   significant  disabilities)  and  assistive                                                                    
technology,   which  helped   disabled  Alaskans   test  and                                                                    
identify  technology that  can  assist them  in their  daily                                                                    
lives as well as in seeking employment.                                                                                         
                                                                                                                                
1:45:08 PM                                                                                                                    
                                                                                                                                
Commissioner Drygas  discussed the AVTEC program  located in                                                                    
Seward  (slide   14).  The  program  was   critical  to  the                                                                    
department's mission  of advancing  employment opportunities                                                                    
for  Alaskans. The  program was  highly  effective, with  an                                                                    
average graduation  rate of  88 percent  over the  past five                                                                    
years.  She elaborated  that over  the past  five years,  an                                                                    
average of 89  percent of AVTEC graduates  had been employed                                                                    
in their area of training  within one year. The department's                                                                    
budget included a  number of changes to  AVTEC's budget. The                                                                    
department  was   switching  $184,000  in  UGF   to  program                                                                    
receipts to  reflect a 7.5  percent increase in  tuition and                                                                    
fees    to   support    overall   programs    in   FY    18.                                                                    
She added that it was the  second year of a two-year tuition                                                                    
and  fee   increase.  The  department  was   also  switching                                                                    
$192,000  in UGF  to program  receipts related  to revamping                                                                    
the culinary  arts program. She detailed  that one full-time                                                                    
instructor position  would be fully supported  with receipts                                                                    
generated  by   the  program.   Plumbing  and   heating  and                                                                    
construction  program  offerings  were  being  reduced  from                                                                    
twice  per year  to  once  per year,  to  better align  with                                                                    
demand and  realize an instructor  workload savings  of over                                                                    
$50,000. The  department would be  working closely  with the                                                                    
program's  new  director to  develop  a  strategic plan  for                                                                    
AVTEC to reduce its reliance on UGF.                                                                                            
                                                                                                                                
Vice-Chair  Gara  asked  about  the percentage  cut  to  the                                                                    
department since  she had become  commissioner. Commissioner                                                                    
Drygas replied it was roughly 37 percent.                                                                                       
                                                                                                                                
Vice-Chair  Gara  referred   to  the  Workers'  Compensation                                                                    
Commission.  He   acknowledged  that  a  cost   savings  was                                                                    
important,  but he  asked if  an analysis  had been  done on                                                                    
saving  $400,000 by  eliminating  the Workers'  Compensation                                                                    
Appeals  Commission.  He remarked  on  the  large number  of                                                                    
cases and  noted that  the cases  automatically went  to the                                                                    
court system.  He asked  if an analysis  had been  done that                                                                    
the proposal  would not  require the  state to  hire another                                                                    
superior  court judge  with a  staff member  and office.  He                                                                    
remarked that those items would cost $400,000.                                                                                  
                                                                                                                                
1:47:47 PM                                                                                                                    
                                                                                                                                
Commissioner Drygas  corrected that  the number  of appealed                                                                    
cases was  low and  had been  decreasing. She  would provide                                                                    
the  information to  the committee.  She explained  that the                                                                    
cases would  be absorbed  and instead  of going  through the                                                                    
appeals  commission they  would  go to  superior court.  She                                                                    
believed the Court  System had filed a zero  fiscal note the                                                                    
previous  year  because of  the  low  number of  cases.  She                                                                    
reiterated that  the Court System  believed the  cases could                                                                    
be absorbed.                                                                                                                    
                                                                                                                                
Co-Chair Seaton  asked the department  to have the  data for                                                                    
the subcommittee. Commissioner Drygas agreed.                                                                                   
                                                                                                                                
Representative  Kawasaki  pointed  to  slide  8  related  to                                                                    
leasing. He asked for detail.                                                                                                   
                                                                                                                                
PALOMA   HARBOUR,  DIRECTOR,   DIVISION  OF   ADMINISTRATIVE                                                                    
SERVICES,  DEPARTMENT OF  LABOR  AND WORKFORCE  DEVELOPMENT,                                                                    
answered that  the leasing component  accounted for  how the                                                                    
department paid for  its lease costs with  state funds. They                                                                    
offset a portion  of all the department's  leases across the                                                                    
state. The department had made  considerable efforts and had                                                                    
cut funding to leasing by over  $1 million in the last three                                                                    
years.                                                                                                                          
                                                                                                                                
Representative  Kawasaki asked  if the  cuts to  leasing had                                                                    
been related to saving space or not renting buildings.                                                                          
                                                                                                                                
Ms.  Harbour  answered that  in  FY  18 the  department  was                                                                    
reducing its total  leased space by over  10,600 square feet                                                                    
for  a  savings  of  approximately $272,000.  She  noted  it                                                                    
reflected  the  latest  reduction,   which  would  occur  in                                                                    
Anchorage;  other reductions  had  been made  in Juneau  and                                                                    
Kenai. The department  was looking at each of  its leases as                                                                    
they came up  to determine if the space was  needed or could                                                                    
be consolidated.                                                                                                                
                                                                                                                                
Representative Kawasaki  did not recall seeing  leasing as a                                                                    
separate allocation in the other budgets.                                                                                       
                                                                                                                                
Co-Chair  Seaton   recalled  that  another   department  had                                                                    
reported on leasing the previous day.                                                                                           
                                                                                                                                
Representative Kawasaki noted they  were looking at scraping                                                                    
nickels  and  dimes  together  related  to  the  budget.  He                                                                    
recognized that DLWD was  not constitutionally required, but                                                                    
there were myriad federal  requirements associated with some                                                                    
of the work  the department had taken on. He  asked if there                                                                    
had been  consideration either  moving things  in or  out of                                                                    
the  department.   For  example,   moving  AVTEC   or  adult                                                                    
education  to   the  Department   of  Education   and  Early                                                                    
Development (DEED).  He asked for  comment on why it  may or                                                                    
may not be a good idea.                                                                                                         
                                                                                                                                
1:51:24 PM                                                                                                                    
                                                                                                                                
Commissioner  Drygas  responded  related to  AVTEC  and  the                                                                    
Adult Basic Education  programs had been moved  from DEED in                                                                    
the  past because  they  felt  DLWD could  do  a better  job                                                                    
administering   the   two.   The   department   had   looked                                                                    
considerably  at  its  essential  core mission  and  at  its                                                                    
programs relating to the mission.  Going through the process                                                                    
had been  very beneficial  in determining  what it  could do                                                                    
without. Over the  last couple of years,  the department had                                                                    
given  up  leases,  and  it   had  identified  the  Workers'                                                                    
Compensation Appeals  Commission as  something it  no longer                                                                    
needed.  She   continued  that   the  commission   had  been                                                                    
hampering  the ability  to  effectively  deal with  workers'                                                                    
compensation  appeals. The  Independent  Living Program  had                                                                    
also  been  transferred  to the  Department  of  Health  and                                                                    
Social Services (DHSS). She remarked  that the silver lining                                                                    
of the state's  budget difficulties was the  impetus to look                                                                    
at what  departments did  well, what  they could  do better,                                                                    
what they could  do without, and what  other departments may                                                                    
be able to administer better.                                                                                                   
                                                                                                                                
Representative  Wilson  commended  the  department  for  the                                                                    
clarity of its  presentation and work. She  pointed to slide                                                                    
4  and  asked what  had  resulted  in  the increase  in  the                                                                    
"services" line.                                                                                                                
                                                                                                                                
Commissioner Drygas  answered that  "it's all of  them." She                                                                    
did not have the specifics on hand and would follow up.                                                                         
                                                                                                                                
1:54:12 PM                                                                                                                    
                                                                                                                                
Representative  Ortiz spoke  to  the reduction  of 212  PCNs                                                                    
since FY  15. He  asked if the  reduction was  hampering the                                                                    
department's ability to accomplish its mission.                                                                                 
                                                                                                                                
Commissioner Drygas replied in  the affirmative; it was seen                                                                    
daily in every division. She  elaborated that DLWD had taken                                                                    
the  governor's  memorandum  seriously about  being  careful                                                                    
about  what  vacancies to  fill  and  making sure  it  could                                                                    
distribute  the work  effectively  with existing  employees.                                                                    
The  department was  significantly  short on  administrative                                                                    
staff.  It  was  hard  to  convey  the  critical  nature  of                                                                    
administrative staff  in the process of  ensuring the public                                                                    
was  served.  She  believed  the  public  was  beginning  to                                                                    
witness  the consequences  of  significant  staff cuts.  The                                                                    
department was doing the best it  could with what it had; it                                                                    
was working to be methodical on  how the cuts were made. She                                                                    
opined it would be rash to make the decisions arbitrarily.                                                                      
                                                                                                                                
Representative Ortiz asked for  some specific examples about                                                                    
where the public was seeing less services from DLWD.                                                                            
                                                                                                                                
GREG CASHEN,  DEPUTY COMMISSIONER,  DEPARTMENT OF  LABOR AND                                                                    
WORKFORCE DEVELOPMENT, answered that  in the last two fiscal                                                                    
years the  department had reduced  its job  center footprint                                                                    
by  three   centers  (Kotzebue,  Barrow,  and   Seward).  He                                                                    
detailed that  the [Seward] job  center had been  located at                                                                    
AVTEC,  which was  a  state-owned  facility; therefore,  the                                                                    
facility still had a resource  room and access point for job                                                                    
seekers. Reducing  the department's footprint had  an impact                                                                    
on the  public. He  added that DLWD  would have  to consider                                                                    
its lease  costs and  job centers  going forward  if further                                                                    
reductions were  made, which  would impact  service delivery                                                                    
to the public.                                                                                                                  
                                                                                                                                
1:57:46 PM                                                                                                                    
                                                                                                                                
Representative  Ortiz asked  in which  areas AVTEC  provided                                                                    
the biggest contribution (e.g. ship building or other).                                                                         
                                                                                                                                
Commissioner Drygas answered that  she wanted more people to                                                                    
know about  AVTEC. She  remarked that  Representative Wilson                                                                    
and  the DLWD  budget  subcommittee had  discussed AVTEC  at                                                                    
length  in past  years and  about the  terrific work  it did                                                                    
training    Alaskans.    Alaskans   from    the    Interior,                                                                    
Southcentral,  North Slope,  and  rural  areas attended  the                                                                    
program.  The  center  had numerous  program  offerings  for                                                                    
vocational education.  One of its  premiere programs  was in                                                                    
maritime  training. Other  programs included  culinary arts,                                                                    
applied     technology     (heating,    ventilation,     air                                                                    
conditioning),  refrigeration,  healthcare, and  other.  She                                                                    
spoke to  the concept  of doing more  with less  and relayed                                                                    
the   goal  was   to  educate   more   Alaskans  about   the                                                                    
opportunities at  AVTEC. The program  was an  affordable way                                                                    
(there   had   been   necessary   tuition   increases)   for                                                                    
individuals to seek  a career path or train  themselves in a                                                                    
new career path.  She underscored that AVTEC  was a terrific                                                                    
educational  opportunity   for  individuals   seeking  good,                                                                    
middle class jobs.                                                                                                              
                                                                                                                                
1:59:50 PM                                                                                                                    
                                                                                                                                
Co-Chair  Seaton  asked  how  much  the  Alaska  Performance                                                                    
Scholarship (APS) was used at AVTEC.                                                                                            
                                                                                                                                
Commissioner Drygas  could not speak to  the specific dollar                                                                    
amount, but  it was underutilized. The  department had asked                                                                    
AVTEC  to include  the APS  badge on  the website  to ensure                                                                    
potential students were  aware they could use  APS funds for                                                                    
the program.  She would follow  up with a dollar  amount for                                                                    
the committee.                                                                                                                  
                                                                                                                                
Co-Chair Seaton  asked the department  to address  the issue                                                                    
during its  subcommittee meetings.  He thought  it may  be a                                                                    
way  to result  in increased  participation and  funding. He                                                                    
asked  the department  to  look at  the  proportion of  high                                                                    
school  graduates  compared   to  older  individuals  taking                                                                    
classes. He noted that individuals  coming to AVTEC from the                                                                    
workforce  would  not have  an  opportunity  to access  [the                                                                    
APS]. He detailed that high  school students would have been                                                                    
required  to graduate  and to  have  taken rigorous  courses                                                                    
with a  C+ average. He  did not  want to compare  that group                                                                    
with older  individuals being retrained who  lacked the same                                                                    
opportunity.                                                                                                                    
                                                                                                                                
2:01:46 PM                                                                                                                    
                                                                                                                                
Co-Chair Foster  relayed he served  on the  Alaska Workforce                                                                    
Investment  Board   when  Mr.  Cashen  had   served  as  the                                                                    
executive   director.    He   had   been    given   numerous                                                                    
opportunities  to visit  AVTEC  and learn  what the  program                                                                    
offered. He  noted the  experiences had  all been  great. He                                                                    
asked about  requirements for the  program. He asked  if the                                                                    
classes  required to  obtain the  APS were  different if  an                                                                    
individual planned to use the  scholarship to attend college                                                                    
versus  AVTEC. He  would  love to  see  more rural  Alaskans                                                                    
going to AVTEC. He wondered  how he could get rural Alaskans                                                                    
to take advantage of the opportunity.                                                                                           
                                                                                                                                
Ms.   Harbour   answered   there   were   different   Alaska                                                                    
Performance   Scholarships   for  advanced   education   and                                                                    
vocational/technical  programs;   the  scholarship  criteria                                                                    
were different for the different scholarships.                                                                                  
                                                                                                                                
Co-Chair Foster  stated that  part of  the problem  in rural                                                                    
Alaska was  an inability to  access the required  classes to                                                                    
qualify  for the  APS. For  example,  if a  person going  to                                                                    
college, they may be required  to take a trigonometry class;                                                                    
however,   perhaps  the   requirement   was  different   for                                                                    
individuals planning  to attend AVTEC. He  furthered that if                                                                    
the classes  were not  offered in  rural Alaska,  there were                                                                    
broadband  issues  [preventing  online  class  options].  He                                                                    
asked  how  to  eliminate  barriers  to  enable  more  rural                                                                    
Alaskans go to  AVTEC and take advantage  of the scholarship                                                                    
program.                                                                                                                        
                                                                                                                                
2:04:22 PM                                                                                                                    
                                                                                                                                
Representative Tilton  thanked the  department for  its work                                                                    
on looking for  efficiencies. She spoke to  the 212 position                                                                    
reductions. She  asked if the  positions had been  vacant or                                                                    
reflected lost jobs.                                                                                                            
                                                                                                                                
Commissioner Drygas  replied there  had been  a combination.                                                                    
Most  of  the  212  PCNs   had  been  through  attrition  or                                                                    
retirement. There had been a few layoffs.                                                                                       
                                                                                                                                
Vice-Chair  Gara referenced  Representative Ortiz's  earlier                                                                    
question about  whether the loss of  employees was impacting                                                                    
the department. He stated some  individuals were starting to                                                                    
get  uncomfortable with  the level  of cuts  the legislature                                                                    
was  adopting. He  recalled a  grant cut  that had  not been                                                                    
reflected  in  the  loss  of employees.  He  referred  to  a                                                                    
program that  existed two  years back  that had  helped fund                                                                    
school counselors who helped steer  youths towards jobs. The                                                                    
program had  been eliminated and  he wondered if  its impact                                                                    
on job opportunity had  not been substantial. Alternatively,                                                                    
he wondered if they regretted cutting the program.                                                                              
                                                                                                                                
Ms.  Harbour  responded there  had  never  been an  argument                                                                    
about  the effectiveness  of the  former Alaska  Youth First                                                                    
Program.  She  reasoned  that  the  state  budget  [deficit]                                                                    
situation was  a reality and  the department had to  look at                                                                    
what was essential to its  mission. She explained that there                                                                    
were  some philosophical  belief  differences about  whether                                                                    
DLWD should be doing adult  training, AVTEC, and adult basic                                                                    
education  (things that  had been  transferred from  DEED to                                                                    
DLWD). She stated  the program had been  highly effective in                                                                    
things like  healthcare academies  and other  important ways                                                                    
to    get   high    schoolers   interested    in   available                                                                    
opportunities.                                                                                                                  
                                                                                                                                
2:07:44 PM                                                                                                                    
                                                                                                                                
Commissioner Drygas  added that she believed  the department                                                                    
had to  expose young Alaskans to  different opportunities in                                                                    
career and technical education. If  youths were not given an                                                                    
opportunity   to  explore   and   interest   -  whether   in                                                                    
construction, healthcare,  plumbing, pipefitting or  other -                                                                    
they  did   not  understand  or   were  not  aware   of  the                                                                    
opportunities. She  underscored that the jobs  were not only                                                                    
fulfilling   careers,  but   good  middle-class   jobs.  She                                                                    
remarked that it was a  problem because more skilled workers                                                                    
were needed.  She believed the  department could not  do its                                                                    
job leading the  way for workforce development  in Alaska if                                                                    
it  did  not reach  individuals  early  on in  their  lives,                                                                    
including talking  to parents  and counselors  about careers                                                                    
in career and technical education.                                                                                              
                                                                                                                                
Commissioner  Drygas  spoke  about difficulties  related  to                                                                    
budget cuts and referred  to Representative Ortiz's question                                                                    
about the 212  jobs eliminated from the  department over the                                                                    
past ten  years. She  believed Alaskans  who dealt  with the                                                                    
department  felt the  impact.  For  example, the  department                                                                    
received numerous  complaints about  how it did  not respond                                                                    
quickly  enough. She  underscored  that  the department  was                                                                    
strapped  for funds;  the Wage  and Hour  Administration had                                                                    
substantial UGF  funds and  the department  was not  able to                                                                    
fill positions as it had in  the past. The situation put the                                                                    
public at  risk. She continued  that DLWD enforced  wage and                                                                    
hour laws. She detailed  that Occupational Safety and Health                                                                    
kept  Alaska's  workers  safe and  conducted  investigations                                                                    
when  situations happened  at  the  workplace. She  stressed                                                                    
that cutting  government services hampered  any department's                                                                    
ability to  offer the services.  The department  was feeling                                                                    
the cuts  in Workers' Compensation  where it had  not filled                                                                    
as   many   positions   as  there   had   been   previously.                                                                    
Additionally, the  commissioner's office  was half  the size                                                                    
it  had been  when she  began the  position, which  had been                                                                    
very difficult  given the monumental  tasks trying to  do as                                                                    
much as possible with much  less. She talked about trying to                                                                    
manage the workload and determine  how best to utilize staff                                                                    
and the available  program funds. She concluded  that it had                                                                    
been difficult.                                                                                                                 
                                                                                                                                
Representative Wilson remarked that  one of the difficulties                                                                    
was  competition within  the state  between the  University,                                                                    
DLWD,  DEED,  and  the  private  sector,  when  it  came  to                                                                    
training Alaskans.  She stated that  how they pulled  it all                                                                    
together is "where  we really have the savings  and where we                                                                    
could do the best for  those who train." She elaborated that                                                                    
several budgets were involved,  which made things difficult.                                                                    
She underscored  it was necessary  to stop  competing within                                                                    
the state, to  do what was best for everyone,  and to do its                                                                    
strong programs.                                                                                                                
                                                                                                                                
Co-Chair  Seaton  remarked  it  was very  difficult  when  a                                                                    
single  department impacted  so many  other departments.  He                                                                    
mentioned high  schools and where  the lines were  drawn. He                                                                    
stated  that   the  crossover  points  were   hard  for  the                                                                    
subcommittees to address.  He pointed to slide  9 related to                                                                    
the  Workers'  Compensation  Appeals Board  and  the  Second                                                                    
Injury Fund. He asked where the  DGF came from and where the                                                                    
funds would go if the programs were eliminated.                                                                                 
                                                                                                                                
2:12:04 PM                                                                                                                    
                                                                                                                                
Ms. Harbour answered that the  appeals commission was funded                                                                    
by  the  Workers'  Safety  Compensation  and  Administration                                                                    
Account, which  brought in funds from  workers' compensation                                                                    
premiums;  if   the  state  saved  money   on  the  workers'                                                                    
compensation  programs,  it  impacted premiums.  The  Second                                                                    
Injury Fund was also paid  through insurance; it was a self-                                                                    
supported  program, but  it would  save  employers money  if                                                                    
they did not have to fund the program.                                                                                          
                                                                                                                                
Co-Chair Seaton asked for  verification that the elimination                                                                    
of  the  programs  would  not  mean  the  funding  could  be                                                                    
diverted to another critical area within the department.                                                                        
                                                                                                                                
Commissioner Drygas  replied in  the negative  and explained                                                                    
that  the   department  referred  to  the   money  as  WSCAA                                                                    
[Workers'  Safety Compensation  and Administration  Account]                                                                    
funds.  The account  also funded  the Workers'  Compensation                                                                    
Division and the Occupational, Safety and Health Section.                                                                       
                                                                                                                                
Co-Chair Seaton thanked the  department for its presentation                                                                    
and  looked forward  to  additional  information during  its                                                                    
subcommittee meetings.                                                                                                          
                                                                                                                                
2:13:32 PM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
2:16:31 PM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                
^FY   18  BUDGET   OVERVIEW:  DEPARTMENT   OF  ENVIRONMENTAL                                                                  
CONSERVATION                                                                                                                  
                                                                                                                                
2:16:31 PM                                                                                                                    
                                                                                                                                
Co-Chair Seaton asked members to  hold their questions until                                                                    
the end of the presentation.                                                                                                    
                                                                                                                                
2:17:14 PM                                                                                                                    
                                                                                                                                
LARRY  HARTIG,  COMMISSIONER,  DEPARTMENT  OF  ENVIRONMENTAL                                                                    
CONSERVATION  (DEC),  provided   a  PowerPoint  presentation                                                                    
titled  "Department  of  Environmental  Conservation,  House                                                                    
Finance Committee"  dated January  27, 2017 (copy  on file).                                                                    
He  reviewed the  mission of  the department,  which was  to                                                                    
protect  human health  and the  environment  (slide 3).  The                                                                    
department  focused   on  bringing  clean   drinking  water,                                                                    
healthy air, safe food, and  no harmful contamination of the                                                                    
environment. The  department achieved  its goals  by setting                                                                    
standards  and incorporating  the standards  in permits  and                                                                    
plans,  compliance assistance  and enforcement,  and funding                                                                    
water  and sewer  infrastructure throughout  the state.  The                                                                    
department's  total UGF  in the  governor's  proposed FY  18                                                                    
budget was slightly  over $15 million (about  one-third of 1                                                                    
percent of total state UGF).  The department's total GF (UGF                                                                    
and  DGF combined)  equated to  approximately $0.37  per day                                                                    
for  an Alaskan  worker or  about $0.17  per day  per Alaska                                                                    
resident.                                                                                                                       
                                                                                                                                
2:18:31 PM                                                                                                                    
                                                                                                                                
Commissioner Hartig  addressed an LFD  graph on slide  3 and                                                                    
reported that the department's peak  GF spending occurred in                                                                    
FY 14  and had  subsequently been  declining. He  noted that                                                                    
the  spending was  not adjusted  for inflation,  which would                                                                    
make the  numbers more dramatic.  The decrease was  a result                                                                    
of some efficiencies and  consolidations, trimming back some                                                                    
programs, and making some fund  switches. The department had                                                                    
experienced a  36 percent decline in  UGF from FY 14  to the                                                                    
proposed FY  18 budget. He  noted that some of  the decrease                                                                    
had been  offset by increased  fees or other  fund switches.                                                                    
He detailed  that the  bar on the  right representing  FY 18                                                                    
was comprised  of $15  million UGF and  $30 million  DGF. He                                                                    
elaborated that  about half  of the DGF  was from  the Spill                                                                    
Prevention and  Response (SPAR) Fund (funded  by a surcharge                                                                    
on  crude   oil  production   and  refined   products);  the                                                                    
remaining half was made up of other fees.                                                                                       
                                                                                                                                
2:19:42 PM                                                                                                                    
                                                                                                                                
Commissioner Hartig  turned to an  LFD bar chart on  slide 4                                                                    
representing all  funds. He pointed  out that most  of DEC's                                                                    
budget  was for  personal  services  and contract  services.                                                                    
Increases  in  the  budget  and  areas  that  may  not  have                                                                    
declined  as  much  as  one  may expect  due  to  cuts,  was                                                                    
partially  due  to  labor contracts  and  health  costs.  He                                                                    
explained  that  things  had not  grown,  but  health  costs                                                                    
continued to rise.                                                                                                              
                                                                                                                                
Commissioner    Hartig   turned    to    slide   5    titled                                                                    
"Appropriations  within  the   Department  of  Environmental                                                                    
Conservation  - All  Funds." He  pointed  to two  converging                                                                    
lines   on  the   lower  right   and   explained  that   the                                                                    
administrative services  line had  increased a bit  over the                                                                    
past year, but  it reflected cost savings.  He detailed that                                                                    
the    department   had    been   trying    to   consolidate                                                                    
administrative services  functions within DEC.  For example,                                                                    
some  Division of  Water  administrative  staff had  shifted                                                                    
over to  the Division  of Administrative  Services (directed                                                                    
by  Tom  Cherian)  in  an  effort  to  realize  efficiencies                                                                    
through  the consolidation  of administrative  services. The                                                                    
department  had   also  been   consolidating  administrative                                                                    
services  at  a  state  level among  departments  in  Shared                                                                    
Services under the Department of Administration.                                                                                
                                                                                                                                
2:21:17 PM                                                                                                                    
                                                                                                                                
Commissioner  Hartig advanced  to an  LFD chart  on slide  6                                                                    
pertaining to  GF only. The  top line reflected  SPAR, which                                                                    
had remained level  over the past couple of  years. He noted                                                                    
that  although the  division  had taken  some  cuts, it  had                                                                    
remained  relatively steady.  He  elaborated  that SPAR  was                                                                    
funded  by  the response  prevention  account  (and a  small                                                                    
amount of  federal funding)  and used  no UGF.  The division                                                                    
showed a  slight increase due  entirely to health  costs and                                                                    
salary adjustments resulting from labor contracts.                                                                              
                                                                                                                                
Commissioner Hartig moved to an  LFD graph on slide 7, which                                                                    
broke  down  the department's  budget  by  fund source.  The                                                                    
department's  total  proposed  FY 18  operating  budget  was                                                                    
slightly under $82 million. Approximately  29 percent or $24                                                                    
million was federal receipts, about  19 percent was DGF from                                                                    
the prevention account  funded by a surcharge  on crude oil,                                                                    
and UGF  accounted for  about 19 percent  or $15  million or                                                                    
so.  He  elaborated that  other  state  funds accounted  for                                                                    
about   16   percent   or  $13   million,   which   included                                                                    
administrative  money from  loan fund  programs, interagency                                                                    
receipts, and other miscellaneous things.                                                                                       
                                                                                                                                
2:22:46 PM                                                                                                                    
                                                                                                                                
Commissioner Hartig  turned to slide 8,  which began showing                                                                    
the  department's  various  allocations  and  components  as                                                                    
included in the  budget book. He relayed the  UGF resided in                                                                    
different  areas  of  the  department  (excluding  the  SPAR                                                                    
Division).  Undesignated  General  Funds  accounted  for  11                                                                    
percent  of  the  Division of  Air  Quality's  budget,  17.8                                                                    
percent  of   the  Administrative  Services   budget,  41.83                                                                    
percent of  the Division of Environmental  Health, and 29.23                                                                    
percent of the Division of  Water. He stated that because of                                                                    
the difference  in where the  UGF resided, it was  where the                                                                    
department had looked for more  efficiencies and cuts. Slide                                                                    
8  pertained  to  the   Division  of  Administration,  which                                                                    
included the Commissioner's  Office. Overall, the division's                                                                    
funding  sources  were  split   equally  between  UGF,  DGF,                                                                    
federal, and other. He detailed  that slightly under half of                                                                    
the  Commissioner's  Office  was  UGF -  the  remainder  was                                                                    
federal   funding.   Other  components   of   Administrative                                                                    
Services had  more DGF -  portions of DEC's  permit programs                                                                    
relied  on information  technology (IT)  and other  services                                                                    
and paid their  way by putting some  funds to Administrative                                                                    
Services.                                                                                                                       
                                                                                                                                
2:24:36 PM                                                                                                                    
                                                                                                                                
Commissioner Hartig addressed  the Division of Environmental                                                                    
Health on  slide 9.  He noted  it was  one of  the divisions                                                                    
that relied on more UGF and  had taken some larger cuts more                                                                    
recently.  The first  item related  to building  maintenance                                                                    
and  operations   for  the   environmental  health   lab  in                                                                    
Anchorage. The  allocation was statutorily required  and was                                                                    
useful for  numerous purposes including in  emergencies such                                                                    
as  food  borne  illness  outbreaks  or  disease  in  animal                                                                    
populations. The  lab necessary to quickly  track the items.                                                                    
The  lab was  also  essential for  the  seafood industry  to                                                                    
conduct   testing  of   different  seafood   products  (e.g.                                                                    
shellfish) before  they could be  sold. The lab  also tested                                                                    
agricultural  products sold  out-of-state  and to  federally                                                                    
funded institutions like schools.                                                                                               
                                                                                                                                
Commissioner  Hartig turned  to  slide 10  and continued  to                                                                    
speak  about  the  Division   of  Environmental  Health.  He                                                                    
addressed food safety  and sanitation, which was  one of the                                                                    
department's  core  components.  The  division  was  largely                                                                    
supported by  fees. The first  item under the  component was                                                                    
shellfish,  which  represented one  of  two  areas that  was                                                                    
heavily subsidized by UGF (the  fees did not cover the costs                                                                    
of the  program). He detailed  that it was a  small industry                                                                    
and the cost of providing the  lab and other services to the                                                                    
industry was high  due to the type of  testing. The division                                                                    
was currently  doing a  seafood and  shellfish fee  study to                                                                    
determine if the  industry could pay any more  - he believed                                                                    
it would be a subcommittee discussion.                                                                                          
                                                                                                                                
Representative   Kawasaki  noted   there  was   a  shellfish                                                                    
allocation on slide  10 in addition to a  shellfish and food                                                                    
safety testing  allocation on  slide 12.  He asked  if there                                                                    
was a  difference between the  two allocations and  why they                                                                    
appeared separately.                                                                                                            
                                                                                                                                
Commissioner Hartig  answered that the  shellfish allocation                                                                    
on slide 10 referred to  program staff and the allocation on                                                                    
slide  12 was  for laboratory  services associated  with the                                                                    
testing. The  testing was for paralytic  shellfish poisoning                                                                    
(PSP) to determine whether there  were paralytic toxins in a                                                                    
product  that was  being sold.  The toxins  were potentially                                                                    
fatal; therefore, the  shellfish had to be  checked prior to                                                                    
being  sold into  commerce. The  two  increments cost  about                                                                    
$700,000  total  - the  fees  of  about $52,000  represented                                                                    
about 7 percent of the total cost.                                                                                              
                                                                                                                                
2:27:47 PM                                                                                                                    
                                                                                                                                
Commissioner  Hartig  highlighted manufactured  food/seafood                                                                    
processors  on slide  10. The  allocation  required a  small                                                                    
amount of UGF, primarily for the federal match.                                                                                 
                                                                                                                                
Co-Chair Seaton  asked about the  source of the  DGF funding                                                                    
for the  manufactured food/seafood  processors. Commissioner                                                                    
Hartig replied the fund source was fees.                                                                                        
                                                                                                                                
Vice-Chair  Gara reasoned  that the  budget problems  should                                                                    
not  be fixed  by  sloughing state  responsibilities off  on                                                                    
municipalities where inappropriate. He  spoke to food safety                                                                    
related  to restaurants  and bars.  He noted  the department                                                                    
had conceded  it was not  able to meet federal  standards in                                                                    
terms of  the restaurant inspections it  conducted. He asked                                                                    
if  the  department  had ever  considered  transferring  the                                                                    
function  over  to  larger  communities.  He  remarked  that                                                                    
restaurant  inspections were  done by  communities in  other                                                                    
states.  He  wondered  if   communities  would  receive  the                                                                    
federal   matching   funds   if   the   responsibility   was                                                                    
transferred.                                                                                                                    
                                                                                                                                
Commissioner Hartig  pointed to  retail food  inspections on                                                                    
slide  11. The  department inspected  restaurants and  other                                                                    
facilities that processed and served  food to the public. He                                                                    
agreed that  in most  other states the  task was  handled at                                                                    
the county  level, whereas in Alaska,  the only municipality                                                                    
responsible for  food inspections was  Anchorage. Generally,                                                                    
in outlying areas  the department went out  for Federal Drug                                                                    
Administration (FDA) inspections  (e.g. seafood processing);                                                                    
therefore, the trips  were not a high cost to  the state. He                                                                    
confirmed that  the department  did not  inspect at  the FDA                                                                    
recommended rate.  He characterized the inspection  times as                                                                    
opportunistic. The  department tried to target  the most at-                                                                    
risk facilities when it did  inspections. He shared that DEC                                                                    
had considered what it could transfer back to communities.                                                                      
                                                                                                                                
Commissioner  Hartig  elaborated  when the  department  made                                                                    
cuts it  considered what  risk was  created for  the public,                                                                    
whether  a community  could take  the responsibility  on, or                                                                    
whether the  public could address  an issue. He  stated that                                                                    
it was  challenging to evaluate  the specific  issue because                                                                    
food  borne illnesses  were largely  unreported  and it  was                                                                    
difficult to  determine how  many food-borne  illnesses were                                                                    
prevented  by an  inspection  because  the inspection  never                                                                    
happened. All that could be done  was to look at other areas                                                                    
of  the  country that  did  not  do inspections,  which  was                                                                    
difficult  because  inspections  were  done  in  most  other                                                                    
areas, or the issue could  be tracked over time. He believed                                                                    
the  responsibility  would  be  difficult to  push  back  to                                                                    
communities because  if it was  not a high priority  for the                                                                    
state  it  was  less  likely  to  be  a  high  priority  for                                                                    
communities. He was  concerned that the state  would have to                                                                    
respond when  something became a crisis.  He reiterated that                                                                    
when DEC  considered making  cuts in any  area it  looked at                                                                    
what could and  could not pushed back  to municipalities and                                                                    
how the risk could be mitigated.                                                                                                
                                                                                                                                
2:31:22 PM                                                                                                                    
                                                                                                                                
Vice-Chair Gara  observed that most  of the funding  for the                                                                    
increment  was  DGF. He  asked  about  the fund  source  and                                                                    
remarked  that perhaps  there was  not a  significant budget                                                                    
impact.                                                                                                                         
                                                                                                                                
Commissioner Hartig  asked if  Vice-Chair Gara  was speaking                                                                    
about retail food.                                                                                                              
                                                                                                                                
Vice-Chair Gara replied in the  affirmative. He stated there                                                                    
was $1.5 million DGF and a low amount of UGF.                                                                                   
                                                                                                                                
Commissioner Hartig believed the DGF was all fees.                                                                              
                                                                                                                                
Vice-Chair  Gara  surmised  it was  largely  fee  supported.                                                                    
Commissioner   Hartig  replied   in  the   affirmative.  The                                                                    
department  was  looking  at   outreach  and  education.  He                                                                    
reiterated his earlier statement  that when making cuts, DEC                                                                    
considered the risk  the cuts would create and  how it could                                                                    
be mitigated.                                                                                                                   
                                                                                                                                
Representative  Pruitt  asked  if  the  department  had  the                                                                    
authority  to  change  fee structures  on  its  own  through                                                                    
regulation   or   the  commissioner's   authority   (without                                                                    
legislation).                                                                                                                   
                                                                                                                                
Commissioner  Hartig   answered  there  were   two  statutes                                                                    
authorizing  the department  to create  and levy  fees; both                                                                    
had  restrictions. Some  were restrictions  on DEC's  direct                                                                    
cost  and  the percentage  it  could  recover and  sometimes                                                                    
there were  prohibitions on collecting  any or  a percentage                                                                    
of the indirect costs DEC  could collect. The department had                                                                    
gone  back and  evaluated the  statutes in  the past  and it                                                                    
believed  in  some areas  fees  could  be increased  without                                                                    
economically  impacting the  related business.  In the  past                                                                    
couple of  years DEC  had worked with  the House  and Senate                                                                    
Finance  Committees  on  draft legislation  to  address  the                                                                    
issue. He  offered to share  the draft legislation  with the                                                                    
committee. He  relayed that the department  was talking with                                                                    
the subcommittee about the issue.  He mentioned that several                                                                    
years back a bill (HB  140) sponsored by Representative Lora                                                                    
Reinbold had passed, requiring agencies  to take a hard look                                                                    
at the  economics of  any new  regulations -  DEC did  so as                                                                    
part of  its fee evaluation  and he believed it  was getting                                                                    
much better at the process.                                                                                                     
                                                                                                                                
Co-Chair Seaton relayed his  expectation that the department                                                                    
would take  up indirect expenditures with  the subcommittee.                                                                    
The subcommittee would come forward with recommendations.                                                                       
                                                                                                                                
Commissioner Hartig agreed.                                                                                                     
                                                                                                                                
2:35:01 PM                                                                                                                    
                                                                                                                                
Commissioner Hartig addressed slide  11 pertaining to public                                                                    
facilities including  pools, spas, and tattoos  and body art                                                                    
facilities.  Funding   included  a  significant   amount  of                                                                    
"other"  funds, which  included  RSA [Reimbursable  Services                                                                    
Agreement]   funding  from   the  Department   of  Commerce,                                                                    
Community  and  Economic  Development (DCCED).  He  detailed                                                                    
that  DCCED collected  licensing  fees for  tattoo and  body                                                                    
art, which was  passed on to DEC to  conduct inspections. He                                                                    
remarked that  because it involved needles  and contact with                                                                    
blood,  it  constituted  a high-risk  from  a  human  health                                                                    
standpoint.                                                                                                                     
                                                                                                                                
Commissioner  Hartig turned  to slide  13 and  addressed the                                                                    
dairy program. He  detailed that program fees  did not cover                                                                    
the   service.  Costs   were  approximately   $405,700  with                                                                    
$405,300  UGF. There  were only  two  dairy farms;  however,                                                                    
significant oversight  was required.  He detailed  that milk                                                                    
was good  for human health, but  a lot of other  things grew                                                                    
in it,  which meant it  needed to be carefully  watched. The                                                                    
department's  overall  UGF  was approximately  $15  million,                                                                    
approximately $5  million was required for  federal matching                                                                    
funds, about $4 million went  to basic services (providing a                                                                    
minimum level  of service  without the  ability to  charge a                                                                    
fee),  and  about  $6  million   went  toward  services  the                                                                    
department charged  a fee for, but  the businesses receiving                                                                    
the  service  were  not  able  to pay  the  entire  fee.  He                                                                    
elaborated  that the  $6  million  went towards  subsidizing                                                                    
industries  served  by the  department.  He  added that  the                                                                    
department did not  expect all the businesses  would be able                                                                    
to cover the costs.                                                                                                             
                                                                                                                                
2:37:16 PM                                                                                                                    
                                                                                                                                
Commissioner  Hartig  addressed  the   bottom  of  slide  13                                                                    
related  to fish  tissue  testing.  The allocation  included                                                                    
approximately  $307,000  DGF.  He considered  all  the  fish                                                                    
tissue testing  to be  more than beneficial  - the  cost was                                                                    
covered by  ocean ranger fees  as a  result of an  action by                                                                    
the House Finance Committee the  previous year (there was no                                                                    
longer  any UGF).  He moved  to slide  14 and  spoke to  the                                                                    
drinking  water component,  which  included public  drinking                                                                    
water  systems serving  25  or more  people.  Over the  past                                                                    
couple of years  with cuts to the  Division of Environmental                                                                    
Health, the department had  eliminated oversight of drinking                                                                    
water systems serving less than  25 people. He remarked that                                                                    
it was a risk that had  been passed on to the people running                                                                    
those  systems and  the public  they served.  About $900,000                                                                    
UGF was matched  with federal funds. Of the  $4.3 million in                                                                    
federal  funds  about  $3.5 million  was  the  public  water                                                                    
systems  management  grant.  The division  received  a  fair                                                                    
amount of money from  the federal government including about                                                                    
$10  million  per  year  to  subsidize  the  drinking  water                                                                    
program.                                                                                                                        
                                                                                                                                
Co-Chair Seaton  asked if the  5 percent recovered  by costs                                                                    
was because  most of  the systems  were municipal  or public                                                                    
instead of private.                                                                                                             
                                                                                                                                
Commissioner  Hartig answered  that  there  were many  small                                                                    
systems and communities served by  the division. Rather than                                                                    
charging  small  communities  a fee,  the  department  would                                                                    
prefer  for them  to use  their  money on  their systems  or                                                                    
landfill. The  department had determined the  area needed to                                                                    
be subsidized  based on the  size of the community  and what                                                                    
they could  bear. He  highlighted the  pesticides allocation                                                                    
at  the  bottom  of  slide  14 that  contained  no  UGF.  He                                                                    
detailed that the program was  funded with registration fees                                                                    
paid  for selling  or distributing  pesticides in  the state                                                                    
(the pesticide had to be approved for use by EPA).                                                                              
                                                                                                                                
2:39:47 PM                                                                                                                    
                                                                                                                                
Commissioner Hartig  addressed the  Division of  Air Quality                                                                    
on slide  15. He pointed out  the low amount of  UGF funding                                                                    
and  remarked that  it was  a  tight-budget division.  There                                                                    
were   numerous  division   functions   that  were   closely                                                                    
integrated. He detailed that about  $1.4 million of the $1.7                                                                    
million UGF was for match  and maintenance of effort; it was                                                                    
the  minimum amount  required by  the federal  government to                                                                    
receive matching  funds. He explained it  left only $300,000                                                                    
to  answer   neighborhood  complaints,  hold   workshops  on                                                                    
controversial  permits,   and  to  deal   with  non-permitee                                                                    
appeals  when  the  department  could  not  recover  appeals                                                                    
costs.                                                                                                                          
                                                                                                                                
Commissioner   Hartig  addressed   the  Division   of  Spill                                                                    
Prevention and Response, which used  no UGF funding. Most of                                                                    
the DGF  was from the  prevention account, which  was funded                                                                    
by a  surcharge on crude oil  and a small amount  on refined                                                                    
product.  He  continued that  5  percent  of the  division's                                                                    
budget came from  the Cruise Ship Passenger  Vessel Fund due                                                                    
to  work SPAR  did  on contingency  plans  for the  vessels.                                                                    
There  was  some federal  funding  that  helped support  the                                                                    
department's   work  related   to   a   number  of   federal                                                                    
contaminated sites.                                                                                                             
                                                                                                                                
Commissioner  Hartig  addressed  the Division  of  Water  on                                                                    
slide 17  and pointed  to the third  row down  pertaining to                                                                    
the  Alaska  Pollutant  Discharge  Elimination  System.  The                                                                    
department  had  been  asked whether  there  were  federally                                                                    
delegated air or water programs  that DEC could give back to                                                                    
save money. He  pointed out that the system  was largely fee                                                                    
supported, meaning it  would not save DEC money  to give the                                                                    
program back. The system received  a small amount of federal                                                                    
funds and  $636,000 UGF.  He explained  that if  primacy was                                                                    
given back to the federal  government, a state program would                                                                    
still  be necessary  due to  state statutes  requiring state                                                                    
issued  wastewater discharge  permits. Additionally,  if EPA                                                                    
took  the  program  back,  the state  would  still  have  to                                                                    
certify the  EPA's permits consistent  with state  law under                                                                    
Section 401 of  the Clean Water Act; it was  the only way to                                                                    
authorize mixing zones. He continued  that just about any of                                                                    
the public's  wastewater treatment systems had  mixing zones                                                                    
that  EPA  could  not  authorize. He  did  not  believe  the                                                                    
program could be operated at a lower cost.                                                                                      
                                                                                                                                
2:42:29 PM                                                                                                                    
                                                                                                                                
Vice-Chair Gara  referred to the  two state  statutes taking                                                                    
primacy from  the federal government.  He recalled  that one                                                                    
of  them  involved  roughly  $2   million  costs  the  state                                                                    
absorbed by taking  over primacy. He asked how  it would not                                                                    
save the state money to return primacy.                                                                                         
                                                                                                                                
Commissioner  Hartig  answered  that the  details  could  be                                                                    
discussed  with the  division  director during  subcommittee                                                                    
meetings.  He  did  not believe  returning  primacy  to  the                                                                    
federal  government would  save  the state  money because  a                                                                    
state  program would  still be  required. He  continued that                                                                    
because much of the program  was covered by fees and federal                                                                    
funds, it would not save  the state significant UGF funding.                                                                    
He noted  that slide  18 showed  additional UGF  funding for                                                                    
compliance. He surmised that if  the state gave primacy back                                                                    
to the federal  government, the state could opt  to cut back                                                                    
on  compliance to  save money.  The  department was  cutting                                                                    
back  compliance  to a  degree  because  it was  doing  less                                                                    
travel.  He  pointed out  that  the  proposed FY  18  budget                                                                    
showed a  UGF cut for  travel, meaning there would  be fewer                                                                    
inspections.  He stated  it was  a balance  and believed  it                                                                    
would  take more  than  merely giving  primacy  back to  the                                                                    
federal government to cut UGF.                                                                                                  
                                                                                                                                
2:44:17 PM                                                                                                                    
                                                                                                                                
Commissioner Hartig  returned to slide 17  and detailed that                                                                    
the engineering  support and plan review  component received                                                                    
$1.4 million UGF.  He specified the work  for onsite systems                                                                    
included leach  fields and other. The  department was trying                                                                    
to find  ways to  reduce UGF  without impacting  the private                                                                    
sector or  the sales of homes  needing system certification.                                                                    
He elaborated  that DEC had established  a stakeholder group                                                                    
that would try  to identify ways to scale back  work done by                                                                    
DEC, by sending work to  the private sector or discontinuing                                                                    
things that would  not create risk or problems  for the sale                                                                    
of properties. The group was  actively working on the issue,                                                                    
but it  would be one  or two  years before savings  could be                                                                    
realized.                                                                                                                       
                                                                                                                                
Commissioner  Hartig  moved  to  slide 18  and  spoke  about                                                                    
surface  water  standards  and  assessment.  The  allocation                                                                    
included $660,000  UGF that was  almost entirely  matched by                                                                    
federal funds.  The cruise ship allocation  was entirely all                                                                    
DGF supported by the Cruise  Ship Passenger Vessel and Ocean                                                                    
Ranger Funds ($4 per berth).                                                                                                    
                                                                                                                                
Commissioner  Hartig  moved to  slide  19  and continued  to                                                                    
address the Division  of Water. The division  had a facility                                                                    
construction  component,  which  included the  Village  Safe                                                                    
Water Municipal  Grant Loan Program  and the  Revolving Loan                                                                    
Fund  Programs.  He detailed  that  the  Village Safe  Water                                                                    
Municipal  Grant Loan  Program  was funded  with 75  percent                                                                    
federal and  25 percent  state money.  He detailed  that the                                                                    
Revolving  Loan Fund  Program was  larger  than most  people                                                                    
realized  and  housed   approximately  $700  million,  which                                                                    
included  outstanding loans  and  cash.  The state  received                                                                    
grant funds  annually from the  federal government  that the                                                                    
state  used to  loan  for water  and  sewer projects  around                                                                    
Alaska.  The  loans went  to  all-sized  communities and  he                                                                    
noted that Anchorage had relied  heavily on the program over                                                                    
the years.                                                                                                                      
                                                                                                                                
Commissioner Hartig  continued that over the  past couple of                                                                    
years,  the  department had  taken  a  portion of  the  loan                                                                    
receipts it  received to cover  the administrative  costs of                                                                    
the  program, meaning  UGF funding  had been  eliminated and                                                                    
the  funding source  had become  "other."  The Village  Safe                                                                    
Water Municipal  Grant Loan Program and  drinking water were                                                                    
funded  by the  loan programs.  He stated  that the  village                                                                    
safe water  program was doing well  - there was no  money in                                                                    
the  governor's proposed  capital  budget  for the  program,                                                                    
which  meant  more  communities  would  be  reliant  on  the                                                                    
revolving  loan  fund  program. The  department  was  paying                                                                    
attention  to ensure  communities did  not fall  through the                                                                    
cracks  in their  ability  to receive  funds  for water  and                                                                    
sewer.                                                                                                                          
                                                                                                                                
Commissioner Hartig  addressed operations assistance  at the                                                                    
bottom   of  slide   19.   The   allocation  funded   remote                                                                    
maintenance  workers  that  helped  communities  when  their                                                                    
water  and   sewer  systems  began  failing   (typically  in                                                                    
villages). The allocation was  primarily funded with federal                                                                    
money and  had a smaller  portion of UGF funds  required for                                                                    
federal  match.  He  elaborated  that  the  allocation  also                                                                    
included the  operator certification program,  which brought                                                                    
in some fees.                                                                                                                   
                                                                                                                                
2:48:05 PM                                                                                                                    
                                                                                                                                
Representative  Ortiz  asked   if  Commissioner  Hartig  had                                                                    
testified that  it may be  a long-term goal to  require more                                                                    
from  the  farmers  to  cover the  costs  of  the  shellfish                                                                    
testing conducted by DEC.                                                                                                       
                                                                                                                                
Commissioner   Hartig  replied   that  the   department  was                                                                    
currently  doing the  economic  analysis and  it would  talk                                                                    
with the  industry, which was small.  The industry contained                                                                    
various  components  including  gooey  ducks,  farmers,  and                                                                    
people   collecting   in   naturally  growing   areas.   The                                                                    
department would look  at the issue as closely  as needed to                                                                    
avoid hurting the industry.                                                                                                     
                                                                                                                                
Representative  Ortiz remarked  it  was a  complaint he  had                                                                    
heard from his constituents.  He asked for verification that                                                                    
the testing center was in Anchorage.                                                                                            
                                                                                                                                
Commissioner Hartig replied in the affirmative.                                                                                 
                                                                                                                                
Representative  Ortiz  stated  that there  was  considerable                                                                    
turnaround time  for individuals  harvesting gooey  ducks or                                                                    
other  products  in  Southeast prior  to  receiving  testing                                                                    
results. He  asked if the department  had considered looking                                                                    
at the cost of the testing  facility and whether a lab could                                                                    
be in closer proximity to the industry.                                                                                         
                                                                                                                                
Commissioner Hartig  answered there  was a lab  in Southeast                                                                    
funded  with   federal  grant  money  that   was  trying  to                                                                    
establish a  local lab. The  department supported  the idea.                                                                    
He elaborated  that DEC  was providing  the service  for the                                                                    
public  and  it would  be  great  if someone  else,  private                                                                    
industry  in  particular,  could  provide  the  service.  He                                                                    
stated that  PSP was fairly prevalent  throughout Alaska; it                                                                    
was  particularly challenging  in  some  parts of  Southeast                                                                    
near Haines, in  Kodiak, and out in the  Aleutian Chain. The                                                                    
poison  was seen  in butter  clams, Dungeness  crab, and  in                                                                    
gooey  ducks.  The poison  was  unpredictable;  it could  be                                                                    
present  one  day  and  gone   the  next.  He  stressed  the                                                                    
necessity of  testing the area  when harvesting; it  was not                                                                    
possible to assume  that because it was  absent the previous                                                                    
year  that  it would  be  absent  in  the current  year.  He                                                                    
underscored   the  negative   impact  on   Alaska's  seafood                                                                    
reputation  that would  occur  if  contaminated seafood  was                                                                    
shipped out  and a person  became sick and died.  He relayed                                                                    
that  the testing  was  expensive -  it  required sending  a                                                                    
sample  to the  Anchorage lab,  it  was then  ground up  and                                                                    
injected into  mice to  see the  effects. He  continued that                                                                    
before  farmers could  harvest they  waited  to receive  the                                                                    
results,  which  made  the timeframe  tight.  The  work  was                                                                    
substantial, and  DEC collaborated with FDA  and industry to                                                                    
look  at alternatives,  but  they were  not  there yet;  the                                                                    
alternative  had  to   work,  due  to  the   danger  of  the                                                                    
situation.                                                                                                                      
                                                                                                                                
2:51:48 PM                                                                                                                    
                                                                                                                                
Co-Chair Foster  asked if Commissioner Hartig  had mentioned                                                                    
the  shifting of  paying for  the service  with cruise  ship                                                                    
funds.                                                                                                                          
                                                                                                                                
Commissioner Hartig  replied in  the negative;  however, the                                                                    
department was looking  at trying to offset some  of the UGF                                                                    
with Cruise Ship Passenger Vessel Funds, which was DGF.                                                                         
                                                                                                                                
Representative Thompson asked  about how much it  cost to do                                                                    
PSP testing and what portion was covered by the state.                                                                          
                                                                                                                                
Commissioner Hartig believed the  testing was about $140 per                                                                    
sample.  The lab  and  oversight cost  was  about 7  percent                                                                    
overall. The $140 testing cost was covered by the industry.                                                                     
                                                                                                                                
Co-Chair Seaton  thought the state  was the largest  user of                                                                    
white mice in the world.                                                                                                        
                                                                                                                                
Commissioner  Hartig answered  that  the  department used  a                                                                    
substantial number of mice.                                                                                                     
                                                                                                                                
Co-Chair  Seaton   hoped  new  chemical  testing   would  be                                                                    
available soon  that would  enable the state  to get  out of                                                                    
the current method.                                                                                                             
                                                                                                                                
2:54:05 PM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
2:55:40 PM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                
^FY 18 BUDGET OVERVIEW: DEPARTMENT OF ADMINISTRATION                                                                          
                                                                                                                                
2:55:49 PM                                                                                                                    
                                                                                                                                
SHELDON FISHER,  COMMISSIONER, DEPARTMENT  OF ADMINISTRATION                                                                    
(DOA),   provided    a   PowerPoint    presentation   titled                                                                    
"Department  of Administration  Overview" dated  January 27,                                                                    
2017  (copy  on  file).  Relayed his  intent  to  prioritize                                                                    
slides. He moved to an  organizational chart on slide 3. The                                                                    
department's  primary  mission   was  to  provide  efficient                                                                    
support  services   to  other  state  agencies.   The  boxes                                                                    
highlighted in  green showed services DOA  provided to other                                                                    
state  agencies, the  blue  boxes  showed services  provided                                                                    
directly to  Alaskans, and the  gray boxes  reflected boards                                                                    
and  commissions  that   the  department  helped  facilitate                                                                    
administration.  The  department  was  responsible  for  the                                                                    
information  technology  (IT)  function;  finance;  leasing,                                                                    
procurement,  travel  administration, and  accounts  payable                                                                    
were  performed by  General  Services  and Shared  Services,                                                                    
which  were  merging  into one  division;  the  Division  of                                                                    
Retirement  and   Benefits  provided  benefits   for  active                                                                    
employees and the retirement plan  and program for retirees;                                                                    
and  the   Division  of  Risk  Management,   which  included                                                                    
insurance, property management, and workers' compensation.                                                                      
                                                                                                                                
2:58:00 PM                                                                                                                    
                                                                                                                                
Commissioner  Fisher  moved to  slide  4  and addressed  the                                                                    
department's share  of total agency operations,  GF only. He                                                                    
pointed out  that GF accounted  for slightly over  2 percent                                                                    
of the  department's budget; the  funds had peaked in  FY 15                                                                    
at  $111 million  and were  down to  about $99.5  million (a                                                                    
decline   of  almost   $12  million).   Slide  5   showed  a                                                                    
combination  of UGF  and DGF  for each  of the  department's                                                                    
divisions (ranked by amount).  The Office of Public Advocacy                                                                    
(OPA) and  the Public Defender  Agency (PD) were at  the top                                                                    
end of  the list. The  two agencies had  remained relatively                                                                    
flat between FY 15 and FY  18 at about $50 million. He noted                                                                    
that  the  department  had  attempted  to  protect  the  two                                                                    
divisions and believed in the  importance of their work. The                                                                    
UGF portion  of the  agencies' budget was  down by  about $2                                                                    
million between FY  15 and FY 18. He continued  that the DGF                                                                    
portion was up by about $2  million. He added that in FY 18,                                                                    
the  two  agencies  had  about  $46.5  million  in  UGF.  He                                                                    
remarked that  the $2.4 million  DGF may or may  not happen.                                                                    
He elaborated  that the agencies  were able to  collect fees                                                                    
in  certain circumstances  from  individuals, but  sometimes                                                                    
the collection  of those fees  was difficult.  The reduction                                                                    
of   the  Permanent   Fund   impacted   the  situation;   if                                                                    
individuals did not  pay their fees the  state could garnish                                                                    
their Permanent  Fund, but as  the fund declined,  the state                                                                    
struggled to recover the money.  He relayed that although it                                                                    
did not  appear there had  been a  cut, there had  been some                                                                    
reductions to the two agencies.                                                                                                 
                                                                                                                                
Commissioner  Fisher  highlighted   the  Division  of  Motor                                                                    
Vehicles (DMV)  as the  second item on  the list  (slide 5).                                                                    
The DMV  was funded entirely  with DGF associated  with fees                                                                    
collected  by   the  division.  The   Alaska  Oil   and  Gas                                                                    
Conservation Commission  (AOGCC) was  third on the  list and                                                                    
was  funded  entirely by  industry  receipts.  The State  of                                                                    
Alaska Telecommunications System (SATS)  and the Alaska Land                                                                    
Mobile Radio System (ALMR) were  fourth on the list and were                                                                    
responsible   for   providing  emergency   telecommunication                                                                    
services to first responders in  the state. The two programs                                                                    
were  funded  primarily by  UGF  -  the  state was  able  to                                                                    
collect a  small amount from  various network users  and the                                                                    
federal government.                                                                                                             
                                                                                                                                
3:01:34 PM                                                                                                                    
                                                                                                                                
Commissioner Fisher  continued to address the  list on slide                                                                    
5. He  pointed out  that the department  administered public                                                                    
television  [shown  as seventh  on  the  list]. He  asked  a                                                                    
colleague to speak to the upcoming slides.                                                                                      
                                                                                                                                
CHERYL  LOWENSTEIN,  DIRECTOR,  DIVISION  OF  ADMINISTRATIVE                                                                    
SERVICES, DEPARTMENT  OF ADMINISTRATION, addressed  slide 6,                                                                    
which  included  the  department's  budget  by  all  funding                                                                    
sources. She  discussed that DOA provided  services to state                                                                    
agencies,   the  bulk   of  the   department's  expenditures                                                                    
appeared in the contractual  line for products and services.                                                                    
Most of the  remaining budget went to  personal services for                                                                    
people helping to  provide the services. She  moved to slide                                                                    
7  including GF  appropriations only.  She pointed  to legal                                                                    
and advocacy services  at the top of  the appropriation list                                                                    
and relayed that  the component carried the  lion's share of                                                                    
UGF.  The second  item was  DMV, which  carried the  bulk of                                                                    
receipts   received    by   the    department.   Centralized                                                                    
Administrative Services  was the third in  line and included                                                                    
a number of  large divisions such as  Finance, Personnel and                                                                    
Labor Relations, and Retirement  and Benefits. The AOGCC was                                                                    
the next in line and was based on receipts.                                                                                     
                                                                                                                                
Ms.  Lowenstein   turned  to  slide  8   and  addressed  the                                                                    
department's    appropriations   all    funds.   Centralized                                                                    
Administrative Services  was at the  top of the  budget list                                                                    
because  it carried  the bulk  of services  provided by  the                                                                    
department  (e.g. personnel,  finance, and  others mentioned                                                                    
previously). Shared  Services was a new  initiative operated                                                                    
by  the department  - the  bulk  of the  funding source  was                                                                    
interagency  receipts.  She  detailed  that  the  department                                                                    
charged  agencies  for  services   it  provided.  Legal  and                                                                    
advocacy  were   third  in  line   and  accounted   for  the                                                                    
department's  GF.  The   Office  of  Information  Technology                                                                    
appeared  fourth  on  the  list   and  was  another  of  the                                                                    
department's  initiatives -  it  was also  a chargeback  and                                                                    
paid with interagency funds.                                                                                                    
                                                                                                                                
3:04:19 PM                                                                                                                    
                                                                                                                                
Ms. Lowenstein  moved to slide  9 and addressed  DOA funding                                                                    
comparison by  fund group. The  department received  a small                                                                    
amount of  federal funds, which  were hardly visible  on the                                                                    
bar  chart.  Federal  funds   were  generally  for  specific                                                                    
purposes - DMV  received a small amount and  ALMR received a                                                                    
small amount to receive funds  from the [U.S.] Department of                                                                    
Defense for the maintenance  of the ALMR system. Interagency                                                                    
receipts made up  the "other" state funds.  She detailed the                                                                    
interagency  receipts may  be  something  like the  Internal                                                                    
Services or Public  Building Fund; it was  the mechanism DOA                                                                    
used to charge and receive  from other agencies. The bulk of                                                                    
the  department's DGF  was DMV  and AOGCC,  whereas UGF  was                                                                    
primarily OPA and PD.                                                                                                           
                                                                                                                                
Commissioner Fisher  advanced to slide 10  pertaining to the                                                                    
Division  of  Finance.  The  division  was  responsible  for                                                                    
managing the  IRIS [Integrated Resource  Information System]                                                                    
accounting   system,    ALDER   [Alaska    Data   Enterprise                                                                    
Reporting],  and  for  producing  the  Comprehensive  Annual                                                                    
Financial  Report   (CAFR)  and  various   audit  compliance                                                                    
reports as required.  He noted the division  worked with LFD                                                                    
to   complete  the   audit.   The   division's  budget   was                                                                    
approximately $10.8 million, split  roughly 50/50 between GF                                                                    
and other funding. He noted  that "other" generally referred                                                                    
to  interagency receipts  received from  other agencies.  He                                                                    
pointed to a column showing  the percent of costs associated                                                                    
with  fees  and relayed  that  fees  collected by  DOA  were                                                                    
typically  from other  agencies (with  the exception  of DMV                                                                    
and AOGCC). The division housed  45 employees who were split                                                                    
roughly   one-third/two-thirds    between   accounting   and                                                                    
administrative functions respectively.                                                                                          
                                                                                                                                
3:07:24 PM                                                                                                                    
                                                                                                                                
Commissioner  Fisher turned  to slide  11 and  addressed the                                                                    
Division of Personnel and Labor  Relations. He addressed the                                                                    
Division of  Personnel first  and shared that  it had  a $12                                                                    
million  budget,  the majority  of  which  was paid  through                                                                    
interagency receipts (there was only  a modest amount of UGF                                                                    
received).  There were  about 120  employees,  most of  whom                                                                    
were in  the Payroll  Services section and  were responsible                                                                    
for getting  the weekly  payroll out.  He remarked  that the                                                                    
state's payroll  was relatively  complicated and  included a                                                                    
number of exceptions. Earlier in  the week, DOA had launched                                                                    
a new HR  [Human Resources] module to IRIS and  the hope was                                                                    
to get better  information into the system in  order to have                                                                    
less  manual processing  of payroll,  which would  hopefully                                                                    
reduce   cost  and   personnel.   The   division  was   also                                                                    
responsible  for performing  classifications and  conducting                                                                    
training.                                                                                                                       
                                                                                                                                
Commissioner  Fisher  moved to  slide  12  and continued  to                                                                    
address  the Division  of Personnel.  The Employee  Planning                                                                    
and Information  Center (EPIC)  provided record  keeping and                                                                    
reporting.  The  division  also housed  the  Americans  with                                                                    
Disability Act  (ADA) and  Statewide Recruitment.  The labor                                                                    
relations  portion of  the division  had a  budget of  about                                                                    
$1.3 million (all UGF) and  seven staff who were responsible                                                                    
for  maintaining the  state's  relationship with  bargaining                                                                    
units and for bargaining agreements as they arose.                                                                              
                                                                                                                                
3:09:37 PM                                                                                                                    
                                                                                                                                
Commissioner Fisher spoke to the  Division of Retirement and                                                                    
Benefits (DRB) on  slide 13. He relayed  that the division's                                                                    
budget   was  almost   $18   million   with  115   employees                                                                    
responsible for  handling the benefits for  active employees                                                                    
and  retirees. He  pointed to  the bottom  of the  slide and                                                                    
relayed  that the  department used  Aetna to  administer the                                                                    
healthcare  plan. He  moved to  slide 14  and addressed  the                                                                    
Division of  Risk Management.  The division  was responsible                                                                    
for  the   administration  of  the   department's  insurance                                                                    
programs for  its third-party  property insurance  (shown in                                                                    
the  second row).  The bulk  of the  division at  almost $32                                                                    
million   was  workers'   compensation   and  other   claims                                                                    
management  functions. The  division had  a budget  of about                                                                    
$40.8 million, with five staff.                                                                                                 
                                                                                                                                
Commissioner Fisher  advanced to  slide 15,  which continued                                                                    
the  Division of  Risk Management.  The allocation  included                                                                    
0.5   positions  with   the   responsibility  of   reviewing                                                                    
contracts to  ensure the  departments had  proper insurance.                                                                    
Part  of workers'  compensation  involved a  Return to  Work                                                                    
program. The  program acknowledged that  perhaps individuals                                                                    
could  not  return to  their  previous  job, but  there  was                                                                    
light-duty work  that could  add value  to the  state, while                                                                    
enabling the individuals to be productive.                                                                                      
                                                                                                                                
3:11:35 PM                                                                                                                    
                                                                                                                                
Commissioner Fisher  addressed Shared Services on  slide 16.                                                                    
The   department  was   working   to  centralize   functions                                                                    
performed by  all agencies  and to  redesign the  process to                                                                    
improve efficiency.                                                                                                             
                                                                                                                                
Co-Chair  Seaton relayed  the component  could be  addressed                                                                    
during subcommittee meetings.                                                                                                   
                                                                                                                                
Commissioner  Fisher moved  to  slide 17  and discussed  the                                                                    
Office of  Information Technology. The department  had an IT                                                                    
initiative underway that was similar  to the Shared Services                                                                    
approach. The two initiatives had  not been combined because                                                                    
of the  specialized nature of  IT. He reported that  DOA had                                                                    
hired a  new CIO who  had begun  work the previous  day. The                                                                    
total ETS [Enterprise Technology  Services] budget was about                                                                    
$47.5  million. He  pointed to  the allocation  for the  new                                                                    
chief information  officer with two staff.  He detailed that                                                                    
IT staff  from other  departments would be  transferred into                                                                    
the organization  beginning in FY  18. The remainder  of the                                                                    
allocations pertained  to current operations. The  first was                                                                    
a database function (the  mainframe and associated databases                                                                    
and  the  Oracle and  Sequel  databases,  in addition  to  a                                                                    
number of  applications). The  allocation included  about 18                                                                    
employees with a budget of about $4.2 million.                                                                                  
                                                                                                                                
3:14:05 PM                                                                                                                    
                                                                                                                                
Commissioner Fisher continued to address  IT on slide 18. He                                                                    
detailed  that  Data  Center  and  Hosting  Services  hosted                                                                    
services related to its servers  and virtual servers offered                                                                    
to other departments. The allocation  included 29 people and                                                                    
a  budget  of about  $15  million.  Network Services  had  a                                                                    
budget of $12 million with  12 employees responsible for the                                                                    
state's  wide area  network  (connectivity  between all  the                                                                    
state offices),  which included major and  satellite offices                                                                    
around the state.  He moved to the  Security allocation with                                                                    
a   budget   of   $3.3  million   and   9   employees.   The                                                                    
administrative allocation was  approximately $3 million with                                                                    
18   employees  and   included   procurement,  fiscal,   and                                                                    
leadership functions.  He addressed  SATS and ALMR  on slide                                                                    
19  with  a total  cost  of  about  $6.7 million  UGF,  $1.9                                                                    
million in  federal funds,  and a  modest amount  from other                                                                    
users.  The SATS  portion was  about $4.4  million and  ALMR                                                                    
accounted for about $3.2 million.                                                                                               
                                                                                                                                
3:15:54 PM                                                                                                                    
                                                                                                                                
Commissioner     Fisher    addressed     the    department's                                                                    
Administrative Services  Division briefly  on slide  20. The                                                                    
division  employed 13  individuals  with a  budget of  about                                                                    
$2.6  million.  He  turned  to  the DMV  on  slide  21.  The                                                                    
division included  about $16.5  million DGF  (fees collected                                                                    
from  state residents)  with 149  full-time and  5 part-time                                                                    
employees.                                                                                                                      
                                                                                                                                
Co-Chair Seaton  pointed to  $151,200 in  other funds  and a                                                                    
note   on  the   slide   reading  that   other  funds   were                                                                    
uncollectible. He asked for detail.                                                                                             
                                                                                                                                
Ms.  Lowenstein answered  that it  pertained to  interagency                                                                    
receipts.  The division  thought  it had  the  need for  the                                                                    
funds at  one time with  an agreement with  DMVA [Department                                                                    
of  Military and  Veterans Affairs],  but the  agreement had                                                                    
not come to fruition and  the funds were unrealizable (there                                                                    
was nothing to bill an agency for).                                                                                             
                                                                                                                                
Commissioner Fisher turned to  the Office of Public Advocacy                                                                    
on  slide  22.  The  office function  was  approximately  30                                                                    
percent  criminal  work  and  70  percent  civil  work.  The                                                                    
criminal work  was associated with  providing representation                                                                    
in  cases  where the  public  defender  was conflicted  out.                                                                    
Civil work was primarily  associated with public guardians -                                                                    
providing a guardian  for wards of the  state, adults unable                                                                    
to care  for themselves,  guardian ad  litem, and  the Court                                                                    
Appointed  Special   Advocate  (CASA)  program   for  foster                                                                    
children.  The Court  Visitor allocation  involved providing                                                                    
work for the court around  the effectiveness of the guardian                                                                    
program.  The Civil  Custody program  was comparable  to the                                                                    
guardian ad litem program, but  it applied when parents were                                                                    
getting  a divorce  and  the  situation became  particularly                                                                    
challenging for children. He addressed  the Child in Need of                                                                    
Aid (CINA)  allocation where representation was  provided to                                                                    
parents  when  there  was  a   question  about  whether  the                                                                    
children should perhaps  be taken out of the  home. He noted                                                                    
that the department's work to  provide criminal services was                                                                    
court  mandated (the  same applied  to guardianship  cases).                                                                    
The department provided some elder  fraud support for elders                                                                    
who  had  been defrauded  of  some  of  their assets  -  the                                                                    
department represented individuals in  a civil action to try                                                                    
to recover assets.                                                                                                              
                                                                                                                                
3:19:47 PM                                                                                                                    
                                                                                                                                
Representative  Wilson asked  for  clarification related  to                                                                    
representation  for  CINA  cases. She  thought  Commissioner                                                                    
Fisher had  mentioned representation  for criminal  cases as                                                                    
well.                                                                                                                           
                                                                                                                                
Commissioner Fisher  corrected that  he had meant  that CINA                                                                    
cases  were  similar  to the  criminal  defense  cases;  the                                                                    
department  was  representing a  parent  as  ordered by  the                                                                    
court. He had not meant to  imply that the [CINA] cases were                                                                    
criminal in any nature.                                                                                                         
                                                                                                                                
Representative  Wilson  asked  if   the  work  was  done  by                                                                    
conflict  attorneys.  She  mentioned  public  defenders  and                                                                    
guardian ad  litem and was  trying to determine  where "this                                                                    
fits with the parents."                                                                                                         
                                                                                                                                
Commissioner  Fisher  answered  they were  civil  cases.  He                                                                    
stated it  was not  only a conflict.  The cases  involved an                                                                    
action involving the family; if  the family could not afford                                                                    
an attorney the department would provide one.                                                                                   
                                                                                                                                
Representative Wilson  spoke about semantics related  to the                                                                    
terminology.   She   stated   that   the   public   defender                                                                    
represented one of  the parents - she referred  to the other                                                                    
attorney as a conflict  attorney. She asked for verification                                                                    
that "these are  the other attorneys that  aren't the public                                                                    
defenders for the other parent in these cases."                                                                                 
                                                                                                                                
Commissioner Fisher replied "right."                                                                                            
                                                                                                                                
Co-Chair Seaton  asked for clarification  on the  term CINA.                                                                    
Commissioner Fisher  replied it stood  for Child in  Need of                                                                    
Aid.                                                                                                                            
                                                                                                                                
Commissioner Fisher addressed the  Public Defender Agency on                                                                    
slide  24. The  agency had  a budget  of nearly  $26 million                                                                    
with  approximately 170  employees.  The  budget was  broken                                                                    
down by  criminal trials,  civil trials  (predominately CINA                                                                    
cases), and appeals.                                                                                                            
                                                                                                                                
3:22:15 PM                                                                                                                    
                                                                                                                                
Commissioner  Fisher relayed  that  the last  slides of  the                                                                    
presentation  pertained   to  boards  and   commissions.  He                                                                    
suggested skipping  the slides  and taking questions  on the                                                                    
overall presentation.                                                                                                           
                                                                                                                                
Co-Chair Seaton  asked about  slide 25  under the  Office of                                                                    
Administrative Hearings. He pointed  to the WCAC Recruitment                                                                    
allocation that  had been listed  as "status quo."  He asked                                                                    
if the  designation meant the  allocation had  not addressed                                                                    
its mission.                                                                                                                    
                                                                                                                                
Commissioner   Fisher   answered    that   the   Office   of                                                                    
Administrative  Hearings was  tasked by  statute to  recruit                                                                    
members of  the workers' compensation board  and commission.                                                                    
He  surmised  the  designation  indicated  that  either  the                                                                    
question was not relevant or that it served all Alaskans.                                                                       
                                                                                                                                
Co-Chair Seaton  noted that the  allocation only  required a                                                                    
one-tenth of one employee. He  asked for verification it was                                                                    
not interfering with the department's work.                                                                                     
                                                                                                                                
Commissioner  Fisher   believed  the  statement   was  fair,                                                                    
although  the Office  of Administrative  Hearings would  say                                                                    
that "these  kind of little  things" are a  nuisance factor.                                                                    
The allocation was  listed as one-tenth of  an employee, but                                                                    
it was primarily the director who spent time on the issue.                                                                      
                                                                                                                                
Representative   Wilson   remarked  that   sometimes   state                                                                    
functions were  in silos.  She referred  to CINA  cases that                                                                    
involved  DOA,  the  Court System,  and  the  Department  of                                                                    
Health   and  Social   Services  (DHSS).   She  stated   the                                                                    
administration was  spending almost  $15 million UGF  on the                                                                    
cases per year.                                                                                                                 
                                                                                                                                
Commissioner    Fisher   asked    for   verification    that                                                                    
Representative Wilson  was adding  the $5.4 million  for OPA                                                                    
and the $4.8 million for the PD.                                                                                                
                                                                                                                                
Representative Wilson  answered that she was  also including                                                                    
the guardian ad litem allocation of $4.6 million.                                                                               
                                                                                                                                
Commissioner  Fisher clarified  the guardian  ad litem  were                                                                    
not  necessarily CINA  and  were  associated primarily  with                                                                    
foster children.                                                                                                                
                                                                                                                                
Representative Wilson  remarked that  every CINA case  had a                                                                    
guardian ad litem. She detailed  that once a child was taken                                                                    
by the  Office of Children's  Services (OCS), the  child was                                                                    
appointed a guardian  ad litem until they  were adopted. She                                                                    
observed that "those all are within that department."                                                                           
                                                                                                                                
Commissioner Fisher agreed. He specified  that it may not be                                                                    
only in the duration of the  CINA case. There was an ongoing                                                                    
relationship if the child was taken out of their home.                                                                          
                                                                                                                                
3:25:50 PM                                                                                                                    
                                                                                                                                
Representative  Wilson disagreed.  She stated  that OCS  had                                                                    
legal  custody  of a  child  until  they were  adopted.  She                                                                    
stated  that the  guardian ad  litem remained  with a  child                                                                    
until adoption.                                                                                                                 
                                                                                                                                
Commissioner Fisher  agreed and  clarified that he  had been                                                                    
trying  to  say  the  same thing.  He  elaborated  that  the                                                                    
representation  of a  parent may  last a  shorter timeframe,                                                                    
whereas,  the guardianship  emerged from  the preceding  and                                                                    
had a longer life.                                                                                                              
                                                                                                                                
Representative  Wilson stated  it was  not possible  to only                                                                    
look at  the $15 million  increment. There would  be another                                                                    
budget amount in DHSS and the Court System.                                                                                     
                                                                                                                                
Co-Chair  Seaton agreed  that  families  in disruption  were                                                                    
expensive to the state.                                                                                                         
                                                                                                                                
Representative  Wilson added  she  wanted to  get them  back                                                                    
together.                                                                                                                       
                                                                                                                                
Co-Chair  Seaton  agreed and  wanted  to  take care  of  the                                                                    
children.  Separately,  he  noted that  healthcare  was  the                                                                    
biggest cost driver in almost  every department. He expected                                                                    
DOA to  talk with the  subcommittee about how it  planned to                                                                    
reduce the cost of  healthcare whether through prevention or                                                                    
other means.  He stressed the  importance of  initiatives to                                                                    
reduce the poor health of Alaskans.                                                                                             
                                                                                                                                
Commissioner Fisher agreed.                                                                                                     
                                                                                                                                
Co-Chair Seaton discussed the schedule for the following                                                                        
week.                                                                                                                           
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
3:28:33 PM                                                                                                                    
                                                                                                                                
The meeting was adjourned at 3:28 p.m.                                                                                          

Document Name Date/Time Subjects
HFC Department Overview 01.27.17 (reduced file size).pdf HFIN 1/27/2017 1:30:00 PM
DEC Budget Overview HFIN
FINAL House Finance DOLWD Overview 01-27-2017.pdf HFIN 1/27/2017 1:30:00 PM
DLWD Budget Overview HFIN
Department of Administration HFin Overview FINAL.pdf HFIN 1/27/2017 1:30:00 PM
DOA Budget Overview HFIN
DOLWD Response to Inquiry during HFC Overview January 27 2017.pdf HFIN 1/27/2017 1:30:00 PM
DLWD Response HFIN