Legislature(1997 - 1998)
03/19/1998 08:02 AM House STA
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HB 463 - ESTABLISH ALASKA PUBLIC BUILDING FUND Number 0003 CHAIR JAMES announced the first order of business is HB 463, "An Act establishing the Alaska public building fund; and providing for an effective date," sponsored by the House State Affairs Committee. Number 0012 PATRICK LOUNSBURY, Secretary to Representative James, Alaska State Legislature, came before the committee. He said HB 463 is an act establishing the public building fund, it's a concept that we believe is consistent with the public's desire for more responsible accountable government. It's the idea that agencies actually pay rent for the space allocated into a special account created in the general fund. This money would then be used for maintenance and dovetails pretty nicely with the deferred maintenance priority that the majority has recognized. Whereas, the deferred maintenance task force is an effort to catch up, the Alaska public building fund lets us keep up. Number 0037 JACK KREINHEDER, Senior Policy Analyst, Office of Management and Budget (OMB), Office of the Governor, came before the committee. He asked if Keith Gerken, Department of Administration, could join him. CHAIR JAMES thanked both of them for their assistance on deferred maintenance issues. MR. KREINHEDER noted they discussed the rent concept in prior testimony on the deferred maintenance task force bill. He stated HB 463 is fairly straightforward, all it does is establish a fund, there's no direct fiscal impact, pro or con, just from establishing the fund but it is an important piece of improving maintenance and management of state facilities. As was mentioned in committee a few weeks ago, the Administration is pursuing - putting a rent structure in place for state facilities. We're looking at putting it into place for the fiscal year 2000 budget on sort of a pilot basis for a few facilities. We're still considering which facilities to include, what is doable for that first year, and so on. MR. KREINHEDER indicated it is possible to do a rent-structure without this public building fund, however, we would be kind of hamstrung without an account to put this money into because we could collect rent and pass the rent onto the Department of Transportation and Public Facilities (DOT/PF), whichever department is maintaining the buildings but we wouldn't be able to have the money carry on from year-to-year. To really deal with the long- term maintenance for state facilities, you need to be able to save some money to replace systems or do major maintenance on systems down the road rather than having to deal with (indisc. - noise) on a year-to-year basis. If this bill did not pass, for whatever reason, I think we would probably proceed with the rent but this is really a key piece of the project. Number 0109 KEITH GERKEN, Architect, Division of General Services, Department of Administration, was next to testify. He said this simply creates a mechanism to collect rent and to use, to spend it and be accountable for it. But if the committee wants to talk about how it would work or why that makes sense we could do that... CHAIR JAMES said they'll see what questions the members will have. She noted Representative Hodgins and Berkowitz are present. Number 0124 REPRESENTATIVE KIM ELTON said he would be interested in the thoughts that were behind designating the Department of Administration rather than the Department of Transportation and Public Facilities as the manger of the fund. MR. GERKEN replied this debate has gone on for a long time, OMB, DOT/PF and Administration have been working jointly for about two years on a number of facilities issues. One is where the function (indisc.) building responsibilities be, and the consensus has generally been, amongst the three entities, that DOT/PF would like to be a transportation oriented agency and that the Department of Administration is the general services provider to other services within government services to other agencies and that at least the management of the fund, if not the provision of service, should be in the Department of Administration. That's their sense at this time and DOT/PF is in agreement with that. CHAIR JAMES stated she supports having the fund managed by the Department of Administration. Number 0149 REPRESENTATIVE FRED DYSON said, "Aren't what we are doing here is making a mechanism so that the dedicated funds, kind of like program receipts that come from the rent, will no longer go into the general fund with this bill?" He asked if that was correct. MR. KREINHEDER responded this public building fund would be an account within the general fund and money would have to be appropriated from it by the legislature every year for maintenance purposes. Number 0164 CHAIR JAMES explained it is not a dedicated fund, it is a designated fund, legislation was passed last year to specifically identify it - a lot of program receipts are designated for a specific use. That does not negate the possibility that the legislature could take the money and do something else with it, the problem is that they would be politically stopped from doing that. She asked wouldn't this be another one of the sweeps that we would have to do as long as we still owe the Constitutional Budget Reserve. The issue was that as long as we owe money to the Constitutional Budget Reserve, then at the end of every fiscal year any money that's left over in any general fund account, with exception of the earnings (indisc.) of the permanent fund, get swept away to pay back into the Constitutional Budget Reserve. So every year when we do a budget, as long as we owe the money and it's probably billions or more now, that we have use out of that fund, then we have to have a three-quarter vote to undo the sweep and put them all back again. She indicated some of those funds didn't have any money in it and believes we got rid of them last year - Representative Therriault had a bill to do that. But this would be one of those funds, like the marine highway fund where the revenue goes in there and then they get to keep that for use, but we still have to appropriate it. So it's not dedicated in the extent that that's all it can be used for, it's just that that's all we're suppose to allocate it for. It's a designated fund so it doesn't need to have a constitutional amendment. The only way we can have a dedicated fund is with a constitutional amendment. Number 0204 REPRESENTATIVE DYSON reiterated the rents, lease money, and all that stuff goes into this pot - designated fund, if responsible organization doesn't spend it all at the end of the year, then we have to have a three-quarter vote to keep those funds from going to the constitutional budget reserve. CHAIR JAMES replied that's correct. REPRESENTATIVE DYSON said, "I think that falls short of what you want to accomplish. Building maintenance particularly, but all kinds of facility maintenance doesn't happen in annual cycles. And indeed on an airplane - you're maybe going to do a major two- thousand hours, so you can't spend the money, you have to do the major on the engine all at one time. And so you have to accumulate the funds - smart pilots put $10 an hour or so into a fund, so that when they get there -- you're going to do a major foundation or building repair on a building, you've got to accumulate a bunch of funds ahead of time in some kind of rational way. So I see that every year, the legislature having to do this three-quarter vote over a lot of detailed things for a lot of buildings. And I see that as a problem." Number 0233 CHAIR JAMES stated it's just a little line in this whole group that we're doing that currently. It's only one account, in a lot of them, that we're doing that currently and we will have to as we owe the Constitutional Budget Reserve. It's not the only thing we'll have to do it for. She said she looks at it as an accounting mechanism more than anything else because by segregating the money and putting it in an account, it does allow for the tallying and reviewing it more than it would if it was accounted for an account. And if you just had it in an account, it would come off the bottom line of the general funds that are left over instead of being specified what's left over for. So it's really an accounting mechanism to be able to identify those rents that are paid in this account and to be used for those purposes. UNIDENTIFIED SPEAKER said that was correct. Number 0253 REPRESENTATIVE DYSON said, "What I hope doesn't happen - and maybe you can tell me madam chair how your bill address this, is that, toward the end of the budget cycle, you all are scurrying around trying to find legitimate and semi-legitimate things to spend the money on, (indisc.) it gets swept away. And the money doesn't get used as efficiently as if it had -- we set it up so that it encourages better stewardship." MR. KREINHEDER replied, "The purpose of the fund is exactly the opposite - to be able to keep money over from year to year. This sweep is really a technicality that's, I guess I would say overridden by the legislature, and as the chair mentioned, this is one of I think dozens of such funds - marine highway funds and so on. This would be no different, there's no need to spend the money at the end of the year, the money is technically swept, but then reappropriated to the fund. So the purpose is to keep that money available for future years maintenance needs. Of course, a large part of it would be spent for current year maintenance needs but there would be no need to spend money at the end of the year." Number 0279 CHAIR JAMES said, "If we didn't do this, if we didn't have this fund, and the money is just transferred to DOT/PF to do the work, then what your fears are - might happen. Because if you didn't spend the money this year, it would be down in the total of other general funds, which doesn't have any identification or any kind of allocation. So it would just be dumped in and so, yes, there would be an indication that you maybe should spend because if the year- end goes by it will be gone. And it has to be appropriated so you can only spend up to the appropriation anyway." CHAIR JAMES stated "I think that the other thing that we miss in this whole process - because there's an appropriation process, and we appropriate for each budget, and the spending frenzy that we talk about is when there was an appropriation and you get toward the end of the year and you haven't spent all of your appropriation then you rush out and spend it because once the year goes by you've lost that appropriation then you'd have to get another one for it. In this particular case you still would have to get an appropriation for what you spend but there would be no reason to lose that ability to spend it this year or next year because the money is there, the appropriation should be (indisc.)." Number 0303 MR. GERKEN said he believes, how it would work, there would be both operating and capital appropriations from the fund. And capital appropriations, he thinks for the items that Representative Dyson was talking about - a new roof. The major items would need to be planned, specifically appropriated by the legislature from the fund, and finding a way to make that work. Although we always like flexibility, he didn't think there would be the flexibility if the Administration simply chose to make a major capital investment out of the fund because there was money there. It would need to be based on an appropriation. CHAIR JAMES stressed, "We don't have any new money here, or we may have new money here. But the whole process of charging rent has to come out of the appropriation in the general fund the agency is spending. When it comes to funding the agency budget, there will be a line in there for rent as opposed to - if they owned the building there wouldn't be. If they were leasing the building, the lease would be appropriated somewhere. If, the way we're currently doing it, there would not be a line for rent. So how that fits is a legislative appropriation process, whether there's an addition to the money that's being appropriated - from what's currently or not, but it certainly would be reallocated. There really isn't any new money because the money that you're paying the rent with is still money that we have to appropriate." Number 0329 REPRESENTATIVE ELTON asked if he understood that they will be adding another line to agency budgets, and that line would be designated for rents or leases, or would that be under an existing line (indisc.). CHAIR JAMES said she thinks it would be rent, but suggested they ask the Administration how they plan to deal with that. MR. KREINHEDER noted he would let Mr. Gerken speak to the leasing side. MR. KREINHEDER referred to the agencies in the State Office Building. Currently the full cost of operating and maintaining that building is born by the Department of Transportation. The process we would use would be similar to the data processing charge-back system that was put in place a few years ago. He stated there would be a line added to the agency budgets, Department of Natural Resources, Department of Revenue, and so on. The Department of Revenue, for example, would have a rent line in its budget, they wouldn't have to take that out of their existing programs, that money that DOT/PF is now spending on the State Office Building would be allocated among the various agency budgets and they would have that money to pay rent. Number 0348 MR. KREINHEDER said, "Down the road, rental rates would be adjusted. Frankly there is a little bit of concern I think in the departments with this approach because, clearly if we're not spending enough to maintain the buildings today - there's no silver bullet or magic answer here. If we need to spend more there will be some pressure to increase rents. Our answer is basically that this would be a gradual process over time." MR. KREINHEDER referred to Chair James statements on no new money. He indicated she was referring to something slightly different. He said, "The one advantage that we are looking at with the rent, that improved maintenance or new money that we could use to improve maintenance, without raising rents or increasing the amount, is that a rental rate structure would allow you to capture some additional federal funds for example and non-G.F. sources. For example, [the Division of ] Retirement and Benefits currently is paying nothing for their space, but they're providing retirement services for all the communities around the state and so on, and we feel it is appropriate that that cost for that space be paid for by the retirement system." Number 0370 CHAIR JAMES stated what she meant by no new money, was that it's a different way of budgeting. The money that would be allocated to DOT/PF to do this would be put in other places. Chair James remarked she doesn't necessarily agree, that if we haven't been keeping up our buildings, and if it's assumed that that's because they haven't had the money. If that's true, then we're going to start keeping them up. Certainly we're going to have to have some money to do that. She indicated that's the whole appropriation issue, that's not what we're dealing with here, so it's quite likely that there will be an additional appropriation for that. CHAIR JAMES mentioned some offices in comparison to others are plush. She believes, if they're paying by the square foot, they will not take any more space than they need. When they argue for their budget they might say, "Well, we could have less space (indisc.) and so therefore, we don't have to pay so much in rent, so we can have it for programs, and so forth." Chair James said she thinks there is an incentive there by letting people know how much their space costs are in their calculations of their programs and so forth, and there will be an added benefit from that process. Number 0393 REPRESENTATIVE DYSON made a motion to move HB 463 with individual recommendations and attached zero fiscal notes. Hearing no objections, HB 463 moved from the House State Affairs Standing Committee.
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