Legislature(2001 - 2002)
02/21/2002 09:36 AM Senate FIN
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE BILL NO. 349
"An Act relating to agency programs and financial plans."
This was the first hearing for this bill in the Senate Finance
Committee.
REPRESENTATIVE FRED DYSON, sponsor, testified this bill would
require the Executive Branch submit to the legislature, a budget
that prioritizes the "activities and outputs" of departments. He
informed he had served on the Municipality of Anchorage Assembly
and that Annalee McConnell, currently director of the state Office
of Management and Budget, while working for the Municipality,
instituted a similar process in that body, which he said has been
effective. He opined the process "has a great deal of utility" and
would provide "another useful tool in our hands."
Representative Dyson relayed that some concerns were raised during
House of Representative hearings on this bill. He gave an example
of two programs that a department determines to have equal
priority. He predicted this would be rectified as the process is
implemented, with an assignment of equal priority as one option.
He noted law mandates some functions and that the Municipality
system included a method for quantifying these programs. In
addition, he noted a process was implemented for identifying
programs that received significant funding contributions from other
sources, such as the federal government.
Representative Dyson qualified this legislation does not require
the Administration to delineate the cost for each item. He shared
that in conferring with Ms. McConnell, she told of frustrations
with the Municipal process in the amount of time and effort spent
identifying all costs for some programs that were undisputed as to
their continuance. He assured this legislation does not require
this expenditure of effort.
Representative Dyson also referenced arguments made in the House
Finance Committee and by the media that the legislature is
responsible for setting budget priorities and he agreed. However,
he stressed that in many instances department personnel is more
knowledgeable on these issues and it is "disrespectful" to not
include them in the process. He emphasized the legislation would
retain the authority to change the priorities submitted by the
Executive Branch.
Representative Dyson summarized the purpose of this legislation is
to, "respectfully get the input from the people who are delivering
the services, have far more experience and frankly are better
qualified to make those judgments than any of us. It's our job to
set the priorities. We deserve to have the best information-best
tools to make those."
Co-Chair Kelly reiterated the criticism raised by the director of
the Office of Management and Budget, is that some programs within
one department have different but equal value. He gave the
Department of Administration as an example, as it implements the
Pioneers' Homes and the Permanent Fund Dividend programs. He asked
if consideration had been given to a different method of
prioritization to accommodate for such instances.
Representative Dyson analogized the Olympic Games pointing out that
if there is a tie in an event, the top two contestants are awarded
gold medals and the third-place finisher receives a bronze medal.
He further described the Anchorage process, which he stated was
done in good faith, although "never ensconced in a law." He told
how that process evolved as necessary.
Co-Chair Kelly asked if the sponsor had consulted with the
Department of Law about the constitutionality of this law and
whether a constitutional amendment would be necessary to enact it.
Representative Dyson had not.
Co-Chair Kelly remarked he wanted this bill to proceed through the
legislative process, but he was concerned about the separation of
powers involved because "as we've seen in the past, you can't
really make the agencies do exactly what you want; they can just
say no and they have the constitutional authority." He ascertained
that a constitutional amendment might be required before this law
could be enforced. He informed he has introduced a resolution
providing for such a constitutional amendment. He stated HB 349 is
an example of how this constitutional amendment would be
implemented.
Senator Olson referenced the title of the bill and expressed
concern that it is too broad and that unintended changes could be
made to the bill itself.
Co-Chair Kelly pointed out no changes to the bill had been made to
date.
Representative Dyson did not consider this a concern. He noted the
bill drafter at the Division of Legal and Research Services
recommended the title name.
Senator Leman supported the concept of the Executive Branch
prioritizing budget expenditures, but had questions about the
implementation. He referenced programs that operate using funding
sources other then the general fund, which may not have a higher
priority, but could be treated as such because of the alternate
funding.
Senator Leman suggested dividing some programs into "sub-
activities" to clarify their importance. He predicted the
Administration would claim that all activities are important
because the legislature directed the agencies to perform them.
Representative Dyson referenced an example of the Municipality of
Anchorage budget priority provided in the bill packets [copy on
file.] He pointed out the items included "their output," which he
stated make prioritization easier. He assumed most discussion would
involve a few items at the top of the priority list. He asserted
the Committee is "part way there already" with the utilization of
the missions and measures practice as well as impact statements
submitted by department. Practicably speaking, he qualified this
prioritization process would be valuable for evaluating only ten to
15 percent of a department's activities.
Representative Dyson expressed the intent of this bill, "is to
build an even more cooperative working relationship between the
Administration and the legislature." He opined this legislation is
reasonable and that the process itself has been successful under
Ms. McConnell's direction at the Municipality of Anchorage.
Senator Ward asked if any other state practices a similar
prioritization method.
Representative Dyson answered yes, but admitted he did not have
specific information as to which states. However, he stressed, all
businesses and individuals practice some method of prioritizing
expenditures.
Senator Wilken shared Senator Leman's concerns about implementation
and warned "I fear we're going to spend more time worrying about
what is number 35 and whether it should be 45 or 25." He spoke of
operating his own business and the practice of rating expenditures
in categories of ABC. He explained "A" items are those expenditures
that must be made, such as fuel; a "B" item might be a new truck
that should be purchased; and a "C" rating would be given to "the
things we'd like to have" such as painting that new truck. He
suggested this system could be applied to budget request items
(BRU) within the state budget.
Senator Wilken next referenced page 1, lines 6 and 7, "Toward that
end, each state agency shall, on a semi-annual basis, identify
results-based measures…" He said this is currently provided
annually and asked why it should be increased to bi-annual.
Co-Chair Kelly corrected that the reporting is already done semi-
annually as established in statute.
Co-Chair Kelly informed that he requested an "ABC list" of the two
agencies for which he serves as budget subcommittee chair. He
anticipated enacting this statute and then adopting a
constitutional amendment that would, "bridge the legislative and
the Executive Branch."
ANNALEE MCCONNELL, Director, Office of Management and Budget,
Office of the Governor, testified she is very familiar with the
proposed system because she developed it for the Municipality of
Anchorage. She stated she knows the advantages and disadvantages of
the system. She stressed those programs "around the margins" are
the issue.
Ms. McConnell clarified the Municipality system focuses on the
level of service and whether the service should be discontinued as
opposed to which services are of least important. She said this
process "breaks activities into lots of sub-elements."
Ms. McConnell informed that if she were to recreate this system for
the Municipality, she would do it differently because of the time
spent on some unnecessary efforts. She gave an example of
attempting to determine an acceptable level of service for the
Alaska State Troopers; whether there should be ten or two troopers,
whether to include the crime lab. She stressed this is wasted
energy if "you accept the premise that we are going have a public
safety function."
Ms. McConnell opined "the service level concept" is similar to the
current impact statement process whereby the department provides an
analysis of the possible impact a proposed specific budget
reduction could have. She remarked this is a significantly
different process then that proposed by Senator Wilken. She agreed
that determining whether an item is number 35 or number 42 on a
priority list is irrelevant if it has been determined that all the
activities must be part of the basic structure.
Ms. McConnell pointed out there are instances where the legislature
could consider eliminating an entire program, which would occur
through the statutory process. She said the Administration could
make suggestions as to which programs should be eliminated. She
pointed out that most "activities" are established in statute.
Otherwise, she warned, process would involve "the silliness of"
determining whether the Division of Family and Youth Services is
more or less important than juvenile corrections or public health.
She reiterated this is a waste of time in that it does not foster
productive discussion about what level of service is acceptable in
each of those programs.
Ms. McConnell stressed the Executive Branch proposed budget does
reflect the governor's priorities. She expressed there is an
"inherent misunderstanding that we don't share priorities." In
fact, she remarked, the proposed budget does reflect the opinions
the sponsor characterized as the most qualified to make such
recommendations.
Ms. McConnell listed the Smart Start initiative and K-12 and
University of Alaska education as examples of the Administration's
priorities. She pointed out the legislature has a process for
determining its priorities and noted there has been agreement with
many of the Administration's priorities.
Ms. McConnell suggested the governor's proposed budget reflects
more prioritizing results then is realized. She spoke to the
"phenomenal exercise" the prioritizing provisions of this
legislation would entail. She compared the state budget to that of
the Municipality, stressing that a municipality has comparatively
limited functions and geographic area to govern. She told of the
importance of public safety and nurses.
Ms. McConnell recommended continuing with the missions and measures
process to determine priorities and to establish the acceptable
level of service. She listed caseloads and number of people served
as measures. She noted that the current level of service is the
level of service the public has generally determined to be
acceptable.
Ms. McConnell addressed the "ABC list" idea. She expressed that in
theory it seems simple, but that greater issues, such as the level
of service, are involved. She asked how such distinctions would be
made for youth correction programs, as the quality of resources
invested is apparent when measuring success.
Ms. McConnell cautioned of the amount of detailed material the
Committee would have to review if this legislation were enacted.
She stated that information that would not add to constructive
discussions about what budget changes is a wasted effort for both
those who prepare the budget and for the Committee.
Ms. McConnell asserted the impact statement process is more
efficient. She stated this is a more direct method for obtaining
the information the legislature needs to make effective decisions
then generating information for "every level of state government
activity in every department…in every nook and cranny."
Ms. McConnell commented that the practice of categorizing programs
into ABC priorities would be done with the intent that all C
programs would be eliminated. "I doubt you'd want to go through
that horrific pain for all C activities even assuming we could
split them…and arbitrarily make a split."
Ms. McConnell pointed out that not every department request is
included in the Governor's proposed budget because the Office of
Management and Budget determines priorities already.
Co-Chair Kelly remarked that Representative Dyson is frustrated by
the process. He made an analogy of performing surgery with mittens
on, noting that some agency representative have been helpful but
others have been resistant in offering information. He stated this
is the situation in the governmental system in that the legislature
does not have the authority to fire the president. He continued
that because of the separation of powers the legislation could not
direct the governor.
Co-Chair Kelly stressed that another method should be established
to obtain information so the legislature could make decisions. This
prioritization, he expressed, could provide a "clearer view" in
making the "mittens" less cumbersome.
Co-Chair Kelly addressed the witness' statement that the governor's
proposed budget is prioritized. He pointed out that the legislature
has rarely received recommendations from the Administration for
where budget reductions could be made.
Co-Chair Kelly remarked, "we've been in a war for seven years"
explaining, "we can't get the information from you; we can't get
the prioritization from you; I'm sure there's things that you can't
get from us."
Co-Chair Kelly remarked this legislation is an attempt to "force"
the legislature and the administration to "work together a little
more cooperatively and in the best interest of the State of
Alaska." He encouraged the witness "to get on board with this,
because for one thing, you're not going to have to live with it."
He continued, "Frankly this Administration isn't going to have to
deal with this." However, he surmised the witness experienced the
usefulness of the prioritization process for the Municipality of
Anchorage.
Ms. McConnell clarified she would "do it very differently if I were
doing it again in Anchorage."
Co-Chair Kelly responded he wanted Ms. McConnell's assistance so
that she could assist in making necessary adjustments for the
benefit of future administrations.
Ms. McConnell noted that what Co-Chair Kelly had characterized as a
"war", she considered were disagreements over whether there should
be budget reductions.
Co-Chair Kelly agreed there are two sides of the issue.
Ms. McConnell noted that if the Administration's judgment is that
increased resources were necessary, the Administration would relay
that to the Legislature. She did not perceive the controversy as a
war but rather a public policy difference of opinion, which is
valid to discuss. She opined it is appropriate for the legislature
to determine where to cut. She added that it is inappropriate to
require the Administration to implement an unallocated budget
reduction if the Administration has determined that reduction is
unadvisable.
Ms. McConnell detailed the process undertaken before any increase
is included in the Governor's proposed budget, because an increase
is not an easy aspect for to the legislature or the public. She
pointed out these efforts have not been acknowledged and emphasized
the difficulty in "keeping up with inflation" and population
increases, specifically the senior population and inmate
population. She indicated that the Administration would do
everything possible to minimize the amount of requested increases.
Ms. McConnell referenced the comments of Co-Chair Kelly regarding
the "board of directors". She commented that the state is not
similar to a private corporation, because in a private business,
during times of economic difficulties, there is no requirement to
answer to the public for its actions. In contrast, she stated, the
public continues to expect the state to educate children and plow
roads. She added that roads must be maintained despite the number
of commuters traveling them.
Co-Chair Kelly interjected that the witness had listed high
priority items and he emphasized the legislature needs advice
regarding those lower priority items. He stated that was the level
of communication that the legislature has never been able to get.
He understood agency directors do not want make reductions this
way. He agreed that the state is not a corporation. He stressed
the frustration is that the legislature has many of the
responsibilities of a board of directors and the Executive Branch
has many of the responsibilities of a manager, "yet it's slightly
out of whack."
Co-Chair Kelly reiterated the prioritization process could begin to
bridge that gap in order to be able to operate in a more reasonable
fashion. He continued, there needs to be a higher level of
communication with the Executive Branch. The Executive Branch
should not be able to "thumb their nose" at the Legislature.
Ms. McConnell explained that the Executive Branch has proposed
budget reductions in response and the Administration's advice has
been disregarded. She gave the proposed budget reductions to the
Department of Transportation and Public Facilities as an example
where the Administration recommended closing maintenance stations
located along least used roads. The Legislature has directed the
Department against such actions, she said.
Ms. McConnell advised that the Governor is not suggesting that the
budget be cut at this point, but rather he is acknowledging that
the State does have some needs for increases in the budget, to keep
up with current commitments and to take on new challenges.
Ms. McConnell pointed out that spending increases have not been
proposed by the Administration to account for increases in
population and/or inflation. She cited the Kato study, which found
that between 1990 and 1997, the average increase in state spending
after adjusting for inflation, was 27 percent among all fifty
states. During that time period, she continued, Alaska was the only
state with a reduction, which was .6 percent. She noted three
states increased spending by over 50 percent. She also informed
that Alaska's general funds/per capita expenditures, adjusted for
inflation, are $1,100 less in the Governor's proposed FY 03 budget
then in 1979 before the oil revenues were available.
Ms. McConnell addressed government efficiency. She listed the
Division of Banking, Securities and Corporations and their
"enormous backlog" for processing corporate filings. She informed
that without requesting additional funding, the Division "saved
money by doing things differently so they could cut down that lag
time."
Ms. McConnell concluded that budget increase requests were only for
those areas "we feel we have absolutely gone as far we can to
squeeze the turnip."
Co-Chair Kelly restated the intent is for the Administration to
inform the Legislature of areas where budget reductions are
possible. He reiterated that the Committee members do not know of
the internal budget reductions.
Co-Chair Kelly mentioned frustrations in dealing with some
employees of the Administration who would not provide information.
He qualified there is a "difference of opinion."
Representative Dyson recommended ending the discussions on the
budget reductions and return to determining whether the
prioritization issue is preferred. He pointed out this legislation
would require less labor then detailed cost analysis of each
program.
Representative Dyson acknowledged that he is not in favor of across
the board budget reductions because it is the legislature's
responsibility to establish priorities and determine whether an
activity should be eliminated. He stressed this bill would assist
the Legislature in making decisions regarding priorities.
Co-Chair Kelly noted the bill is "well into the process" and he
intended to hold it in Committee to allow consideration of other
prioritizing methods. He indicated it is his intent to pass the
bill.
Co-Chair Donley voiced support of the bill.
Co-Chair Kelly ordered the bill HELD in Committee.
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