Legislature(1999 - 2000)

03/04/1999 08:04 AM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
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SENATE BILL NO. 33                                                                                                              
"An Act relating to the Task Force on Privatization;                                                                            
and providing for an effective date."                                                                                           
                                                                                                                                
                                                                                                                                
SENATOR JERRY WARD testified to the bill, saying this was a                                                                     
follow up of a bill from two years ago and vetoed by the                                                                        
governor, then reintroduced last year but died in                                                                               
committee. He referred to a drafted committee substitution                                                                      
and handed out suggested changes to that CS. The changes                                                                        
replaced the words "delivery" with "privatization" wherever                                                                     
they appeared in the bill. He felt there were some problems                                                                     
with the proposed CS but thought they could be overcome.                                                                        
He felt the consideration of privatization public services                                                                      
was long overdue.                                                                                                               
                                                                                                                                
Senator Pete Kelly asked what was the difference between a                                                                      
task force and a commission. Senator Jerry Ward answered                                                                        
that according to legal, there was no difference.                                                                               
                                                                                                                                
Co-Chair John Torgerson didn't think the change to                                                                              
"privatization" in the title would allow the other                                                                              
functions he intended.  Senator Jerry Ward responded that                                                                       
he checked with the Legal Services Division and it did. The                                                                     
heart of the matter was that if the Legislature was going                                                                       
to consider the privatization of government services it                                                                         
needed to be clearly stated, he said. Co-Chair John                                                                             
Torgerson countered that he made the other changes in the                                                                       
CS because he did not want the committee to just look at                                                                        
privatization. "There were more things to be looked at," he                                                                     
said.                                                                                                                           
                                                                                                                                
Senator Al Adams had a concern with the drafting in how it                                                                      
dealt with separation of powers.  To avoid the problem, he                                                                      
suggested deleting (1), the two members appointed by the                                                                        
Governor telling him who he should appoint. Co-Chair John                                                                       
Torgerson asked that the matter be held until the CS was                                                                        
before the committee.                                                                                                           
                                                                                                                                
DARWIN PETERSON, staff to Senator John Torgerson, explained                                                                     
the committee substitute.  Senate Finance Committee                                                                             
Substitute for SB 33 would establish a commission on the                                                                        
delivery of government services, he told the committee.                                                                         
The motive behind the title change was to give the                                                                              
commission the flexibility to broaden its research on the                                                                       
most efficient way to deliver state government services to                                                                      
the public.                                                                                                                     
                                                                                                                                
Section 1 found that annual state government expenses were                                                                      
exceeding revenues and therefore, the Legislature's intent                                                                      
was to determine which functions of state government could                                                                      
be delivered more efficiently and cost effectively by                                                                           
considering four options. Option 1, transferring services                                                                       
to the private sector, Option 2, transferring services to                                                                       
local governments, Option 3 consolidating services                                                                              
internally and Option 4, discontinuing some services for                                                                        
the federal government.                                                                                                         
                                                                                                                                
Section 2 would establish an 11-member commission appointed                                                                     
by the Governor, the Senate President, the Speaker of the                                                                       
House, the Alaskan Municipal League, the Local Boundary                                                                         
Commission and the Alaska State Chamber of Commerce.                                                                            
                                                                                                                                
Section 3 stated that the four public members of the                                                                            
commission appointed by the Senate President and the                                                                            
Speaker of the House, were not eligible for compensation                                                                        
but were entitled to travel and per diem.                                                                                       
                                                                                                                                
Section 4 instructed the commission to meet as often as                                                                         
necessary to finish their work.                                                                                                 
                                                                                                                                
Section 5 outlined the duties of the commission.  It would                                                                      
review similar studies performed in other states, review                                                                        
state contract and policy and procedure, and identify state                                                                     
government services that were capable of being delivered to                                                                     
the public in a more efficient manner.  The commission                                                                          
would then determine whether the identified functions                                                                           
should be transferred to the private sector or local                                                                            
governments, consolidated and if appropriate, discontinued.                                                                     
This section also instructed the commission to include in                                                                       
its written report, the government services that should                                                                         
remain the responsibility of the state.  The commission was                                                                     
required to submit its report by January 1, 2000.  This                                                                         
would allow the Legislature to take advantage of the                                                                            
commission's recommendations during the second session of                                                                       
the Twenty-first Legislature in order to realize any                                                                            
feasible actions as soon as possible.                                                                                           
                                                                                                                                
Section 6 established a sunset date of January 1, 2000.                                                                         
                                                                                                                                
Section 7 provided an immediate effective date.                                                                                 
                                                                                                                                
Senator Randy Phillips wanted to know why a member would be                                                                     
appointed from the local boundary commission. Darwin                                                                            
Peterson replied they would bring a wealth of information                                                                       
to the table as far as municipalities around the state in                                                                       
general. Co-Chair John Torgerson added that it was to                                                                           
address the consolidation of school districts under REAA                                                                        
where there was a boundary problem.  Senator Randy Phillips                                                                     
suggested the municipal league would cover that.  Co-Chair                                                                      
John Torgerson responded that they didn't have the power.                                                                       
                                                                                                                                
Senator Al Adams returned to his point of separation of                                                                         
powers.  He again suggested the committee delete Section 2                                                                      
(1) and also lines 24 and 25, telling the Governor whom to                                                                      
appoint.  He then said he had a fiscal note on the original                                                                     
version of the bill and asked if there was a fiscal note                                                                        
for the CS to address travel and per diem expenses?                                                                             
                                                                                                                                
Co-Chair John Torgerson said the CS was new and there                                                                           
hadn't been time yet for fiscal notes to be drafted.  It                                                                        
was not his intention to pass the bill out of committee                                                                         
today.                                                                                                                          
                                                                                                                                
Senator Randy Phillips moved to adopt the CS for SB 33.                                                                         
Without objection, it was adopted.                                                                                              
                                                                                                                                
Senator Gary Wilken questioned why the state chamber of                                                                         
commerce called out as a particular group to work on this                                                                       
project.  He was unsure what they would bring to the table.                                                                     
Perhaps there were other that would want to be included and                                                                     
could bring more than the chamber of commerce could, he                                                                         
suggested. Co-Chair John Torgerson said that was a good                                                                         
comment and said that the reason they were included was                                                                         
because it was a priority of the organization and they were                                                                     
more focused on the issue than others.                                                                                          
                                                                                                                                
Senator Loren Leman compared this to the blue ribbon                                                                            
commission appointed by Governor Jay Hammond in 1978.                                                                           
Senator Loren Leman said he had proposed a similar                                                                              
commission in 1989 or 1990. He wanted to see if the duties                                                                      
were broad enough to get at what he felt needed to be                                                                           
addressed, which was to look at all functions of government                                                                     
and see how they might be preformed better.  He asked if it                                                                     
was Senator John Torgerson's intent to have this be a                                                                           
similar operation. Co-Chair John Torgerson said it was and                                                                      
that a report such as described would be an excellent tool                                                                      
for the Legislature. He wanted the task force to have more                                                                      
responsibilities than just the privatization of                                                                                 
governmental services and he spoke of the five options.                                                                         
                                                                                                                                
JUANITA HENSLEY, Department of Administration, testified in                                                                     
person in Juneau.  The Department of Administration had no                                                                      
real concerns over the CS.  She did point out that even                                                                         
though the bill did not speak to it directly, any time a                                                                        
government function was outsourced that would displace a                                                                        
state employee feasibility studies had to be done. The                                                                          
studies cost approximately $20,000 to $50,000. Co-Chair                                                                         
John Torgerson asked if that requirement was in statute.                                                                        
Juanita Hensley answered no it was in the current contract                                                                      
language with the labor bargaining unit.  Co-Chair John                                                                         
Torgerson wanted to know if that couldn't be changed with a                                                                     
statute change. Juanita Hensley said she would get an                                                                           
answer back on that.                                                                                                            
                                                                                                                                
Senator Loren Leman suggested the bill could give direction                                                                     
to the Administration on how it should negotiate employee                                                                       
contracts to avoid restrictions like this.                                                                                      
                                                                                                                                
PAM LABOLLE, President Alaska State Chamber of Commerce,                                                                        
testified in person from Juneau. She spoke of the history                                                                       
of the privatization efforts saying that this bill had been                                                                     
a priority of the state chamber for the past several years.                                                                     
They wanted state leadership to make a commitment to take a                                                                     
look at privatization of appropriate functions and                                                                              
services. She spoke to the chamber's resolution that urged                                                                      
the Legislature and the Administration to forge a plan by                                                                       
the end of 1999 and implement a program to privatize all                                                                        
applicable services currently provided by government. She                                                                       
referred to a 1996 study focusing on the Department of                                                                          
Transportation and Public Utilities.  She talked about the                                                                      
Council of State Government Survey done in 1997 showing                                                                         
that half of the states had increased privatization over                                                                        
the past five years and planned expansion.  In most states,                                                                     
privatization was widespread, according to Pam LaBolle.                                                                         
She pointed out written testimony she had provided to the                                                                       
committee.                                                                                                                      
                                                                                                                                
MARJORIE VANDOR, Assistant Attorney General, Governmental                                                                       
Affairs Section, Civil Division, Department of Law,                                                                             
testified that the department believed this bill had                                                                            
problems.  Legal concerns arose because the taskforce was                                                                       
being created by law rather than by resolution. With that                                                                       
came heightened concerns about the constitutionality of the                                                                     
separation of powers. Her second concern was that the bill                                                                      
placed restrictions on whom the Governor could appoint to                                                                       
the commission.  Her final concern was with Section 3 line                                                                      
29 on page 2 of the CS. It changed from the earlier version                                                                     
as to compensation for public members. It only allowed                                                                          
compensation for those public members appointed by the                                                                          
Legislature whereas the earlier version allowed for                                                                             
compensation of all public members. A member of the Local                                                                       
Boundary Commission was entitled to compensation, she said,                                                                     
and whether they would be paid out of their budget or the                                                                       
Legislative task force budget was unclear. Co-Chair John                                                                        
Torgerson said the committee would get fiscal notes on                                                                          
this. He guessed Senator Al Adams would make a                                                                                  
recommendation that the Governor appointments be removed                                                                        
from the bill.  He supported that, but had hoped the two                                                                        
branches could work together.                                                                                                   
                                                                                                                                
Senator Randy Phillips lamented that the Department of Law                                                                      
could find any excuse to not support a bill.  "Does the                                                                         
administration support the privatization of services?" he                                                                       
asked.  Marjorie Vander believed so.  Senator Randy                                                                             
Phillips then asked why no committee substitute had been                                                                        
offered to address the concerns.  Senator Al Adams                                                                              
countered that he did offer a solution.                                                                                         
                                                                                                                                
Co-Chair John Torgerson assumed the local boundary                                                                              
commission would pay costs incurred by their member.  He                                                                        
noted that the CS just came out yesterday so there would be                                                                     
more fiscal notes forthcoming.                                                                                                  
                                                                                                                                
JOYCE HARRIS, Court Visitor, Office of Public Advocacy,                                                                         
testified via teleconference from Fairbanks. She explained                                                                      
that she was a private contractor who provided services to                                                                      
the OPA for eight years. The unique aspect was that she did                                                                     
not have a contract, but was required to respond to a RSP                                                                       
every two years. In her position, she reviewed the work of                                                                      
a state agency that awarded her contract. "I send my bill                                                                       
in to the agency whose work I review as a private                                                                               
contract," she stated. In her opinion, in her area of work,                                                                     
the private sector was able to provide a much higher level                                                                      
of service at no cost to the state. However, the state                                                                          
continued to provide services that could be provided and                                                                        
funded by the private sector. This was more to protect the                                                                      
jobs in the state agencies rather than to provide the best                                                                      
level of service to the public, she stressed. She then                                                                          
urged that the task force look at how the contracts would                                                                       
be regulated, monitored and that there would actually be                                                                        
signed contracts with the state.  She wanted to ensure that                                                                     
there was adequate oversight to take action if individuals                                                                      
holding those contracts failed to provide those services.                                                                       
She suggested that the private sector could also do the                                                                         
required feasibility studies.                                                                                                   
                                                                                                                                
B. JARVI, Vice President Professional Guardian Services                                                                         
Corp., testified via teleconference from Fairbanks. She                                                                         
believed that the state must provide for the common good to                                                                     
insure consistency and continuity in areas such as police                                                                       
protection, educational systems, highway systems and the                                                                        
function of regulation. She told how Alaska used to need to                                                                     
provide many services because there was no one else                                                                             
available to provide them. However, before the state                                                                            
started funding more public services, it should look at                                                                         
eliminating the cost of the state being a service provider                                                                      
where it was not necessary. Privatization of services                                                                           
offered by entities whose services were funded by the state                                                                     
should be looked at also, in her opinion.  She suggested                                                                        
that many University of Alaska services, such as the                                                                            
student loan program, bookstores and food stores, medical                                                                       
services and maintenance services could be privately                                                                            
handled.  She spoke about her for-profit company and the                                                                        
services it provided. Their main competitor was the state                                                                       
itself. She talked about the Office of Public Advocacy,                                                                         
which regulated her company and also competed, for her                                                                          
business. She also thought non-profit entities needed to be                                                                     
reviewed.                                                                                                                       
                                                                                                                                
MONITA LANE, president, Alaska Caregivers Association,                                                                          
testified via teleconference from Fairbanks. She supported                                                                      
SB 33 and thought the public should be involved in the task                                                                     
force. The Office of Public Advocacy should be privatized,                                                                      
in her opinion. The Pioneer Homes should also be privatized                                                                     
and receive no state funding.  She talked about her                                                                             
organization's assisted living facilities that were not                                                                         
funded by the state. She felt the insurance reimbursement                                                                       
program should also be privatized and would pay for itself                                                                      
with the savings of assisted living rather than nursing                                                                         
home care services.  Longevity program fund savings should                                                                      
be channeled back to senior services and consolidated into                                                                      
one office, she said.                                                                                                           
                                                                                                                                
Co-Chair John Torgerson ordered the bill held in committee.                                                                     

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