Legislature(1999 - 2000)
03/04/1999 08:04 AM FIN
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
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.