Legislature(2003 - 2004)

04/02/2003 09:00 AM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                                                                                                                                
     SENATE BILL NO. 115                                                                                                        
     "An  Act  allowing  expenses  of  the correctional   industries                                                            
     program that  may be financed from the correctional  industries                                                            
     fund to include the  salaries and benefits of state employees."                                                            
                                                                                                                                
                                                                                                                                
This  was the first  hearing  for this  bill in  the Senate  Finance                                                            
Committee.                                                                                                                      
                                                                                                                                
Co-chair  Wilken informed  the Committee that  this bill involves  a                                                            
$963,000  fund   source  change  from   the  general  fund   to  the                                                            
Correctional  Industry   Fund.  He  stated  that  the  Senate  Rules                                                            
Committee, at the request  of Governor Murkowski, sponsors the bill.                                                            
                                                                                                                                
JERRY  BURNETT,  Director,  Division  of  Administrative   Services,                                                            
Department  of Corrections  stated that  this bill  would amend  the                                                            
Alaska Correctional  Industries' (ACI)  statutes to allow  ACI State                                                            
employees salaries  to be paid from ACI product-cost  revenues, from                                                            
which "all  other administrative costs"  are currently paid,  rather                                                            
than  from the  general  fund. He  expressed,  that  were this  bill                                                            
adopted,  the Division  of  Correctional  Industries  would be  100-                                                            
percent self-supporting.                                                                                                        
                                                                                                                                
Mr. Burnett specified that  ACI operates eight programs in the State                                                            
including:  two  laundries,   a wood  furniture   plant,  an  office                                                            
furniture plant, a metals  plant, an auto body shop, and two garment                                                            
shops.  Additionally,   he  specified,   ACI  cooperates   with  the                                                            
Department  of Natural Resources  to operate  the Mt. McKinley  Meat                                                            
Plant in Palmer.                                                                                                                
                                                                                                                                
Senator Taylor asked whether ACI programs generate a net profit.                                                                
                                                                                                                                
Mr. Burnett  responded that a net  revenue of $150,000 is  projected                                                            
in  FY 03.  He continued  that  with  improved  marketing,  improved                                                            
products,  and program  oversight, ACI  is expected  to begin  FY 04                                                            
with a fund balance of approximately $300,000.                                                                                  
                                                                                                                                
Senator Taylor asked how the fund balance would be utilized.                                                                    
                                                                                                                                
Mr. Burnett stated  that the beginning FY 04 fund  balance, combined                                                            
with FY  04 projected revenues,  would allow  the Department  to pay                                                            
salary expenses and allow ACI to expand its programs.                                                                           
                                                                                                                                
Senator  Taylor asked  whether  the  current $960,000  general  fund                                                            
expense  provides  for such  things  as materials  and  supplies  in                                                            
addition to salary expenses.                                                                                                    
                                                                                                                                
Mr. Burnett  clarified that  the $960,000  exclusively provides  for                                                            
salaries and benefits.                                                                                                          
                                                                                                                                
Senator Taylor  commented that ACI  currently grosses approximately                                                             
$3 million annually.                                                                                                            
                                                                                                                                
Mr. Burnett  agreed  and voiced  optimism  that ACI  would gross  in                                                            
excess of $4 million in FY 04.                                                                                                  
                                                                                                                                
Senator Taylor  summarized, therefore, that the ACI  fund balance of                                                            
approximately  $300,000 and projected  FY 04 revenues would  provide                                                            
for all Department expenses,  including $960,000 in salary expenses.                                                            
                                                                                                                                
Mr. Burnett concurred.                                                                                                          
                                                                                                                                
Senator Taylor  puzzled as  to "how exchanging  one fund source  for                                                            
another"  would   allow  for  ACI  program  expansion.   He  further                                                            
questioned  whether  there  should  be  an  additional  $300,000  in                                                            
savings to the general  fund because of the ACI FY 04 beginning fund                                                            
balance.                                                                                                                        
                                                                                                                                
Mr. Burnett  expressed  that  the goal  of this  fund source  change                                                            
request is  to save $960,000 in general  fund expenditures  relating                                                            
to ACI salaries.                                                                                                                
                                                                                                                                
Senator  Taylor voiced  concern that  this would  be identified  "as                                                            
another dedicated  fund within  the revenue  streams of Alaska."  He                                                            
asked whether program expansion  would require additional personnel.                                                            
                                                                                                                                
Mr. Burnett responded  that no increases in personnel  are expected,                                                            
and that  consideration  is being  given to  form partnerships  with                                                            
public entities to market Correctional Industries products.                                                                     
                                                                                                                                
Senator Taylor  voiced support for  ACI efforts to develop  industry                                                            
"to provide  meaningful  activities  and training  to individuals;"                                                             
however, he  declared, aggressive  marketing and program  expansions                                                            
should not compete with private industry.                                                                                       
                                                                                                                                
Co-Chair Green  asked how ACI programs  are evaluated; specifically                                                             
the  criteria  used   to  determine  whether  a  program   is  self-                                                            
sufficient.                                                                                                                     
                                                                                                                                
Mr. Burnett responded  that a Correctional Industries  Board reviews                                                            
each  program to  evaluate  its viability  and  to ensure  that  the                                                            
service does not compete with private industry.                                                                                 
                                                                                                                                
Senator Bunde noted that  the Mt. McKinley Meat Processing Plant has                                                            
experienced  "difficulties  in functioning  successfully." He  asked                                                            
"at what  point," it might  be decided that  this program should  be                                                            
eliminated.  He additionally  asked  how the  plant's closure  would                                                            
affect ACI finances.                                                                                                            
                                                                                                                                
Mr. Burnett clarified that  the Department of Natural Resources owns                                                            
the facility  and provides  for salaries  of the  ACI personnel.  He                                                            
noted  that the  salaries paid  to ACI  employees  generate a  small                                                            
profit for the Department of Corrections.                                                                                       
                                                                                                                                
Mr. Burnett  informed the  Committee that  the eight ACI  industries                                                            
would be  reviewed this  year to determine  program continuance  and                                                            
expansion as well as to  consider the development of new industries.                                                            
                                                                                                                                
Senator  Bunde   surmised,  therefore,   that  the  Department   has                                                            
mechanisms in place to expand or terminate programs.                                                                            
                                                                                                                                
Mr. Burnett concurred.                                                                                                          
                                                                                                                                
Co-Chair Wilken asked for  confirmation that the Department's fiscal                                                            
note is incorporated into the Governor's proposed FY 04 budget.                                                                 
                                                                                                                                
Mr. Burnett confirmed.                                                                                                          
                                                                                                                                
Senator  Taylor   moved  to  report  SB  115  from  Committee   with                                                            
individual recommendations and accompanying fiscal note.                                                                        
                                                                                                                                
There  being no objection,  the  bill REPORTED  from Committee  with                                                            
previous fiscal note #1 from the Department of Corrections.                                                                     
                                                                                                                                

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