Legislature(2011 - 2012)SENATE FINANCE 532
04/25/2012 03:30 PM House LEGISLATIVE BUDGET & AUDIT
| Audio | Topic |
|---|---|
| Start | |
| Approval of Minutes | |
| Executive Session | |
| Other Committee Business | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
LEGISLATIVE BUDGET AND AUDIT COMMITTEE
April 25, 2012
3:49 p.m.
MEMBERS PRESENT
Representative Mike Hawker, Chair
Representative Kurt Olson
Representative Mike Doogan
Representative Scott Kawasaki (alternate)
Representative Bill Stoltze (alternate)
Senator Bert Stedman, Vice Chair
Senator Hollis French
Senator Lyman Hoffman
Senator Linda Menard
Senator Thomas Wagoner
Senator Kevin Meyer (alternate)
MEMBERS ABSENT
Representative Mark Neuman
Representative Bill Thomas
COMMITTEE CALENDAR
APPROVAL OF MINUTES
EXECUTIVE SESSION
OTHER COMMITTEE BUSINESS
PREVIOUS COMMITTEE ACTION
No previous action to record
WITNESS REGISTER
KRISTIN CURTIS
Legislative Auditor
Legislative Audit Division
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Requested consideration for approval of
purchases.
ACTION NARRATIVE
3:49:18 PM
CHAIR MIKE HAWKER called the Legislative Budget and Audit
Committee meeting to order at 3:49 p.m. Representatives Hawker,
Kawasaki, Doogan, and Olson, and Senators Stedman, Meyer,
Menard, Hoffman, and French were present at the call to order.
Representative Stoltze and Senator Wagoner arrived as the
meeting was in progress.
^Approval of Minutes
Approval of Minutes
3:49:43 PM
CHAIR HAWKER announced that the first order of business would be
the approval of the minutes.
3:51:06 PM
SENATOR STEDMAN made a motion to approve the minutes of March
28, 2012. There being no objection, the minutes from the
meeting of March 28, 2012 were approved.
^Executive Session
Executive Session
3:51:23 PM
SENATOR STEDMAN made a motion under Uniform Rule 22 to move to
executive session for the purpose of discussing confidential
audit reports under AS 24.20.301. There being no objection, the
committee went into executive session at 3:51 p.m.
4:08:26 PM
CHAIR HAWKER brought the committee back to order at 4:08 p.m.
SENATOR STEDMAN made a motion for the final audits for the Virus
Free Seed Potatoes Project and the Film Production Incentive
Program - Financial Compliance to be released to the public.
There being no objection, it was so ordered.
^Other Committee Business
Other Committee Business
4:08:59 PM
CHAIR HAWKER explained that the oil and gas tax production
consultants, PFC Energy, would complete the initial stage of
their funding on April 30, 2012. Reporting that he and Senator
Stedman had spoken with the chairs of committees in which the
legislation was being considered, he relayed that there was
interest for maintaining a contract with PFC Energy throughout
the special session. He shared that a daily rate had been
agreed upon with PFC Energy, and, although the company had other
commitments, there would be "as uninterrupted a service as we
possibly could have during the course of the legislative
[special] session."
4:10:51 PM
CHAIR HAWKER asked that the committee amend the current contract
with PFC Energy, which was not to exceed $650,000, to $900,000,
which would include the special session and interim issues and
projects should the current issue remain unresolved.
4:11:23 PM
SENATOR STEDMAN made a motion that the Chairman of the
Legislative Budget and Audit Committee be authorized to amend
the current contract with PFC Energy to an amount not to exceed
$900,000.
4:11:37 PM
CHAIR HAWKER objected for discussion.
SENATOR FRENCH asked if the fiscal model would only be delivered
after the passage of legislation, in order to adapt it to the
legislation. He asked what the time frame was for delivery of
the model after legislation was passed, and whether a model
would be delivered if legislation was not passed. He asked if
model prototypes were currently available, even though the
legislation was still undergoing changes.
4:12:48 PM
CHAIR HAWKER, in response to Senator French, explained that the
current contract with PFC Energy was comprised of six tasks,
which included a fiscal model of the current Alaska tax
structure with the capability for modeling proposed changes to
the Alaska tax system. The second task was for a comparative
analysis of the relationship between proposals from industry
groups with those systems of other jurisdictions. The third
task was to collect and assess the corporate responses from
other stakeholders in Alaska. The fourth task was an assessment
of the competing choices and the overall implications for fiscal
terms, which included the final transfer of the work by PFC
Energy to the Alaska State Legislature. The fifth task included
formal presentations to the legislative committees, and the last
was "the retainer section." He clarified that all of the
aforementioned were in the original contract with PFC Energy.
He offered his belief that the concern by Senator French was for
the fiscal model. He explained that the initial contract
discussions with PFC Energy recognized that this was a "fluid
and dynamic process" and would necessitate the ability to make
changes. He offered examples of models to various scenarios,
including shifting the progressivity curve to a gross or a net
basis, or the ACES (Alaska's Clear and Equitable Share) tax
regime, and noted that all of these required changes, edits, and
adaptations to the model. He declared that the interpretation
from these various models was necessary, in order for the fiscal
model to relate to the question being asked. He established
that the agreement with PFC Energy was for a fiscal model to be
transferred to the Alaska State Legislature "upon completion of
the project work program as determined by the chairman of the
Legislative Budget and Audit Committee." He confirmed that,
should the committee determine not to extend the PFC Energy
contract, the most conclusive version of the model would be
given to the legislature. He noted that the contract extension
with PFC Energy would allow this contract to be terminated
without advance notice, and would require that the model
referencing specific legislation be given to the committee for
possible distribution.
4:17:22 PM
SENATOR FRENCH expressed his understanding that although there
could be possible confusion from additional prototype fiscal
models, he did not agree. He asked to clarify that the most
current fiscal model would be available from PFC Energy, whether
or not legislation was passed, when the legislature adjourned.
4:18:20 PM
CHAIR HAWKER replied that the contract provided "for a judgment
statement" and he read from the contract: "transferable to the
Alaska legislature upon completion of the project work program
as determined by Chairman Hawker." In response to Senator
French, he said that the decision for contract termination would
be made "when we get there." He suggested that this would be
based on the facts and circumstances, possibly at the end of the
special session if the committee was no longer utilizing and
developing the model. He pointed out that the Senate had never
requested that PFC Energy share their model.
4:19:36 PM
SENATOR FRENCH, referencing earlier fiscal models such as ACES
and Gaffney, Cline & Associates, stated that these models could
be put onto a spread sheet, the numbers could be adjusted to
produce different outcomes, and then it could be released to the
public. He declared that this was useful for "advancing the
public understanding of what we're doing, and our own personal
understanding of what each different number meant, rather than
asking that a set of parameters be run." He stated that this
would allow all the legislators to experiment, rather than route
all the requests through Chair Hawker for appropriate
determinations. He opined that he preferred this earlier
method.
4:20:41 PM
CHAIR HAWKER offered his belief that the Gaffney, Cline &
Associates model was "an entirely different request of a
consultant." He declared that the input variables for ACES were
straightforward, whereas PFC Energy was offering the exact model
which the Legislative Budget and Audit Committee had approved on
December 5, 2011. He stated that this was not a "black box"
model, but instead, a model to better aid the legislature for
understanding the evolving and potential changes to the state
fiscal system. He stated that this model style was "to avoid
putting some sort of misleading black box model on the internet
that said it's as easy as putting in a number and getting an
answer." He declared that the projected fiscal changes were far
more complicated with very challenging consequences.
4:22:03 PM
SENATOR STEDMAN reported that he had discussed the PFC Energy
model with Janak Mayer, including corporate income tax rates,
depreciation, capital expenses, operating expenses, and credits.
He declared that the model was very complex, and any change to
the variables was difficult to understand without a greater
understanding of the model. He compared this to the David Wood
model for gas, noting that it was neither complete nor
available, even though it had been "in the works for four
years." He pointed out that other models were available to give
"rough ideas of the impacts of changing variables."
4:24:59 PM
REPRESENTATIVE KAWASAKI asked if members of the legislature had
access to the PFC model, and he requested an opportunity to view
the model.
4:25:33 PM
CHAIR HAWKER replied that the model and the work by PFC Energy
had been available to legislators for the past 90 days. He
noted that procedures had been established for the utilization
of these consultants: top priority to committee chairs
currently hearing the relevant bills; and the next priority for
members of the committees actively involved in that legislation.
He confirmed that individual members of the legislature were
also able to talk with PFC Energy, or other legislative
consultants. He suggested that any specific requests be made to
him, and he would attempt to make the consultants available, as
determined by the established prioritizations, while observing
"the most efficient and effective utilization of the limited
consulting resource that we have." He declared that this
availability had become even more limited during the special
session.
4:27:34 PM
REPRESENTATIVE DOOGAN, declaring that he was not competent to
judge the work of PFC Energy, asked if the company had done the
requested work, and if there was still sufficient work to
justify the contract extension.
4:28:26 PM
CHAIR HAWKER offered his belief that the work had been
accomplished, on time and on budget. He projected that, as
there was the potential for a 30 day special legislative
session, he had multiplied the 30 days by the PFC Energy daily
rate, and arrived at the amount for the requested contract
extension. He reflected that this would allow a reasonable
amount of work to be accomplished.
4:29:31 PM
SENATOR STEDMAN expressed his agreement with Chair Hawker for
the work by PFC Energy. He acknowledged that he did not know
what changes might be forthcoming to the proposed taxation from
the House Resources Standing Committee, and of those proposed
changes, which ones might replicate work already done or might
require modifications. He declared that all the PFC Energy
documents were available to both the House and the Senate.
4:30:24 PM
CHAIR HAWKER explained that the proposed contract was not for a
fixed fee, and clarified that there would not be any obligations
should the legislature adjourn early.
REPRESENTATIVE DOOGAN proffered his assurance that the contract
proposal was a reasonable projection.
4:31:37 PM
CHAIR HAWKER removed his objection.
4:31:47 PM
SENATOR FRENCH stated his objection.
4:32:05 PM
A roll call vote was taken. Representatives Olson, Doogan,
Stoltze, and Hawker and Senators Menard, Wagoner, Meyer, and
Stedman voted in favor of the contract proposal. Senator French
voted against it. Therefore, the contract amendment for PFC
Energy was approved by the Legislative Budget and Audit
Committee by a vote of 8 yeas - 1 nay.
4:33:32 PM
KRISTIN CURTIS, Legislative Auditor, Legislative Audit Division,
Alaska State Legislature, requested that the Legislative Budget
and Audit Committee consider and approve the solicitation and
purchase of a new project and time accounting system. She
projected that the system would cost $85,000, as of the latest
proposal received today. She assured the committee that her
division would submit an RFP (request for proposal) to ensure
the most competitive price available. She described that the
current system was implemented in 1999, and had "reached the end
of its useful life" as the operating system, Windows 95, was no
longer supported. She explained that the system was used to
manage projects, which included billing for single audit hours,
and to prepare cost allocation plans.
4:35:45 PM
SENATOR STEDMAN made a motion that the Legislative Budget and
Audit Committee authorize the Legislator Auditor to solicit and
purchase a time and project accounting system not to exceed
$85,000. There being no objection, it was so ordered.
4:36:08 PM
MS. CURTIS requested that the Legislative Budget and Audit
Committee consider and approve the solicitation and purchase of
a new color copier, printer, and fax. She projected that the
system would cost $34,000, and based on the State of Alaska
negotiated state-wide contract, no procurement process would be
necessary. She explained that the Legislative Audit Division
desired to change the report format to a more cost effective
binding, and add color, to produce a more professional, polished
audit report.
4:37:07 PM
SENATOR STEDMAN made a motion that the Legislative Budget and
Audit Committee authorize the Legislative Auditor to solicit and
purchase a color copier, printer, and fax in an amount not to
exceed $34,000. There being no objection, it was so ordered.
CHAIR HAWKER expressed his support for any necessary equipment
purchases.
4:38:19 PM
ADJOURNMENT
There being no further business before the committee, the
Legislative Budget and Audit Committee meeting was adjourned at
4:38 p.m.
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