Legislature(2013 - 2014)Anch Temporary LIO
12/11/2013 09:00 AM House LEGISLATIVE BUDGET & AUDIT
| Audio | Topic |
|---|---|
| Start | |
| Approval of Minutes | |
| Executive Session - Audits | |
| 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
Anchorage, Alaska
December 11, 2013
9:06 a.m.
MEMBERS PRESENT
Senator Anna Fairclough, Chair
Senator Kevin Meyer
Senator Click Bishop
Senator Cathy Giessel
Senator Donald Olson
Representative Alan Austerman
Representative Kurt Olson (via teleconference)
Representative Andy Josephson
MEMBERS ABSENT
Representative Mike Hawker, Vice Chair
Representative Bob Herron
Representative Scott Kawasaki (alternate)
Representative Bill Stoltze (alternate)
Senator Mike Dunleavy (alternate)
COMMITTEE CALENDAR
APPROVAL OF MINUTES
EXECUTIVE SESSION - AUDITS
OTHER COMMITTEE BUSINESS
PREVIOUS COMMITTEE ACTION
No previous action to record
WITNESS REGISTER
KRIS CURTIS, Legislative Auditor
Legislative Audit Division
Legislative Agencies and Offices
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Presented the Legislative Audit Division
Peer Review Report for 2013.
LAURA PIERRE, Staff
Senator Anna Fairclough
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: As staff for the Legislative Budget and
Audit Committee, provided information that was requested by
Chair Fairclough pertaining to the professional services
contract with Janak Mayer and Nikos Tsafos.
ACTION NARRATIVE
9:06:30 AM
CHAIR ANNA FAIRCLOUGH called the Legislative Budget and Audit
Committee meeting to order at 9:06 a.m. Senators Meyer, Bishop,
Giessel, Olson, and Fairclough, and Representatives Austerman,
Olson (via teleconference), and Josephson were present at the
call to order.
^Approval of Minutes
Approval of Minutes
9:07:23 AM
CHAIR FAIRCLOUGH announced that the first order of business
would be the approval of the minutes.
SENATOR MEYER made a motion to approve the minutes of the
Legislative Budget and Audit meeting of November 25, 2013, as
presented.
9:08:17 AM
SENATOR GIESSEL recalled she left that meeting early and
expressed her understanding that the contract under discussion
is to be offered. She asked whether there was further action to
be taken "in terms of consultants."
9:08:43 AM
CHAIR FAIRCLOUGH said not at this time. There being no further
discussion, the minutes from the meeting of November 23, 2013,
were approved.
^Executive Session - Audits
Executive Session - Audits
9:08:56 AM
CHAIR FAIRCLOUGH announced that the committee would next move
into executive session.
SENATOR MEYER made a motion that the committee under Uniform
Rule 22, go into 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 9:09
a.m.
CHAIR FAIRCLOUGH brought the meeting back to order at 10:15 a.m.
Senators Olson, Bishop, Giessel, and Fairclough, and
Representatives Austerman, Josephson, and Olson (via
teleconference) were present at the call back to order.
10:15:46 AM
SENATOR GIESSEL made a motion for the following final audits to
be released to the public: Department of Administration, Alaska
Land Mobile Radio Communications System; and Department of
Natural Resources, Alaska Seismic Hazards Safety Commission.
There being no objection, it was so ordered.
^Other Committee Business
Other Committee Business
10:16:10 AM
CHAIR FAIRCLOUGH announced that the next order of business would
be an update from the committee's auditor on her peer review.
10:16:25 AM
KRIS CURTIS, Legislative Auditor, Legislative Audit Division,
Legislative Agencies and Offices, Alaska State Legislature,
presented the division's peer review report for 2013. She
informed the committee a peer review report is issued by members
of other states' audit organizations, and coordinated through
the National State Auditors Association. The review covers the
system of quality control in place at an audit agency to ensure
that audits are conducted, and reports are issued, in accordance
with professional standards. A peer review is required by audit
standards every three years, and in September the Legislative
Audit Division received the highest rating possible. The peer
review opinions are historically posted on the division's
website.
10:17:26 AM
CHAIR FAIRCLOUGH congratulated the division on "the highest
success possible."
10:17:42 AM
LAURA PIERRE, Staff, Senator Anna Fairclough, Alaska State
Legislature, speaking as staff to the Legislative Budget and
Audit Committee, reminded the committee that at its last meeting
the chair was authorized to negotiate a professional services
contract with Janak Mayer and Nikos Tsafos, consultants on oil
and gas issues; however, there was discussion on how to address
the additional expenses of their housing, car rental, and travel
during the course of the legislative session. At the request of
Chair Fairclough, Ms. Pierre estimated that the additional
expenses of leasing a house to share would add long-term per
diem, which is $33 per day, compared to short-term per diem,
which is $140 per day, to the contract. Travel is estimated at
$2,100 for transportation for both consultants from Washington
D. C., a lease to secure joint housing will be $3,000 per month,
and a rental car is about $1,200 per month for one car. In
addition, heating fuel for the house is estimated at $1,500.
The total estimate for all of the expenses is $26,000 for both,
for the 90-day session.
10:21:05 AM
CHAIR FAIRCLOUGH opined these are very reasonable expenses
compared with housing in a hotel room at $150 per day.
10:21:24 AM
REPRESENTATIVE AUSTERMAN asked whether it is a normal standard
to pay a flat fee for work plus expenses, or if expenses are
part of a negotiated contract.
10:21:47 AM
CHAIR FAIRCLOUGH recalled in the last contract with PFC Energy,
"We cover everything when they're here." The expenses are part
of their day rate of $2,800 - up to $7,500 - per day.
10:22:14 AM
MS. PIERRE further explained that past contracts with the
Legislative Budget and Audit committee have not drawn a flat
amount for a contract; for example, PFC Energy's contract was
$1.7 million dollars as billed on a daily rate, which depended
on who was working on the contract. At that time, Janak Mayer's
rate was $2,400 per day for time, and did not include housing,
travel, car, or per diem. She opined a similar day rate would
cost "well beyond, we feel, $13,000."
10:23:34 AM
CHAIR FAIRCLOUGH, in response to Representative Austerman, noted
the contract being negotiated is for a $250,000 flat fee per
contractor, plus travel, housing, and per diem expenses.
10:23:53 AM
REPRESENTATIVE JOSEPHSON asked whether the contract has been
signed.
10:24:10 AM
CHAIR FAIRCLOUGH said no, negotiations are underway.
10:24:15 AM
MS. PIERRE added that comments from the committee will be taken
into consideration, and the contract contains certain benchmarks
that the contractors must meet to receive payment.
10:24:33 AM
REPRESENTATIVE JOSEPHSON observed it is unclear what will be
happening during the next session, and expressed his concern
about state spending. Clearly, only issues such as a large
diameter gas line and decoupling will require the consultants to
work "15 hours a day."
10:25:18 AM
CHAIR FAIRCLOUGH advised that another issue of concern related
to the consultants' contract is whether the state should invest,
and assume risk, so that a gas line goes forward. She said she
is discussing with the consultants whether to add that scope of
work, because the governor has said Alaska may want to take an
ownership interest. If so, the committee wants to ensure that
legislators and Alaskans know the risks and rewards possible
from investments "along that chain of opportunity." In response
to Representative Austerman, she said $500,000 plus expenses was
the limit put on the contract.
10:26:28 AM
REPRESENTATIVE AUSTERMAN ascertained the contract could pay out
$500,000 plus living expenses.
CHAIR FAIRCLOUGH said correct.
REPRESENTATIVE AUSTERMAN said, "I have a problem with that but
that's me being frugal I guess."
10:26:34 AM
SENATOR GIESSEL referred to the minutes of the November 25th
meeting and pointed out that the contract under discussion will
run through January 31, 2015, thus work could continue through
the fall of 2014.
10:26:52 AM
CHAIR FAIRCLOUGH explained that the scope of work for the flat
fee is $250,000. If the committee wanted to utilize the
consultants in the fall, the committee would establish a day
rate. In response to Representative Austerman's concerns, she
said, "this is low compared to what we paid PFC Energy."
10:27:29 AM
SENATOR BISHOP clarified that if the committee concurs, the
contract locks the consultants in for a year for $500,000, but
for work after 90 days, a daily rate must be renegotiated.
10:27:56 AM
CHAIR FAIRCLOUGH said that is correct.
10:28:00 AM
MS. PIERRE advised the consultants have agreed to enter into a
contract for an entire year; however, the amount approved by the
committee is just for the length of the upcoming 2014
legislative session. The intent is to negotiate and secure a
daily rate in this contract for work beyond the session.
10:28:39 AM
SENATOR BISHOP cautioned about the possibility of a special
session.
10:29:02 AM
MS. PIERRE, in response to Representative Austerman, confirmed
that the $500,000, plus $13,000 in expenses for each consultant,
is for the 90-day session; there could be a daily rate for work
beyond that, or the committee could negotiate another flat fee.
10:29:10 AM
CHAIR FAIRCLOUGH advised the committee that the consultants are
not getting paid at this time for work directed by the
committee, such as pre-session work on models, contract
liability issues, and confirming the legislature's ownership of
the gas symposium information. Information provided by the
consultants has been forwarded to Legislative Legal Services; in
fact, the 90-day "clock already started ticking," and the
consultants are engaged in the market, gathering the data in
order to be prepared to fulfil their scope of work.
10:30:26 AM
MS. PIERRE added that the contract needs to run through January
31, [2015] so the consultants are secured from conflicts of
interest.
10:31:09 AM
CHAIR FAIRCLOUGH, further addressing the conflict of interest
question, said she has asked the consultants to review a
possible conflict of interest that was raised at the previous
meeting. Furthermore, the intent is to negotiate for the
ability to extend the contract multi-year, if desired by the
next committee chair.
10:31:35 AM
REPRESENTATIVE AUSTERMAN observed that a full-year contract does
not limit the consultants from contracting for other work that
is not in conflict with the state.
10:32:03 AM
MS. PIERRE said that is correct.
10:32:08 AM
CHAIR FAIRCLOUGH agreed with the need to look carefully at every
dollar the committee spends and invests on behalf of Alaskans.
10:32:32 AM
SENATOR GIESSEL made a motion that the committee, in addition to
the approved professional services contract of $500,000 from the
November 25, 2013 meeting, also approves $26,000 for session
expenses to be split between the two consultants. There being
no objection, it was so ordered.
10:33:06 AM
CHAIR FAIRCLOUGH then expressed her interest in securing an
actuary for use by the committee and legislature during the
upcoming session. The governor has proposed transferring $3
billion from the Constitutional Budget Reserve [CBR] to the
Alaska Retirement Management [ARM] Board, and due to the
importance of this subject, experts are needed to advise on
health care costs and retirement. She offered to draft a
Request for Proposal [RFP] for an actuary to work either on a
flat fee, or a rate basis, as directed by the committee.
10:34:35 AM
SENATOR BISHOP concurred and asked that the scope of the RFP
search is for "the best of the best on this type of monetary
decision."
10:34:56 AM
SENATOR GIESSEL agreed.
10:35:11 AM
REPRESENTATIVE AUSTERMAN agreed.
10:35:18 AM
CHAIR FAIRCLOUGH asked Ms. Pierre, committee staff, to research
the cost and to draft an RFP for an actuarial with expertise in
health and in retirement pension funds. In fact, two experts
may be needed to advise on the governor's proposal and on
upcoming legislation. Suggestions for applicants are to be
solicited from the Legislative Audit Division, although the work
may be done internally.
10:36:41 AM
REPRESENTATIVE JOSEPHSON agreed with the need for an actuary;
however, unlike the field of oil and gas, this work is also done
by the Legislative Finance Division and engaging additional
advisors may create redundancy.
10:37:30 AM
CHAIR FAIRCLOUGH said she spoke to David Teal, Director of
Legislative Finance, on this subject and he suggested the
legislature may want to bring on an actuary. Her understanding
of the expertise of an actuary "is they know what's affecting
the system and so they have a unique perspective on each
question, on all the criteria that is moving the needle inside
of that, that issue ... ." Actuaries are a source for different
perspectives and policy choices.
10:38:11 AM
REPRESENTATIVE JOSEPHSON, as an aside, noted that Michigan also
has constitutional protection for public employees and the
federal district judge there decided that federal bankruptcy law
is supreme. Unlike Michigan, he said Alaska wants to honor its
obligations, which are "vitally important."
10:38:57 AM
REPRESENTATIVE AUSTERMAN stated the need for the committee to
know the members' legal obligations as legislators, if there is
a legal obligation to pay, and whether there is a deadline. He
cautioned against using an arbitrary number set by the ARM
Board. Some of these questions are constitutional issues and he
was unsure of whether an actuary could help.
10:40:01 AM
CHAIR FAIRCLOUGH ascertained that the committee wants the
expertise in order to address upcoming legislation. The role of
the committee is to secure the best information possible by
hiring contractors to ensure that Alaskans - and the legislature
- have the best representation of an industry, so as to make the
best policy choices. An actuary can talk specifically about the
pension and the governor's proposal. She asked for the
committee's support to allow the drafting of an RFP and
solicited suggestions for whom to hire.
10:41:38 AM
REPRESENTATIVE OLSON, in response to Chair Fairclough, said he
had no problem pursuing an actuary to address the retirement
issue, but cautioned against hiring Mercer. He suggested
putting high limits on the errors and omissions coverage.
10:42:44 AM
CHAIR FAIRCLOUGH reminded the committee the RFP process is open
to proposals from all interested parties of the general public.
10:42:53 AM
REPRESENTATIVE OLSON recommended contacting Mike Barnhill.
10:43:17 AM
CHAIR FAIRCLOUGH asked for clarification on whether the
committee also wished to search for expertise on health care;
services to address both issues may or may not come from one
company. Hearing no further discussion, it was so ordered.
10:44:13 AM
ADJOURNMENT
There being no further business before the committee, the
Legislative Budget and Audit Committee meeting was adjourned at
10:44 a.m.
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