Legislature(2015 - 2016)HOUSE FINANCE 519
01/21/2015 09:00 AM House LEGISLATIVE BUDGET & AUDIT
| Audio | Topic |
|---|---|
| Start | |
| Election of Chairman | |
| Election of Vice Chairman | |
| Approval of Minutes | |
| Outgoing Chairman Status Report | |
| Report from Legislative Finance Division | |
| Overview of the Legislative Audit Process | |
| Consultant Contracts | |
| 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
January 21, 2015
9:01 a.m.
MEMBERS PRESENT
Representative Mike Hawker, Chair
Representative Kurt Olson
Representative Lance Pruitt
Representative Steve Thompson
Representative Sam Kito
Senator Anna MacKinnon, Vice Chair
Senator Lyman Hoffman
Senator Cathy Giessel
Senator Bert Stedman
Senator Click Bishop
MEMBERS ABSENT
Representative Mark Neuman (alternate)
Senator Pete Kelly (alternate)
OTHER LEGISLATORS PRESENT
Representative Lora Reinbold
COMMITTEE CALENDAR
ELECTION OF CHAIRMAN
ELECTION OF VICE CHAIRMAN
APPROVAL OF MINUTES
OUTGOING CHAIRMAN STATUS REPORT
REPORT FROM LEGISLATIVE FINANCE DIVISION
OVERVIEW OF THE LEGISLATIVE AUDIT PROCESS
CONSULTANT CONTRACTS
PREVIOUS COMMITTEE ACTION
No previous action to record
WITNESS REGISTER
DAVID TEAL, Legislative Fiscal Analyst
Legislative Finance Division
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Provided information to the Joint Committee
on Legislative Budget and Audit.
KRISTIN CURTIS, Legislative Auditor
Division of Legislative Audit
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Provided information on the legislative
audit process.
ROSS ALEXANDER, Performance Review Manager
Division of Legislative Audit
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Provided information on the performance
review process.
ACTION NARRATIVE
9:01:13 AM
CHAIR ANNA MACKINNON called the Legislative Budget and Audit
Committee meeting to order at 9:01 a.m. Representatives Kito,
Thompson, and Hawker and Senators Stedman, Bishop, Giessel,
Hoffman, and MacKinnon were present at the call to order.
Representatives Olson and Pruitt arrived as the meeting was in
progress. Also in attendance was Representative Reinbold.
^ELECTION OF CHAIRMAN
ELECTION OF CHAIRMAN
9:02:08 AM
CHAIR MACKINNON announced that the first order of business would
be the election of a new committee chair.
9:02:23 AM
SENATOR GIESSEL nominated Representative Mike Hawker as Chair of
the Legislative Budget and Audit Committee for the 29th Alaska
State Legislature and moved and asked unanimous consent that
nominations be closed. There being no objection, it was so
ordered.
^ELECTION OF VICE CHAIRMAN
ELECTION OF VICE CHAIRMAN
9:02:39 AM
CHAIR HAWKER announced that the next order of business would be
the election of a new vice chair. He nominated Senator Anna
MacKinnon as Vice Chair of the Legislative Budget and Audit
Committee for the 29th Alaska State Legislature and moved and
asked for unanimous consent that the nominations be closed.
There being no objection, it was so ordered.
^APPROVAL OF MINUTES
APPROVAL OF MINUTES
9:03:59 AM
CHAIR HAWKER announced that the next order of business would be
the approval of the minutes from the Legislative Budget and
Audit Committee meeting of December 16, 2014.
9:04:35 AM
VICE CHAIR MACKINNON directed attention to the aforementioned
minutes and asked that these be amended to reflect the correct
spelling of Mr. Janak Mayer. She made a motion to approve the
minutes of December 16, 2014, as amended. There being no
objection, the minutes from the meeting of December 16, 2014
were approved, as amended.
^OUTGOING CHAIRMAN STATUS REPORT
OUTGOING CHAIRMAN STATUS REPORT
9:05:50 AM
CHAIR HAWKER announced that the next order of business would be
a status report from the outgoing chair regarding the
subcommittee on Corporations, Business and Professional
Licensing.
VICE CHAIR MACKINNON acknowledged the hard work of Laura Pierre
and Erin Shine on this subcommittee. She also expressed her
thanks to Kris Curtis and David Teal, "who have been exemplary
in their performance for the State of Alaska, and truly a gem
for all of us, and a resource that we should utilize even more
than we do now."
CHAIR HAWKER expressed that it had been his privilege to work
with Senator MacKinnon, her staff, and the aforementioned
employees.
VICE CHAIR MACKINNON reported that the subcommittee had held
nine meetings over the prior year for discussion of issues
raised by constituents, professional licensees, and board
members. These meetings focused on a variety of topics which
had included indirect cost, investigation, board member travel,
and the lack of financial information provided for boards to
make decisions. She shared that the subcommittee had directed
her staff to draft potential legislative changes to address
these issues. She listed these changes to include the cleaning
up of statutes of an inactive board, review of options to
mitigate the indirect cost of licensees, and analysis of the
travel issues presented to the board. She noted that this work
was being transitioned to the office of the incoming Legislative
Budget and Audit Committee chair, Representative Hawker and she
offered assistance as the process moved forward.
CHAIR HAWKER asked whether there were any questions, noting that
the committee was considering the presentation of legislation to
address some of the subcommittee suggestions.
VICE CHAIR MACKINNON acknowledged the participation of Sara
Chambers on this work, offering that Ms. Chambers [Director,
Division of Corporations, Business, and Professional Licensing,
Department of Commerce, Community & Economic Development] was
available for questions.
SENATOR GIESSEL expressed the gratitude of her constituents for
this work.
CHAIR HAWKER expressed his thanks to Ms. Shine for her work.
^REPORT FROM LEGISLATIVE FINANCE DIVISION
REPORT FROM LEGISLATIVE FINANCE DIVISION
9:10:40 AM
CHAIR HAWKER announced that the next order of business would be
an update from the Legislative Finance Division regarding its
relationship with the Legislative Budget and Audit Committee.
9:11:12 AM
DAVID TEAL, Legislative Fiscal Analyst, Legislative Finance
Division, Alaska State Legislature, explained that most of the
work from his division was related to the appropriation process,
specifically toward bill preparation and the budget process. He
explained that RPLs, Revised Programs Legislative, were requests
for unanticipated expenses, and were submitted by departments to
be reviewed by the Legislative Budget and Audit Committee for
authorization. He noted that the Legislative Finance Division
was available "to do anything that the committee requests of
us."
CHAIR HAWKER clarified that the Legislative Budget and Audit
Committee did not have the statutory authority to make new
appropriations and that RPLs were a request intended for
additional, unanticipated funds in support of issues already
appropriated.
MR. TEAL pointed out that RPLs were limited to certain types of
funds, most often federal receipts.
^OVERVIEW OF THE LEGISLATIVE AUDIT PROCESS
OVERVIEW OF THE LEGISLATIVE AUDIT PROCESS
9:13:23 AM
CHAIR HAWKER announced that the next order of business would be
an overview of the legislative audit process.
9:13:35 AM
KRISTIN CURTIS, Legislative Auditor, Division of Legislative
Audit, Alaska State Legislature, reported that she was
responsible for the Division of Legislative Audit and she
introduced some of her key staff in attendance, Stacy Nylen,
Richard Radford, and Ross Alexander, explaining their roles in
the division.
MS. CURTIS presented the latest version of the Legislative
Budget and Audit Committee handbook, and summarized that it
included the authorizing statutes for the committee, as well as
information and organization charts for the two permanent staff
agencies, Divisions of Legislative Audit and Legislative
Finance. The handbook described the committee's formal policies
and procedures, and she pointed out that the committee was
authorized to adopt rules to conduct its business and develop
procedures for its functions. She directed attention to page 39
of the handbook which outlined the formal procedures, including
the report release process for audits and performance reviews,
the consideration and approval of audit requests, the contract
process, and administrative issues, including travel. She
emphasized the necessity for awareness to the confidential
report distribution process, noting that statutes ensured that
the audit and performance review process was confidential. She
stressed the importance of measures by legislators and staff to
prevent any premature release of audits and performance review
information until the committee had reviewed and approved its
release. She detailed that these reports were released in a
multi-phased process, with the first distribution considered
preliminary. This first distribution would be at a Legislative
Budget and Audit Committee meeting, and would only be discussed
during executive session to protect its confidentiality. During
this time, she would review the conclusions and recommendations,
and field any questions. Once the committee returned to the
public meeting, there was an opportunity to vote for the release
of this preliminary report to the agency under review for its
formal comments. She emphasized that, at this point, the report
still maintained its confidential status. She explained that
these formal comments were then combined with the preliminary
report, which was then returned to the Legislative Budget and
Audit Committee for the authorization of its final release. She
noted that these final reports were provided to the committee
members in advance of the committee meeting, two days in advance
during legislative session, and four days in advance during the
interim. She stated that the confidentiality procedures were
strict, and that each committee member would receive a sealed
envelope, marked confidential, and that a signature would be
required to receive the report. She pointed out that these
final reports were printed on blue paper, to ensure awareness
that these were confidential documents. During the ensuing
committee meeting, the process for consideration of the report
would be similar to that of the preliminary report.
9:18:28 AM
MS. CURTIS, addressing the audit workload, directed attention to
a memo to Chair Hawker [Included in members' packets]. She
summarized that there were currently nine audit requests in this
workload, which included four mandatory sunset audits, and one
special audit. She explained that the three audits which were
currently 65 - 95 percent complete, the Alaska Public Offices
Commission audit, the Alaska Pioneer Homes audit, and the
Statewide Single Audit, should be completed in the near future.
She reported that the audit request for the Alaska Regional
Development organization, requested in 2013, had been withheld,
as these agencies had been terminated at the end of that year,
but then re-authorized, so the audit would be held until there
had been one year of completion by these agencies. She noted
that the audit regarding the overhaul and refurbishment of the
M/V Tustumena was currently on hold until completion of an
administrative proceeding. She concluded with an update on the
Matanuska Maid audit and the dispensation of its assets upon its
sale, noting that one building remained for sale. She reported
that there were four sunset agencies with termination dates of
June, 2016, and that these audits would begin shortly.
9:20:55 AM
MS. CURTIS directed attention to a memo describing the
responsibilities of the Legislative Budget and Audit Committee
[Included in members' packets]. She stated that the main
function of the committee was to provide the Alaska State
Legislature with fiscal analysis, budget analysis, and audits
and performance reviews. She pointed out that the committee had
broad powers which included reviews of revenue projections,
state agency appropriation requests, expenditure of state funds,
and the fiscal policies and procedures of state government. She
shared that the committee could make recommendations concerning
appropriations, expenditures, and fiscal policies to the
governor and the state legislature. She listed the statutes to
include AS 24.20.201 and AS 24.20.206. She stated that other
sections of statutes presented the committee with oversight
responsibilities, and often designated it as the primary
representative of the legislative branch. She shared that the
degree of power exercised had varied with the discretion of the
committee chair.
CHAIR HAWKER noted that historic statute, as well as the current
ongoing statutory responsibilities, lent itself to the various
responsibilities listed in the aforementioned memo. He pointed
out that these were guidelines for the direction of the
committee over the next two years.
9:24:13 AM
CHAIR HAWKER explained that the performance reviews were a
"significant, and increasing component of the work performed by
the Legislative Auditors staff" and, as they were expensive, it
was incumbent upon the committee to continue to evaluate,
review, and determine that the cost benefit was appropriate.
9:25:04 AM
ROSS ALEXANDER, Performance Review Manager, Division of
Legislative Audit, Alaska State Legislature, offered an overview
of the process and the current status for these reviews. In
2013, House Bill 30 was passed which required that the
Legislative Audit Division complete performance reviews of each
state department at least once every ten years in a prescribed
order. He explained that the statutes governing the performance
review provided a list of areas which the review team may
evaluate, although each performance review had a unique scope
which was developed by the division with input and final
approval from the Legislative Budget and Audit Committee.
Following approval of the scope, a competitive procurement to
hire a contractor was conducted for each review. These
contractors were selected based upon experience with the issues
conducted by the agency under review, as well as knowledge
regarding the performance review process. These reviews,
although conducted by the contractor, were facilitated by the
division with a systematic assessment for the appropriateness,
effectiveness, and efficiency of the department, agency, or
program. They were meant to provide information to improve
performance, while assisting the Alaska State Legislature in the
decision making process. He reported that the review team would
seek to identify a list of programs supported by general funds
that could be cut or reduced without affecting the ability of
the department to fulfill its mission or reduce required
services to the public. Once the contractors completed the
field work, the finds and recommendations were compiled into a
final report, which was presented to the committee for its
ultimate release as a public document. He shared that the final
report for the Department of Corrections had been released by
the committee at the December 16, 2014, meeting. Currently, the
review for Department of Health and Social Services was
underway, and, given the size and scope of services, this review
had been split into four parts, with contractors hired to review
Behavioral Health Services, Long Term Care Services, and the
departmental organization and administrative structure. He
shared that the division would also analyze DHSS self-reported
data. He estimated the final reports for DHSS to be completed
in the fall of 2015, with the Department of Education and Early
Development scheduled for the next performance review.
9:27:58 AM
CHAIR HAWKER, in response to Senator Hoffman, pointed to page 19
of the aforementioned committee handbook for a schedule of the
remaining departmental reviews.
9:28:21 AM
VICE CHAIR MACKINNON reflected that, as the Department of
Corrections had "been fairly non-responsive in actually cutting
themselves" in response to its audit, there had been discussion
for a change to the language in the statute to allow expansion
for the reception of vital information to the committee.
CHAIR HAWKER offered his belief that she had summarized one of
the audit outcomes, the challenge for outside examiners in
reviewing and securing the cooperation of the agency under
review. He cited AS 44.66.020(C) which stated that the agency
would provide the review team a list of programs, or elements of
programs, which comprised at least 10 percent of the general
funds in the agency's budget appropriated from the general fund
which could be reduced or eliminated. He declared that the
agencies were not cooperating, and he expressed agreement with
Senator MacKinnon that this needed to be addressed by the
committee in order to make the process work more effectively.
VICE CHAIR MACKINNON, in response, offered that it was "the
language itself that actually hampered the contractor's ability
to recommend other things to the legislature." She declared
that this was a good bill, "especially with what Alaska's facing
right now."
CHAIR HAWKER suggested a review to determine whether the
language needed to be amended to accomplish the desired goals.
^CONSULTANT CONTRACTS
CONSULTANT CONTRACTS
9:33:13 AM
CHAIR HAWKER announced that the last order of business would be
discussion for the ongoing and potential future consultant
contracts, as the Legislative Budget and Audit Committee was
generally delegated to procure these professional resources. He
noted that the only oil and gas experts currently engaged were
Janak Mayer and Nikolas Tsafos, and he offered his belief that,
although they provided good advice to the State of Alaska, the
committee needed to have the resources available, with "a full
suite of professional skills," to address new issues. He
suggested beginning a dialogue with the committee, and with
public consideration, to assess what resources the legislature
needs to anticipate upcoming gas pipeline development.
9:35:29 AM
SENATOR STEDMAN suggested that it would be beneficial to
consider the history of consultants, as, in the past, there had
been "quite a deep bench of consultants to draw from" which
allowed the committee to better prepare itself for complex
upcoming issues and events. He pointed out that there had been
a drift of consultants from the Legislative Budget and Audit
Committee to the administration, and that, although "some would
call it inadvertent, some would call it imbedded politics," this
had created a tighter time frame for review of the issues. He
suggested that earlier engagement of consultants would allow the
committee to be better prepared for oil and gas subject matters,
instead of wholly relying on the administration. He offered his
belief that "clearly we need a broader bench" of almost
overlapping consultants for discussions of oil and gas economics
tied to the tax structure. He expressed his concern that the
state legislature would not have sufficient consultants.
CHAIR HAWKER expressed his interest in working with Senator
Stedman to bring recommendations to the committee, and he
declared his agreement with the aforementioned concerns.
9:39:24 AM
REPRESENTATIVE KITO suggested the need for contract expertise.
CHAIR HAWKER clarified that he interpreted consultation to
include legal expertise, and he expressed agreement that "it's a
very different thing than economic analysis."
9:39:57 AM
CHAIR HAWKER directed attention to education consultants,
stating that the passage of House Bill 278 in 2014 had charged
the committee to conduct two procurements to obtain consultants
for education issues. He explained that one consultant
procurement would review the current funding formula in Alaska,
and the other would review alternatives to the approach for
funding. He reported that, as both of these procurements were
underway, there was limited ability to further discuss this as
there was a need for confidentiality. He shared that he would
discuss the results as soon as allowed.
9:40:56 AM
CHAIR HAWKER, referencing the potential for Medicaid expansion,
shared that he would work with leadership in both the house and
the senate for agreement that the Legislative Budget and Audit
Committee procure a consultant, available to leadership and the
finance committee chairs, to explain the many complexities and
consequences for this proposal. He said that this decision
would be open to discussion.
9:42:37 AM
CHAIR HAWKER, referencing the protocols for accountable,
responsible contract management, explained that the use of
consultants by the legislature was done through the committee
chair. He noted that a memo reiterating the process would be
forthcoming.
9:44:22 AM
CHAIR HAWKER thanked the committee members for their dedication
and commitment to the state, as there were serious challenges
before the state and the committee would have an important role
in guidance toward successful solutions.
9:44:48 AM
ADJOURNMENT
There being no further business before the committee, the
Legislative Budget and Audit Committee meeting was adjourned at
9:44 a.m.
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