Legislature(2003 - 2004)
07/09/2003 03:10 PM House BUD
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
JOINT COMMITTEE ON LEGISLATIVE BUDGET AND AUDIT
Anchorage, Alaska
July 9, 2003
3:10 p.m.
MEMBERS PRESENT
Representative Ralph Samuels, Chair
Representative Mike Hawker
Representative Vic Kohring (via teleconference)
Representative Jim Whitaker (via teleconference)
Representative Beth Kerttula (via teleconference)
Senator Gene Therriault, Vice Chair (via teleconference)
Senator Ben Stevens
Senator Gary Wilken
Senator Lyman Hoffman
MEMBERS ABSENT
Representative Reggie Joule, alternate
Representative Bill Williams, alternate
Senator Con Bunde
Senator Lyda Green, alternate
OTHER LEGISLATORS PRESENT
Representative Sharon Cissna
Representative Les Gara
Representative Bob Lynn
COMMITTEE CALENDAR
APPROVAL OF MINUTES
EXECUTIVE SESSION
AUDIT REPORTS
REVISED PROGRAM - LEGISLATIVE (RPLs)
OTHER COMMITTEE BUSINESS
AUDIT REQUESTS
WITNESS REGISTER
CHERYL FRASCA, Director
Office of Management & Budget (OMB)
Office of the Governor
Juneau, Alaska
POSITION STATEMENT: Presented the RPLs to the Joint Committee
on Legislative Budget and Audit.
BILL ROLFZEN
State Revenue Sharing
Municipal Assistance, National
Forest Receipts, Fish Tax, PILT
Division of Community & Business Development
Department of Community & Economic Development
Juneau, Alaska
POSITION STATEMENT: Presented information and answered
questions pertaining to RPL 08-4-0019, Temporary Tax Relief
Payments - DCED.
DAVID TEAL, Legislative Fiscal Analyst
Legislative Finance Division
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Offered comments pertaining to RPL 08-4-
0019, Temporary Tax Relief Payments - DCED.
JEFFREY S. GRAHAM, Forester III
Forest Stewardship Coordinator
Division of Forestry
Department of Natural Resources (DNR)
Anchorage, Alaska
POSITION STATEMENT: Provided information pertinent to RLP 10-4-
5002, Diamond Creek - Forest Legacy Grant Land Acquisition.
ARLISS STURGELEWSKI
Alaska State Legislature
POSITION STATEMENT: Provided information regarding RLP 10-4-
5002, Diamond Creek - Forest Legacy Grant Land Acquisition.
DONNA LOGAN, Senior Manager
McDowell Group
Anchorage, Alaska
POSITION STATEMENT: Presented information on the Alaska State
Veterans Home Feasibility Study to the committee.
JOHN VOWELL, Director
Division of Alaska Longevity Programs
Department of Health and Social Services
Juneau, Alaska
POSITION STATEMENT: Provided information relevant to the Alaska
State Veterans Home Feasibility Study.
PAT DAVIDSON, Legislative Auditor
Division of Legislative Audit
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Presented the special audit requests and
the request for approval for lease space to the committee.
SALLY HUNTLEY, Owner and Manager
Frontier Travel, Inc.
Anchorage, Alaska
POSITION STATEMENT: Testified on the special audit request
regarding travel procurement process.
ACTION NARRATIVE
TAPE 03-5, SIDE A
[The counter numbers reflect time elapsed.]
CHAIR RALPH SAMUELS called the Joint Committee on Legislative
Budget and Audit meeting to order at 3:10 p.m. Members present
at the call to order were Representatives Samuels and Hawker
and Senators Ben Stevens and Wilken; Representatives Kohring,
Whitaker, Kerttula and Senator Therriault were on line via
teleconference. Senator Hoffman joined the meeting as it was in
progress. Also present were Representatives Cissna, Gara, and
Lynn.
APPROVAL OF MINUTES
0.6
REPRESENTATIVE HAWKER made a motion to approve the minutes of
April 29, 2003. There being no objection, the minutes from the
meeting of April 29, 2003, were approved as read.
EXECUTIVE SESSION
1.2
REPRESENTATIVE HAWKER made a motion 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.
CHAIR SAMUELS brought the committee back to regular open session
at approximately 3:30 p.m.
AUDIT REPORTS
1.6
REPRESENTATIVE HAWKER made a motion for the preliminary
statewide single audit, audit control number 0240003-03, to be
released to the appropriate agencies for response. There being
no objections, the audit was released for response.
REVISED PROGRAM - LEGISLATIVE (RPLs)
2.0
CHERYL FRASCA, Director, Office of Management & Budget (OMB),
Office of the Governor, began her testimony by referring to the
first two RPLs, which were a result of Congress's approval of
the President's fiscal relief package to the states. In that
package, Alaska will receive $50 million. The state received
$25 million in July, and the remaining $25 million will be
received in October of federal fiscal year (FY) 04. The
proposal for the first $25 million includes the distribution of
$10 million in a General Relief Assistance Program that would
provide 10 months of payment, $120 per month, to those who are
eligible, which is estimated to be 7,500 individuals. This
relief will be provided for all [qualifying] seniors over the
age of 65, not just those who have been receiving the longevity
bonus.
4.4
REPRESENTATIVE HAWKER moved that the committee approve RPL 06-4-
0028, Temporary Tax Relief Payments, Health and Social Services.
SENATOR HOFFMAN asked what other states are doing with the tax
relief dollars that are being received.
MS. FRASCA responded that the information as to how other states
are using those dollars wasn't available. However, she noted
that the states were given broad latitude regarding how the
monies were to be used. Although the governor had to indicate
that the monies would be used for an essential state service of
a type in the appropriation process, there is very wide
latitude. This latitude is unlike most federal funds that are
tied to a certain purpose, she said.
CHAIR SAMUELS asked whether there were any objections to the
motion. There being none, it was so ordered.
5.6
MS. FRASCA continued with the second RPL, RPL 08-4-0019, which
takes $15 million of the $25 million and distributes it to local
communities based on a formula similar to revenue sharing. The
[difference] is that the minimum amount of entitlement to a
municipality will be $40,000, compared with the approximately
half of that which has been customarily received through revenue
sharing in recent years. Because "we vetoed the money" in the
two programs, Safe Communities and the State's Revenue Sharing
Program, this will provide transitional finding because FY 05
funding won't include proposals of funding those programs,
either. The RPL includes a spreadsheet that shows the amounts
to be received by each community.
6.7
SENATOR WILKEN directed attention to page 1 of the [attachment
to RPL 08-4-0019], wherein it indicates that of the $15 million
in available federal funding, $3,500 will be given to each of
[73] unincorporated communities, which amounts to [$255,500]
from the $15 million. Also, [$13,857] will be given to 21
volunteer fire departments, which leaves [$14.7] million to
allocate among all of the communities. He then referred to the
last [column on the attachment] and asked where the amount of
$40,000 came from.
MS. FRASCA replied that $40,000 was a target amount. Because
the Capital Matching Grants Program was also vetoed, the
question was asked, "What's a reasonable number if we took what
they might have gotten under Revenue Sharing, Safe Communities,
and the Capital Matching Grants Entitlement?"
SENATOR WILKEN surmised, "So that's an arbitrary number."
MS. FRASCA replied, "Yes, that's another word for it."
SENATOR WILKEN then referred to last page of the spreadsheet,
noting that he didn't understand columns four, five, and six.
BILL ROLFZEN, State Revenue Sharing, Municipal Assistance,
National, Forest Receipts, Fish Tax, PILT, Division of Community
& Business Development, Department of Community & Economic
Development answered that [column four], "Amount Under Minimum,"
[was based on the assumption] that every community would receive
$40,000. [Column three], "Straight Percentage Allocation,"
specifies what each community would receive based upon what was
received in FY 03. When the $40,000 that every community
receives is taken into account, the amount under the minimum
amount can be determined, and therefore the amount necessary to
total $40,000 is apparent. Communities under $40,000 will be
given money. In [column five] the "Min. Allocation Make-up
Contributor" is the amount that is over the $40,000. Each
municipality that is over $40,000, based on its [straight
allocation] percentage from last year, has to contribute some
money, which is then subtracted from the community's total
entitlement.
10.4
SENATOR WILKEN referred to column four and asked if the amount
of $2.9 million, contributed by those having more than $40,000,
was then being spread amongst those who would be under $40,000,
in order to bring those communities up to $40,000.
MR. ROLFZEN confirmed this was correct.
SENATOR WILKEN referred to [the attachment] in which the $35,853
amount in column one for Adak is about 0.12 percent [of FY 03].
If the 0.12 percent amount was taken, Adak would have a straight
percentage allocation of about $18,000. He related his
understanding that Adak would be about $21,900 under the $40,000
amount, and therefore would be underfunded, according to this
plan.
SENATOR WILKEN then referred to Fairbanks, which received $1.3
million, or about 4.7 percent [of FY 03], and if a straight
allocation was done based on FY 03, Fairbanks would receive
[$659,336]. Since that's over $40,000, according to column six,
Fairbanks is contributing [$172,240] back into the pot; he asked
if this was correct.
12.0
MR. ROLFZEN replied, "Yes." However, he highlighted that it's
important to look at the big picture and consider that if
revenue sharing were funded, there would be a minimum
entitlement, and Adak would then receive $18,000. The minimum
for that program is about $25,000 times the COLA [Cost of Living
Allowance]. Therefore, looking at it as a straight percentage
is somewhat misleading because Adak wouldn't have received
$18,000 this year in revenue sharing. The money would have just
been put in that program because that program has a minimum.
SENATOR WILKEN paraphrased his understanding as follows, "Adak,
under this '04 scheme, is receiving more than it normally would
have gotten under the $25,000 plan, while Fairbanks is getting
less than they would have, [as are] other large communities. Am
I reading that right?"
MR. ROLFZEN answered that if the capital matching grants, which
were also vetoed, are included, then every community loses
money. He explained that if the $35,853 that [Adak] received in
FY 03 under Revenue Sharing and Safe Communities is added to
that other $25,000 received under capital matching grants, that
would total about $70,000, and therefore Adak would be funded at
$40,000.
SENATOR WILKEN asked if a like amount would apply to Fairbanks,
beginning with the amount of $1.39 million.
MR. ROLFZEN clarified, "You would have to add the capital
matching grant."
SENATOR WILKEN asked if what was done for Adak would also be
done for Fairbanks.
MR. ROLFZEN said the bottom line is that every community would
show a reduction.
SENATOR WILKEN asked, "Why are the big communities contributing
money in order to make the small communities either whole or
greater than whole from '03?"
13.9
MS. FRASCA explained that in allocating this one-time money, the
revenue-sharing formula was chosen because it tended to weight
distribution of the monies based on services provided. The Safe
Communities program, by contrast, is of benefit to larger
communities, by population. She said [this proposal] is a
hybrid that tries to accommodate some connection to services
delivered in using the Revenue Sharing Program. She
acknowledged that it is not perfect and noted that larger
communities have more of a capacity to make up for some of the
lost revenue than do the smaller communities.
CHAIR SAMUELS asked whether in total, every community took a
"hit" when taking into consideration the Capital Matching Grants
and Safe Communities programs.
MS. FRASCA confirmed that, saying, "Yes, there is a cost."
15.2
MR. ROLFZEN, in response to Senator Wilken, said that under the
Capital Matching Grants program, every municipality and
unincorporated community receives, at a minimum, a $25,000
capital-matching grant. For example, the unincorporated
communities that are scheduled to receive $3,500 are also losing
their $25,000 capital-matching grant.
SENATOR WILKEN mentioned this being some arbitrary scheme that
asks the big communities to contribute [approximately] $3
million in order to bring other communities to $40,000. He said
he didn't know why and didn't agree with the arbitrary selected
amount of $40,000. He said he was ok "as long as everybody is
being treated equally, but we're not." Smaller communities are
benefiting while larger communities are not. He said he didn't
understand this rationale and could not support this. He asked
that the committee consider $25,000 or else allocate according
to column three so that everybody would be treated equally.
18.0
SENATOR HOFFMAN offered that the smaller communities are very
dependent on a program that is going away. He told the
committee that he already has one community that is looking at
dissolution and in many cases, elimination of this program
accounts for 60-80 percent of the funds used to operate the
local government. Fairbanks can't similarly say, with the
elimination of this program, that 80 percent of its operation
dollars are going away. That, he said, is the most significant
factor in the elimination of this program, [which he predicted
would result in] small communities' disbanding and going with
tribal governments. These communities are dependent on the
minimal amount of state aid that is received. Governor
Murkowski is presenting something that is at least fair, he
said.
20.5
CHAIR SAMUELS asked if any community would be considered a
"winner," given the $40,000 minimum and the combination of
matching grants.
MS. FRASCA confirmed that if the programs from FY 03 Revenue
Sharing, Safe Community, and Capital Matching grants were
combined, the amount would have been greater than $40,000 for
any one municipality.
21.3
SENATOR WILKEN moved that the allocations for the appropriations
be done according to Straight Percentage Allocation as shown
under column three [of the attachment].
SENATOR HOFFMAN objected.
SENATOR THERRIAULT asked if it was possible to allocate
according to the methodology used in determining the third
column.
MS. FRASCA deferred to Mr. Rolfzen, asking if there is money in
addition to the $14.7 million that gets paid out of the $15
million, since "this is just municipalities."
MR. ROLFZEN responded that the $14.7 million pertains only to
municipalities and the $3,500 pertains to unincorporated
communities.
MS. FRASCA asked if column three, the Straight Percentage
Allocation, could be used to meet the allocations spread among
communities, plus the other obligations under similar revenue
sharing arrangements, under the $15 million total.
MR. ROLFZEN said, "Yes, we could because column three also
totals $14.73 million."
SENATOR THERRIAULT then asked about the 21 volunteer fire
departments and referred to the Fairbanks Northstar Borough and
wondered whether it received money from another part of the
formula, since it is an organized borough.
MS. FRASCA replied that Fairbanks's allocation as a municipality
includes fire services reimbursement, through a formula.
MR. ROLFZEN said that under the Revenue Sharing program, the
Fairbanks fire service areas would receive a portion of the
revenue-sharing payment.
SENATOR BEN STEVENS inquired about an anticipated plan to
distribute the $25 million in October.
MS. FRASCA replied that a plan has not as yet been formulated.
24.7
SENATOR BEN STEVENS asked if this chart could be reviewed at a
later date using a different methodology of allocation.
MS. FRASCA said there has been no discussion or plan for the
second installment, and therefore everything was available for
discussion.
SENATOR HOFFMAN told the committee that he thought that both
Representatives Morgan and Foster would be displeased with the
passage of the motion because [the smaller] communities [in
their districts] would be hit the hardest, whereas the larger
communities could make it through the transition easier.
26.7
DAVID TEAL, Legislative Fiscal Analyst, Legislative Finance
Division, Alaska State Legislature, informed the committee that
emergency regulations have been written to distribute this
money. If a modification to the formula is suggested, he
wondered whether there would be a need for new regulations, or
whether there would be a delay.
MR. ROLFZEN responded that the regulations specified a dollar
amount, including the minimal entitlement amount of $40,000.
The proposed formula is set out in the regulations, which had
been adopted several weeks ago, and therefore are currently in
effect.
SENATOR WILKEN said that he hoped that regulations would never
prevent equal treatment from occurring.
MR. TEAL said that if regulations were in effect, the Joint
Committee on Legislative Budget and Audit could simply place the
money in the appropriation in this component, thereby giving the
executive branch the right to spend the money any way it so
chooses. Furthermore, if regulations currently exist, nothing
prevents starting over with the regulations and saying, "We've
got a new formula." However, the latter brings up questions
regarding where the executive-and-legislative line is drawn
[with regard to] the [method used] to distribute the money,
which is a legal question.
MS. FRASCA said if the committee decides on $25,000, then the
legislature's intent would be followed. The goal was for the
checks to go out in late July, which is customarily when
revenue-sharing checks are [distributed].
29.8
REPRESENTATIVE HAWKER reiterated that the motion before the
committee was to approve of a distribution based on column
three, the Straight Percentage Allocation. He asked, if that
motion was passed, and if the RPL was approved, as amended,
whether there would be any legal authority to that, or whether
it would fall back to an administrative decision, which could
then go back to whatever allocation percentages [the
administration] chooses to enact.
MS. FRASCA responded that unless it is precluded by some legal
reason, what the legislative committee decides upon is what will
be done.
REPRESENTATIVE HAWKER confirmed that his concerns were put to
rest because "Ms. Frasca was good to her word," and said that
although Senator Wilken's argument is convincing, Senator
Hoffman presented an equally valid consideration. He said he
wasn't comfortable with the $40,000 floor and that perhaps a
$25,000 floor would be a more appropriate factor, or perhaps
with a straight allocation, some communities would come in under
the $25,000. He stated his interest in splitting the issue and
wondered if using the $25,000 floor ... [tape ends].
TAPE 03-5, SIDE B
0.0
SENATOR WILKEN said the problem is that there's nothing magic
about $25,000 either. He said the governor did his vetoes and
said, "Folks, the rules are changing the way we're doing
government. And he did what he did. That left everybody
hanging. Senator Hoffman is exactly right. I understand that
argument." Senator Wilken pointed out that he represents people
who will be asked to come up with another $420,000 either in
revenue or in reductions to the budget, and that is really the
question before the committee. He explained that his motion
speaks to allocating funds across the board, taking into account
what happened previously, all the way back to 1978. He said he
suspects that the same allocation discussion will arise this
year and next, [even] with the additional monies. He summarized
by saying, "Take the gift and allocate it according to what's
been ratified by this legislature, year after year, and not by
some arbitrary number that takes the people who are paying taxes
and subsidizes those who aren't or who may not be. That's why I
would speak against the $25,000."
2.0
SENATOR THERRIAULT referred to the first column, with the FY 03
dollar amount, and asked if that amount took into account the
minimum $25,000 threshold when the FY 03 checks were cut.
MS. FRASCA said she didn't believe there was enough money in the
distribution to pay the $25,000 minimum.
SENATOR THERRIAULT clarified that he was asking about FY 03,
when the current distribution statute would have been followed.
He asked if this would have included the $25,000 minimum
threshold.
MR. ROLFZEN explained although that was true under revenue
sharing, [revenue sharing] was subject to a reduction because it
was so underfunded; the average minimal entitlement was more in
the neighborhood of $20,000.
SENATOR THERRIAULT then asked if the FY 03 number includes "a
bit of a bump for the smaller communities."
MR. ROLFZEN confirmed that this was correct.
SENATOR THERRIAULT asked, if the calculated percentage was also
used for FY 04 funding, whether it would similarly include "a
bit of a bump for those communities."
MR. ROLFZEN confirmed this to be correct.
3.5
REPRESENTATIVE WHITAKER commented that it was difficult to argue
against an equal allocation based upon a previous allocation.
He said he totally supports Senator Wilken's proposal and would
argue against altering it.
MR. ROLFZEN, in response to Senator Ben Stevens, specified that
what is currently in regulation is the final column, the "Final
Allocation column."
SENATOR BEN STEVENS inquired as to how the FY 03 distribution,
approved by the legislature, was derived.
MR. ROLFZEN explained that when the legislature appropriated
money for FY 03, it put the money into the existing programs,
Revenue Sharing and Safe Communities, which incorporate minimal
entitlements and so on. He continued, saying that in FY 03,
distributing a percentage of an existing amount of money, rather
than funneling it through existing program statute ...
SENATOR BEN STEVENS interjected and asked about a hypothetical
situation in FY 03 wondering, if the amount at the bottom of
column one were changed to $20 million, whether those
percentages in column two would remain the same or would change,
based on the formula.
MR. ROLFZEN replied that if more money were added to the formula
on the spreadsheet, each community's percentage would remain the
same, but the payment would increase as the overall
appropriation increased.
SENATOR BEN STEVENS reiterated his question.
MR. ROLFZEN replied that it would depend on where the $20
million was placed. If it was placed in the Revenue Sharing
program, the percentages would go up significantly. Adak, for
example, as a smaller community, would be eligible for that
$25,000 minimum, so its payment or allocation would be greater
than what is shown in column three. He restated that it depends
on "where you put the money."
SENATOR BEN STEVENS said the argument is based on the
percentages in column two, as compared with the percentages in
column seven. If the money went into the same programs, the
State Revenue Sharing and Safe Community programs, he asked
whether that would change the percentages.
MR. ROLFZEN said, "Yes, it would."
CHAIR SAMUELS said it depends on the minimum. [The communities'
allocations] will all change slightly, depending on the minimum
and on what program is being used.
SENATOR BEN STEVENS said he was trying to justify Senator
Wilken's position versus Senator Hoffman's position, versus how
this would affect his community.
CHAIR SAMUELS clarified that the approach was to consider three
separate programs and "eyeball something in the middle."
SENATOR BEN STEVENS asked, if the monies being considered had
changed and been reduced, whether it could have been reduced on
an equitable basis, or whether the percentages for the larger
communities would have fallen.
MS. FRASCA said the problem with the revenue-sharing formula is
that "it's not just purely a math equation" because it's
weighted according to certain services and consideration is
given to smaller communities. She said that the percentage for
FY 03 is merely Adak's percentage of the total amount available.
MR. ROLFZEN said that from FY 03 to FY 04 there was a 25 percent
reduction approved by the legislature. Anchorage's reduction
from FY 03 to FY 04 would have been more in the neighborhood of
29 to 30 percent. The smaller communities, because of the
minimal entitlement and so forth, would have a reduction that is
less than that - it would have been under 25 percent in many
instances.
12.3
SENATOR WILKEN echoed his earlier comments that where the money
came from is irrelevant [because it should be shared equitably],
which, he said, is his motion.
SENATOR THERRIAULT said it seems from the testimony that's been
given that as the pot of money has been reduced, the smaller
communities have been treated favorably and have received a
premium all the way up to FY 03. Now, if the calculation is
just a straight percentage on the FY 03 funding and all those
premiums factor into that percentage, then the smaller
communities will continue to get the premium that's been built
up over the years and it will be applied to the current pot of
money. Furthermore, the smaller communities would still receive
a premium if the second column percentage were used to come up
with a straight allocation. He said, "And if that's not
correct, I'd like clarification."
SENATOR HOFFMAN told the committee that he doesn't believe the
communities are receiving a premium because there are two
separate formulas. The percentages are a hybrid of a dollar
amount and two formulas that have been melded together. He
said:
If you big communities want to go ahead and steal the
money from the small communities, go ahead and do it.
But if you want to be fair about it, be fair and
equitable, then take the money and distribute it under
the Revenue Sharing Program, a portion of it, and take
another portion and distribute it under the Safe
Communities Program. Those formulas, we know what
they are. The legislature has adopted them. And
let's take the dollars and distribute the monies
equally under those two programs.
SENATOR HOFFMAN stated that the percentage column was a hybrid
of something that had not been seen before, and asked if there
was any basis to the percentages that existed in column two,
according to law.
MS. FRASCA confirmed that the basis wasn't statutory but that it
is distributed as per law.
SENATOR HOFFMAN commented that it was distributed according to
those two formulas.
17.9
REPRESENTATIVE HAWKER stated that "the issue before us is how to
allocate" a gift that is replacing programs that no longer
exist. He asked, "What if we went back and took this money and
redistributed it under the absolute guidance of those previous
programs?" He said that those programs are not funded and do
not exist and that this is money coming from the Federal Tax Act
- money that "none of us ever expected to have." Representative
Hawker said he's come full circle in supporting Senator Wilken's
presumption on this. Since the program isn't being reinstated
and the committee is looking for a benchmark and a basis to
allocate the money received, he suggested that an absolutely
ratable allocation in proportion to the prior years' receipts is
a fair solution and that, ultimately, Senator Wilken has a very
sound point.
19.9
CHAIR SAMUELS commented that these are one-time monies, and
whether one likes or dislikes the way the governments are set up
in rural Alaska, it will be far more difficult to "ramp them
down," although that will ultimately be the case because this is
a one-time shot. He noted that there are many ways that the
administration could look at this, for example, splitting it
into three pots for three programs.
20.8
REPRESENTATIVE KERTTULA acknowledged that dealing with this one-
time money was a difficult decision for the administration. She
stated that Senator Hoffman is correct. She said that if the
desire is to treat communities equally, a lot more would have to
be done; the smaller communities don't have water, sewage,
electricity, or the infrastructure of the larger communities.
With regard to treating everybody equally, she said "we haven't
been doing that for a long time." Therefore, she suggested that
[the legislature] needs to determine how it's going to treat
those communities more equally in the future in order for them
to survive.
22.2
A roll call vote was taken. Representatives Hawker, Whitaker,
and Kohring and Senators Ben Stevens, Wilken, and Therriault
voted in favor of the motion [to use the Straight Percentage
Allocation as shown in the attachment to RPL 08-4-0019].
Senator Hoffman and Representatives Kerttula and Samuels voted
against it. Therefore, the motion passed by a vote of 6-3.
23.0
REPRESENTATIVE HAWKER moved the approval of RPL 08-4-0019,
Temporary Tax Relief Payments - DCED, as amended by the prior
motion. There being no objection, the motion carried.
CHAIR SAMUELS announced that the next order of business would be
[RPL 10-4-5001] Alpine Satellite Project - ConocoPhillips
Alaska, Inc.
MS. FRASCA explained that this project was approved as part of
the FY 04 operating budget in terms of statutory designated
program receipts in which ConocoPhillips Alaska, Inc., pays the
state for work that's being done on the Alpine Satellite
Project. In the budget, $149,700 was approved, which was the
best estimate at the time as to what the costs would be. The
Memorandum of Understanding (MOU) with the department and
ConocoPhillips Alaska, Inc. has since been finalized and an
additional $76,600 is being requested.
24.5
REPRESENTATIVE HAWKER moved to adopt RPL 10-4-5001, the Alpine-
Satellite Project - ConocoPhillips Alaska, Inc. There being no
objection, the motion carried.
CHAIR SAMUELS announced that the next order of business would be
[RPL 10-4-5002] Diamond Creek - Forest Legacy Grant Land
Acquisition.
MS. FRASCA explained that this was a request to receive $450,000
in federal funds as part of the Forest Legacy Grant Land
Acquisition program. She noted that there is a lot of
constituent support for the purchase of this land in the Homer
area. She said that this was approved in the capital budget,
and "we all did veto it" and, upon reflection, are bringing it
back to the committee for approval.
25.6
SENATOR WILKEN noted that the property, some 160 acres, would be
going out of private ownership, out of the tax base, and into
public status, off of the tax base, in order to have a trail
through it. The trail, he recognized, was needed for recreation
purposes and for the Arctic Winter Games. He asked why a trail
easement wouldn't be a preferable approach rather than taking
the [land] out of private ownership.
26.8
JEFFREY S. GRAHAM, Forester III, Forest Stewardship Coordinator,
Division of Forestry, Department of Natural Resources (DNR),
testified that the owner of the land intends to sell it and
needs the income from the property. He said he hasn't spoken
with the owner directly, but understands that an easement
wouldn't be sufficient for the owner.
SENATOR WILKEN asked about the configuration and wondered where
the trail was located within the 160 acres.
MR. GRAHAM said he did not have the specific location of the
trail on his map. He said the area was adjacent to and
surrounded on two sides by a piece of state land called the
Homer Demonstration Forest that has a number of ski and hiking
trails, which connect with the trails on this particular parcel.
SENATOR WILKEN expressed concern over taking land out of private
ownership and putting it into public ownership. Senator Wilken
informed the committee that last week an issue was brought to
his attention in Fairbanks regarding the purchasing and
procurement methods used by Arctic Winter Games, Inc. He
expressed concerns about how Arctic Winter Games, Inc., is
spending money, specifically regarding keeping money in the
state. He has requested their bid and procurement procedures,
in writing, but "they seem not to have any."
29.8
ARLISS STURGELEWSKI, a former Senator with the Alaska State
Legislature, testified that she wanted to make it very clear
that she does not represent the Arctic Winter Games, Inc. She
said that she was the original sponsor of the land trust
regulations or legislation. There are some very active trusts,
such as Kachemak Bay, Land Heritage Trust, and the Great Land
Trust. There is a willing buyer and a willing seller, and these
unique properties are of value to community use. For instance,
the Fish Creek Estuary in the Anchorage area is located near the
Tony Knowles Trail; it's a very special area. The group worked
to get private and foundation funding, et cetera, to keep the
area, which has a tremendous waterfall and viewing area. She
said that this legislation does not allow for eminent domain, so
it involves a willing buyer, a willing seller, and there has to
be community support or, "it's just not going to go." How the
winter games works, is another [question]....
TAPE 03-6, SIDE A
0.0
SENATOR WILKEN said, "They have certainly been put on record
that they need to develop and improve their purchasing process,
and the legislature will hear more about that."
REPRESENTATIVE KERTTULA commented that her husband, Jim Powell,
is on the board of the Arctic Winter Games.
SENATOR BEN STEVENS offered that he had previous experience
running a procurement program on a winter games enterprise and
said that under state law, recipients need to follow the state
procurement code; otherwise, the grant is being violated.
REPRESENTATIVE HAWKER echoed the concern expressed by Senator
Wilken regarding the transfer of land from private to public
domain; however, he said that the circumstances in this case
justify this as a good acquisition for the public trust.
REPRESENTATIVE HAWKER moved to approve RPL 10-4-5002, Diamond
Creek - Forest Legacy Grant Land Acquisition.
SENATOR WILKEN objected.
A roll call vote was taken. Senators Ben Stevens, Hoffman and
Therriault and Representatives Hawker, Whitaker, Kohring,
Kerttula, and Samuels voted in favor of the motion. Senator
Wilken voted against it. Therefore, the motion passed by a vote
of 8-1.
The committee took a brief at-ease.
OTHER COMMITTEE BUSINESS
CHAIR SAMUELS announced that the next order of business would be
the presentation of the Alaska State Veterans Home Feasibility
Study.
DONNA LOGAN, Senior Manager, McDowell Group, began her testimony
by thanking members of the steering committee involved with the
study, and then referred to the 146-page document, the Alaska
State Veterans Home Feasibility Study. She noted that in
addition to the McDowell Group, assistance was provided by the
Health Dimensions Group and the Arctic Slope Consulting Group,
Inc. She acknowledged the importance of understanding that
within the federal Department of Veterans Affairs (VA), there is
interest in moving away from institutionalized care and towards
community home-based care; there is a national trend in the
long-term care industry of striving towards maximizing one's
independence for as long as possible. She reported that a needs
assessment and a demands assessment were conducted. Based on
the U.S. Census data, a random survey was done in which 450
veterans located throughout the state were contacted; this was a
good demographic sampling, she said.
9.4
MS. LOGAN told the committee that standard methodology was
applied to determine demand. She referred to what the VA calls
"a reliance factor," saying that the VA recognizes that it is
unrealistic to serve all veterans for all levels of care, and
therefore recognizes that about 11.5 percent of the veterans
needing long-term care would receive it in the state veterans
home. Utilization rates within nursing homes and assisted
living homes throughout the state was also looked at in order to
understand where veterans are with regard to being in community-
based nursing homes and assisted living homes.
MS. LOGAN indicated that several different systems and
perspectives were used to determine and verify the demands.
Also, the most viable options regarding financial implications
were considered, which resulted in a range of three options.
She said that one option was developing or building a new,
freestanding veterans home within the state, whereas another
option was to use the Alaska Pioneers' Home System in some way,
and also to look at community and home-based care.
12.0
MS. LOGAN outlined the first option as the conversion of the
Palmer Pioneers' Home to a 78-bed state veterans home. The
necessary renovations, costing approximately $1.5 million, could
be shared by the federal and state governments, and through a
grant process, there would be a 65/35 split between federal and
state government. She said that because of natural attrition
due to illness and death, a conservative estimate is that it
would take about three years to convert the non-veteran beds to
veteran beds. She emphasized that no one was advocating for
moving people out of the home; rather through natural attrition,
as non-veterans would leave the facility, those occupants would
be replaced by veterans. She noted that the facility is not
currently operating at maximum capacity.
14.5
MS. LOGAN continued that regarding operating costs, the current
level of service and the way the home operates would remain the
same. The VA does not currently have reimbursement for
assistant living care, but does for nursing home care,
domiciliary care, and for adult daycare. She explained that the
beds won't be designated as nursing home beds because nursing
home reimbursement won't be available; however, the domiciliary
reimbursement will be available for those beds, although
currently, there is no per diem available for assistant living
care. There will be about $27 per day of additional revenue
coming into the system from the VA to pay for domiciliary care,
which is really an assisted living level of care. She clarified
that there is no assisted living per diem reimbursement; there
is eligibility only for the domiciliary reimbursement, even
though the level of care being offered would be that of assisted
living care.
16.5
MS. LOGAN estimated that the state would save about $250,000 per
year once the system was operable, because of additional
revenues from the federal government, and there would also be
some reduction of overhead costs due to the rise in occupancy
level; there would be a net gain to the state, from conversion.
Regarding the state's recouping its capital investment, she said
of the $1.5 million in renovations of the Palmer facility, the
state's portion of roughly $400,000 could be recouped in 2.1
years, after the home was operable. She said that regarding
pros and cons, ideally the home should be placed in Anchorage
because that's where the bulk of veterans live; however, Palmer
is within a 50-mile radius of Anchorage and the facility is
relatively new and has been recently renovated.
CHAIR SAMUELS asked if there were different parameters for
different types of homes.
MS. LOGAN responded that the VA has a lot of regulations
regarding common space, room size, and office space. After a
preliminary assessment, the Palmer facility has been determined
to be in good shape; for example, the rooms are of adequate
size. She said that renovations of common space may be
necessary, but since it is currently an 82-bed facility, there
are extra rooms that can be converted.
19.0
SENATOR THERRIAULT asked if, similar to contributing to
construction costs, the VA would contribute 65 percent if the
state were to purchase a facility in the private sector.
MS. LOGAN answered, "Yes, they would."
SENATOR THERRIAULT asked if, since the facility is already
owned, there would be a 65 percent reimbursement for the cost of
that facility.
MS. LOGAN answered, "No, only for the renovation costs."
19.8
MS. LOGAN told the committee that because the largest number of
veterans are located in the Anchorage and Fairbanks areas, the
second option involves renovating two Alaska Pioneers' Homes in
those areas of greatest need so that veterans could stay there.
Converting all of the Alaska Pioneers' Homes was found to be
cost-prohibitive and cumbersome, especially in light of the
condition of homes such as the home in Sitka, and also given
that the number of veterans in some of those areas would be
quite small. The second option designates 60 beds in the
Anchorage Pioneers' Home and 19 beds in the Fairbanks Pioneers'
Home. Currently, there are 17 veteran beds in Fairbanks, so the
demand is met in that community. In Anchorage, through natural
attrition, a conservative estimate is that it would take about
one and one-half years for the non-veteran beds to be filled
with veterans.
MS. LOGAN testified that all of specific VA regulations would
need to be met in both facilities, and the construction costs
are estimated at $5.3 million. Ultimately, after the facilities
are operable, there would be a net gain of $250,000 to the state
due to VA financing from the per diem, and also due to increased
efficiency because occupancy would be increasing in the
Anchorage facility and possibly the Fairbanks facility as well.
She said that an obvious advantage to this option is that
"you're where the vets are." However, because the Fairbanks
Pioneers' Home is popular, there is a concern that the facility
won't be as accessible to non-veterans. She said that option
two is similar to option one, but the homes would be a mixture
of Pioneers' and veterans homes.
23.7
SENATOR WILKEN asked about the placing of the two populations
together, which was had been looked into several years ago.
MS. LOGAN replied that no one is advocating for segregating the
veterans throughout the homes. She said that according to the
survey, veterans, like other people, don't want to be
segregated, but would rather mix with others. She pointed out
that even if a wing were designated as a veteran wing, the other
portions of the facility would still need to meet the VA
requirements for a state veterans home.
CHAIR SAMUELS noted that the $5.3 million in conversion costs
would not result in there being a designated wing for veterans.
MS. LOGAN confirmed this to be correct, saying that this would
involve offering the level and breadth of care available in the
Alaska Pioneers' Home System, which is pretty high.
25.0
REPRESENTATIVE GARA said that the last thing desired was to pit
one group of seniors against each other, in competition for
scarce monies. The original concept of funding a veterans home
was to make more beds available for senior veterans and
therefore to leave at least the same number, if not more, beds
available for non-veteran seniors. He asked if an analysis had
been done on the impacts of taking beds away from the non-
veteran population.
MS. LOGAN said that occupancy impacts have been [studied] for
nursing homes, Pioneers' Homes, and assisted living homes.
REPRESENTATIVE GARA asked if an assessment had been done
regarding the costs involved with adding spaces for veterans
while leaving the same number of non-veteran rooms available for
non-veterans.
MS. LOGAN replied that this had been factored into the overall
demand, knowing that there is currently excess capacity in the
Alaska Pioneers' Home System and the nursing home system within
the state. She mentioned that since the state already provides
care for veterans in the Alaska Pioneers' Home System, the
discussion pertains to increasing the number of veterans
designated within a certain facility. She said that perhaps
there would be a cost savings because the excess capacity in the
Pioneers' or nursing homes could be filled.
REPRESENTATIVE GARA referred to option two and asked if the
$250,000 in savings could be used to hold the non-veterans'
population number of beds harmless, and also add new spaces for
veteran seniors.
MS. LOGAN said that although the exact number is not known,
because of there being excess capacity, the answer is "yes" to
the question of whether the non-veteran population would still
have access if the number of beds in the Alaska Pioneers' Home
System was not increased, but 60 or 79 beds were designated for
veterans. She then explained that there is a complicating
factor due to there being several levels of care available in
the Alaska Pioneers' Home System. She said that there is a lot
of demand for beds that have a nursing home level of care, while
occupancy is available at the lower level of care, the basic
level.
28.0
REPRESENTATIVE GARA referred to page 36 [Alaska State Veterans
Home Feasibility Study], which reads in part, "the non-veteran
population [in the Pioneers' Home is] largely unaffected," and
commented that he hoped that the non-veteran population could be
completely rather than "largely" unaffected by the changes
proposed in the second option.
MS. LOGAN said the degree to which that population would be
affected is relatively nominal because of there being excess
capacity currently available, and also because of the level of
care that's needed within the Alaska Pioneers' Home System
itself.
28.5
JOHN VOWELL, Director, Division of Alaska Longevity Programs,
Department of Health and Social Services, testified that
veterans are on the waiting list "just like anyone else" and
come into the system based upon the home they have chosen and
upon the level of care needed. Currently, the available beds
within the system are what is considered by the VA,
[domiciliary] care, partially because of the development of
assistant living and other alternatives within the community.
He said that he didn't think that the demand for those beds by
non-veterans would be changing, so using those beds, designated
for veterans, should not affect a non-veteran's ability to get
into the home.
30.2
REPRESENTATIVE KERTTULA commented that of the veterans included
in the poll, their number-one wish was to stay in their own
community.
MS. LOGAN confirmed this was correct.
REPRESENTATIVE KERTTULA asked about the financial breakdown of a
program that was more community oriented, and about the national
PACE [Programs of All-Inclusive Care for the Elderly] program.
She questioned whether, instead of centralizing, if it would be
preferable to keep veterans in their own communities. She said
her concern pertained to people on the waiting list for the
Palmer Pioneers' Home as well as for those seniors wanting to go
into that home, should it became a veterans home. She commented
that she thought the three-year approximation to be inaccurate
because of seniors who have already been living there for quite
a while, in addition to others who might be coming in.
MS. LOGAN said that if the Palmer Pioneers' Home were converted
to a veterans home, the only non-veterans able to live there
would be spouses or relatives of veterans. She confirmed that
there would be a displacement of others wanting to go to that
home, but said that there would be space and occupancy available
in Anchorage. She said that community-based programs have been
looked into, noting that the VA currently operates within the
state by providing care for veterans through community-based
private providers. She emphasized that these [three] options
are not in lieu of current VA programs, but rather make
additional services and options available to veterans.
32.3
REPRESENTATIVE KERTTULA asked if the home-based and community
services would be continued.
MS. LOGAN replied, "Absolutely." She referred to a section in
the report reflecting the desire of the federal Department of
Veterans Affairs to keep services in community-based programs
through private providers and home care, when possible. She
confirmed that non-veterans who were not relatives of veterans
but who wanted to live at the Palmer Pioneers' Home would need
to go elsewhere. She clarified that up to 25 percent of the
beds could be occupied by non-veterans but those people would
need to meet the regulation of being related to a veteran.
33.5
MS. LOGAN told the committee that the number of beds required by
the VA to receive grants is determined according to regulation,
and is not an arbitrary number; Alaska has been allocated 79
beds. If more beds are desired, the state would need to come up
with additional funding or with a good argument as to why the
federal government should fund more than that amount. She
opined that the amount of 79 was close to the demand estimate,
so it appeared to be a good number.
SENATOR THERRIAULT commented that the survey helped to gauge
what kind of care was wanted and how it was to be delivered, as
desired by the veterans. He noted that in response to some
pressure from the [legislative] minority to "build a home," the
study points to the concern of meeting veteran demands in a way
that is affordable by the state.
35.6
MS. LOGAN said that the third option involves the establishment
of a freestanding facility. She said that there is sufficient
demand within the Anchorage market to sustain a home; however,
it needs to be understood that when the demand is being talked
about, there is a "bubble" pertaining to aging veterans, which
will peak around the year 2015 to 2020. The concept behind the
third option is to build a 60-bed facility to service the
veteran community, with the recommendation that 30 beds would be
nursing home and 30 (indisc.). An attractive element to this
option would be having a new facility for veterans, a central
location, and for that location to be in the community with the
largest veteran population. A disadvantage, she said, is that
the facility would have about a 40-year lifespan, but the
"bubble" would have already passed, possibly leaving the
question of how to fill those beds. She stated that the
construction costs to build a new facility were estimated at
$9.4 million and that there would be no payback for the state's
investment due to additional operating expenses of about $2.8
million per year because of adding beds to the state system, at
a nursing home level of care.
CHAIR SAMUELS asked if the VA precludes the state from filling
those beds with other people once the bubble passes.
MS. LOGAN responded, "Who knows what happens with the
regulations in the years to come." She noted that the
regulations allow for 25 percent of the beds to go to non-
veterans, but specify that the population needs to be related to
veterans.
REPRESENTATIVE GARA asked if that 25 percent going to non-
veterans would not receive VA funding.
MS. LOGAN said this was correct. She reiterated that those beds
could only go to relatives of veterans, such as spouses, and
that there might be federal funding available, but it wouldn't
be VA funding.
REPRESENTATIVE GARA asked about the idea of upgrading 60 rooms
in the Anchorage Pioneers' Home to meet VA standards, and asked,
if those were considered as veteran rooms under federal law,
whether those rooms couldn't be given to non-veterans.
MS. LOGAN confirmed that this was correct.
40.4
REPRESENTATIVE GARA suggested that a comparison be made among
the three proposed options, addressing the number of veteran and
non-veteran beds currently being filled, and also indicating how
many veteran and non-veteran beds will be filled.
TAPE 03-6, SIDE B
0.0
SENATOR BEN STEVENS commented that nursing home occupancy by
region is 85 percent, whereas Pioneers' Home occupancy is 80
percent, so the assumption is that "you'll be higher than you
already are."
MS. LOGAN said that was correct "because the veterans would fill
those beds."
SENATOR BEN STEVENS mentioned that the given statistics include
veteran occupancy, which is 15 percent in the nursing homes and
16 percent in the Pioneers' Homes, so vacancy exists in both
categories.
MS. LOGAN said that the demand assessment showed that a 90
percent occupancy for options one and two was a reasonable
expectation, with the recognition that things would change after
the year 2020.
REPRESENTATIVE LYNN told the committee that although he was not
a member of the [legislative] minority, his message was, "Build
a home, build a home, build a home." He said the needs of the
non-veterans need to be considered as well as those of veterans.
He stated that he was speaking as the chairman of the [House
Special Committee on Military and Veterans' Affairs], as someone
who has retired from the United States Air Force, as a Vietnam
veteran, and as an older person; he said he wanted to point out
that the privilege of today's debate was possible because of
what veterans have fought for and have been wounded for, and
therefore a great debt of honor is owed to the veterans.
Factors other than dollars and cents need to be considered, he
said.
CHAIR SAMUELS said that in the interest of time, questions
should be focused towards the survey rather than addressing the
broader policy issues at this time.
4.4
SENATOR BEN STEVENS referred to Tables 7, 8, 9, 10, and 12 on
pages 20-26 [Alaska State Veterans Home Feasibility Study],
specifically to page 20, "Nursing Home Occupancy Trends by
Region" and asked if these nursing homes were privately managed.
MS. LOGAN responded that these 15 nursing homes were currently
in Alaska, and some of which were associated with community
hospitals.
SENATOR BEN STEVENS referred to an amount of $550,000 and asked
why there was such a dramatic jump from "'01 to '02."
MS. LOGAN replied that she didn't' know the specific answer.
SENATOR BEN STEVENS asked for an answer to that question at a
later time, and then confirmed that Table 12 was a summary. He
referred to Appendix IV, page 8, a spreadsheet of private
assisted living facilities indicating an additional [952] beds
and asked if this was in addition to the numbers already seen.
MS. LOGAN said this amount was factored into the demand, but was
not factored into the Pioneers' demand because there was no way
to measure the number of veterans that were currently in the 200
facilities.
6.8
SENATOR BEN STEVENS asked if VA payments qualify in those homes.
MS. LOGAN responded that there is a pilot program in which, from
this long list, nine assisted living facilities participate in
the program. She said that there is no policy with the VA and
there is not an assisted living reimbursement in the United
States.
SENATOR BEN STEVENS asked if there was any table coinciding with
Appendix IV regarding the occupancy rate of the 952 beds.
MS. LOGAN said she didn't believe so, saying that the focus was
on the Pioneers' Homes' assisted-living occupancy. She noted
that assisted living isn't regulated in the same way as the
nursing home beds, and her understanding is that even the
Division of Senior Services doesn't know the answer to the
question, "Of your four beds, are three filled?"
SENATOR BEN STEVENS referred to page 23, "Levels of Care - Basic
Assistant Living," and asked if this was provided for by the VA.
MS. LOGAN said that it wasn't and explained that this referred
to levels of care currently available within the Alaska
Pioneers' Home System.
SENATOR BEN STEVENS asked whether, if he were a veteran living
under basic assistant living classification then he wouldn't
qualify.
MS. LOGAN said this was correct unless this was a state veterans
home, which currently it is not. She mentioned survey results
indicating that a core of about 15 percent of veterans voted,
regardless of cost or need, to "build a home." She reported
that generally, what was heard was the veterans' desire to stay
within their community; they want choices, they don't want to be
forced into a state veterans home, and they expressed interest
in community-based programs. She said that veterans are aware
of fiscal constraints and are interested in low-cost
alternatives to a state veterans home.
REPRESENTATIVE LYNN commented that nobody, whether veteran or
non-veteran, wants to go to a nursing home, and that he was not
surprised by the survey.
MS. LOGAN offered that the survey provided insight into how
veterans are thinking about these issues.
REPRESENTATIVE GARA asked if the following question had been
incorporated: "Would you support this if it resulted in a
decrease in the number of beds available for non-veteran
seniors?"
MS. LOGAN replied that this question had not been asked.
12.5
REPRESENTATIVE KERTTULA asked if people on the waiting list for
the Pioneers' Home or if people in Pioneers' Homes had been
surveyed.
MS. LOGAN replied that surveying veterans in Pioneers' Homes was
complicated because a number of those residents are under
guardian care, or have dementia, and so forth. Administrators
of those facilities, rather than residents, had been contacted.
REPRESENTATIVE KERTTULA asked whether non-veterans within the
Pioneers' Homes were surveyed.
MS. LOGAN replied that non-veterans within those facilities had
not been contacted.
CHAIR SAMUELS thanked Ms. Logan for her work, and suggested that
she return to a future [Joint Committee on Legislative Budget
and Audit] meeting after the committee had time to formulate
additional questions.
REPRESENTATIVE HAWKER moved that the Alaska State Veterans Home
Feasibility Study, prepared for the Alaska State Legislature,
Joint Committee on Legislative Budget and Audit, be made
available to the public at this time.
CHAIR SAMUELS asked if there were any objections. There being
none, it was so ordered.
The committee took a brief at-ease.
AUDIT REQUESTS
14.9
PAT DAVIDSON, Legislative Auditor, Division of Legislative Audit
Alaska State Legislature, referred to the second audit request
on the agenda, a review of Alaska's sunset process, requested by
Chair Samuels. She said this was a request to review Alaska's
"sunset laws," which currently require a periodic review of
various boards and commissions to determine if the entity should
remain in existence.
REPRESENTATIVE HAWKER moved that the committee approve the
authorization for the [review of Alaska's sunset process].
CHAIR SAMUELS asked whether there were any objections. There
being none, it was so ordered.
16.5
MS. DAVIDSON continued that the next audit request, from Senator
Guess, was a review of state residency requirements. She said
this involved several issues such as exemptions, whether
educational, medical, or military.
REPRESENTATIVE HAWKER moved that the committee approve this
request for the [review of state residency requirements].
CHAIR SAMUELS asked whether there were any objections. There
being none, it was so ordered.
CHAIR SAMUELS passed the gavel to Representative Hawker due to a
conflict relating to the next item of business.
REPRESENTATIVE HAWKER recognized Chair Samuels' declaration of a
conflict of interest and took the gavel.
18.2
MS. DAVIDSON explained that Senator Wilken's request was to
evaluate the travel procurement process.
SENATOR WILKEN explained that the state buys about $50 million
in travel each year, or at least did so in FY 2000, and the
notion is that a central travel office will be established and
state government will become its own travel agent, thereby
essentially dealing private travel agencies out of their ability
to book state travel. Senator Wilken said he wanted to find out
why this was being done, what the business plan was, and why
public government was replacing the private sector. He
distributed a memorandum dated June 20, 2003, from Kim Garnero,
Division of Finance, to Ray Matiashowski, Deputy Commissioner,
Department of Administration. He referred to pages 3 and 4
wherein there is mention of "underemployed" travel agents, and
he said this was a euphemism for people in the industry who are
in danger of losing their jobs.
23.5
SALLY HUNTLEY, Owner and Manager, Frontier Travel Inc., said her
agency has been a provider of travel arrangements for the state
since 1982, and has designed systems based on the state's
requirements for travel. She said that when agents are used,
the competition has kept the rates down for state travel and
that a problem with using an online product such as "EasyBiz" is
that it doesn't allow for competitive information. In a market
such as Fairbanks, for example, a small provider such as
Frontier Flying Service averages $100 reductions per ticket, but
that provider won't be available to state employees because it,
like PenAir or Era Aviation, Inc., is not available on EasyBiz.
Also, the travel agency can book hotel, car, and air
reservations more quickly than others who are not familiar with
the systems.
26.5
SENATOR HOFFMAN said he had owned a travel agency for 15 years,
and inquired about the amount of the current fees.
MS. HUNTLEY replied that every agency establishes its own fees,
and an agency can charge up to $33 for a state fee.
CHAIR SAMUELS commented that perhaps that question pertained to
the amount of the commission paid by the airlines, which is
zero.
SENATOR WILKEN said his concern was that a regular audit would
take 6 to 12 months, during which time travel agents would lose
their jobs. He wondered if there was some way to address this
issue without doing a full audit.
27.8
MS. DAVIDSON responded that additional information could be
provided but it wouldn't produce the recommendations provided by
a full audit. She said that the use of EasyBiz is a separate
question from that of the establishment of a central travel
office. She said another question is the efficient use of staff
resources, vis-à-vis a travel agent's fee, and that an
additional question is whether EasyBiz directs state agencies to
particular vendors over other vendors. Ms. Davidson said she
could gather preliminary information regarding where the bulk of
state travel dollars are being spent and then share that
information with the [Joint Committee on Legislative Budget and
Audit]. She added that she suspects that decisions are still
being made regarding the establishment of the central travel
office.
31.3
SENATOR WILKEN said he hoped the brakes would be applied until a
business plan and further analysis were done and that he would
like to find an answer to the question, "What is the benefit of
a central travel office?"
MS. DAVIDSON said she would draft a letter to the administration
so that the expected benefits could be put in writing.
REPRESENTATIVE HAWKER mentioned that ultimately this issue would
become a budget request, saying that one approach would be to
address it through a subcommittee of one of the finance
committees.
SENATOR WILKEN moved that the committee authorize the auditor to
write a letter to the governor and to the administration, asking
questions pertaining to the travel procurement process, and to
have the letter be approved by [Vice Chair Therriault's office].
There being no objection, it was so ordered.
SENATOR BEN STEVENS asked if Ms. Davidson had seen the letter
[memorandum dated June 20, 2003] that had been referenced during
the meeting.
MS. DAVIDSON confirmed that she had [seen the memorandum].
SENATOR BEN STEVENS asked if the State Finance Officer
Association's work group had the authority to implement or
create procurement procedures.
MS. DAVIDSON said no. She stated that the association is
responsible for instituting internal controls that are
procedure-oriented but is not typically empowered to set
regulation or to make any key decisions.
REPRESENTATIVE HAWKER turned the gavel back to Chair Samuels.
36.5
MS. DAVIDSON asked if the committee was going to take up
approval of the lease space for the [Division of Legislative
Audit] office in Anchorage at this meeting.
CHAIR SAMUELS responded that this would be added to the agenda.
The committee took a brief at-ease.
MS. DAVIDSON testified that the current lease for the Anchorage
office of the Division of Legislative Audit expires on November
30, 2003. The request is for the approval of the solicitation
and award of a contract for lease space. She told the committee
that the process falls under limited competitive procurement; a
space between 1,400 to 1,800 square feet costing under $50,000
is desired. She explained that their current space has been
occupied for more than 10 years and they would like to continue
in that space, but the costs have gone up. She said that the
desire is for an RFP [request for proposals] to be distributed
to brokers, and noted that the division is looking for Class B
space, and will therefore not be competing with the Legislative
Affairs Agency's desire for space, either in size or in class.
SENATOR BEN STEVENS asked if there were seven or five, or how
many classifications were being included in the evaluation
criteria.
MS. DAVIDSON said this hadn't quite been yet decided, but she
thought it would be closer to five. She said the desire was to
be centrally located, in mid-town, and also to be in a well-
secured building because 90 percent of the documents are working
papers that are confidential, by law.
REPRESENTATIVE HAWKER moved to approve the request by the
legislative auditor to issue an RFP for the space as outlined in
the memorandum of July 7, 2003.
CHAIR SAMUELS asked if there was any objection. There being
none, it was so ordered.
CHAIR SAMUELS announced that the agenda item, "Yuri Morgan -
Denali Commission update," would be moved to the next meeting.
40.7
ADJOURNMENT
There being no further business before the committee, the Joint
Committee on Legislative Budget and Audit meeting was adjourned
at approximately 6:00 p.m.
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