Legislature(1997 - 1998)
04/24/1998 09:00 AM House FIN
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* first hearing in first committee of referral
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= bill was previously heard/scheduled
HOUSE FINANCE COMMITTEE
APRIL 24, 1998
9:00 A.M.
TAPE HFC 98 - 124, Side 1
TAPE HFC 98 - 124, Side 2
CALL TO ORDER
Co-Chair Gene Therriault called the House Finance Committee
meeting to order at 9:00 a.m.
PRESENT
Co-Chair Hanley
Co-Chair Therriault
Representative Davies Representative Martin
Representative Davis
Representative Foster Representative Mulder
Representative Grussendorf
Representatives Moses, Kelly and Kohring were absent from
the meeting.
ALSO PRESENT
Denny DeWitt, Staff, Representative Mulder; Kevin Ritchie,
Alaska Municipal League; Michael Morgan, Facilities Manager,
Department of Education; Jack Kreinheder, Office of
Management and Budget, Office of the Governor.
SUMMARY
HB 313 "An Act relating to preventive maintenance
programs required for certain state grants; and
providing for an effective date."
CSHB 313 (FIN) was REPORTED out of Committee with
a "do pass" recommendation and with a zero fiscal
note by the Office of the Governor, dated 2/25/98
and a fiscal impact note by the Department of
Education, dated 2/25/98.
HB 315 "An Act relating to operating appropriations for
annual maintenance and repair and periodic renewal
and replacement of public buildings and
facilities; and providing for an effective date."
CSHB 315 (FIN) was REPORTED out of Committee with
a "do pass" recommendation and with two zero
fiscal notes, one by the Office of the Governor
and one by the Department of Education, both dated
2/25/98.
HOUSE BILL NO. 313
"An Act relating to preventive maintenance programs
required for certain state grants; and providing for an
effective date."
MICHAEL MORGAN, FACILITIES MANAGER, DEPARTMENT OF EDUCATION
stated that the Department supports HB 313, with one
exception. He noted that the legislation affects the
Department's process for ranking and prioritizing projects
for school construction maintenance. The legislation
affects the eligibility of school districts to have projects
on the list. Districts want to be on the Department's list
of eligible projects even if they are at the bottom. Some
projects, which were rejected by the Department, were
recommended for funding by the Deferred Maintenance Task
Force. The legislation adds further criteria for rejecting
projects.
Mr. Morgan noted that the Department of Education proposes
that the criteria be used for scoring projects on the list
instead of rejecting projects from being placed on the list.
To affect the Department's proposed change, AS 14.11.011 (b)
would be amended to add a new subsection 7 in AS
14.11.013(b).
Mr. Morgan pointed out that the legislation requires that a
district "is adequately adhering to the preventive
maintenance plan." He questioned if the district would be
rejected in a case where a roof has failed due to past
practices, even if they have changed their practices.
Representative Davies noted that the school district has to
comply with the list to be eligible for a grant. He
questioned what would prevent the project from being
included on the list.
Mr. Morgan explained that projects on the list are certified
by the State Board of Education as being eligible for
funding. (This conflicts with the legislation's provision
that projects are not eligible for funding if a recognized
maintenance plan is not in place.)
Representative Mulder stated that the Task Force felt
strongly that projects would not be funded unless the school
district has a recognized maintenance program. He stressed
that school districts would be encouraged not to do
maintenance unless there is a requirement. He observed that
schools that have not been maintained are jumped up the list
when there are catastrophes, while schools that perform
regular maintenance remain lower on the list. He maintained
that schools that do regular maintenance are penalized.
Representative Davies spoke in support of the Department of
Education's proposal. He noted that criteria would be moved
from the grant area to the review portion of statute.
Projects would be allowed to be on the list, but would be
prevented from receiving funding unless there is a
maintenance program.
In response to a question by Co-Chair Therriault, Mr. Morgan
explained that the current method for ranking projects uses
a whole range of criteria for which projects receive points.
The legislature could look at scores to base funding
decisions.
Representative Mulder spoke against the suggestion. He
pointed out that deferred maintenance decisions would be
based on politics.
Representative Martin pointed to private business. He
observed that the Internal Revenue Service allows 3 to 4
percent of the operating budget to be used for annual
maintenance. Co-Chair Therriault observed that a renewal
and renovation system needs to be demonstrated.
Representative Grussendorf questioned if there was
discussion regarding the fact that municipal leaders change
and crises occur.
Representative Mulder stated that the Task Force did discuss
those issues. He emphasized that the intent was to remove
politics from the deferred maintenance program. He observed
that some rural districts have great maintenance programs.
He stressed that it is not that expansive to have a
recognized, well-established maintenance program, but if
there is no maintenance program there will be a huge capital
project on the backside.
Representative Grussendorf expressed concern that
municipalities facing a crisis would not be able to follow
the schedule. Representative Mulder noted that the Task
Force did not find a school district or municipality that
was opposed to the concept.
Co-Chair Therriault thought that as long as the district
showed that the reduction in maintenance was the result of a
fiscal emergency and not a year after year reduction of
components on the list that they would still be deemed to be
in compliance. He observed that it was easy to short
maintenance of university facilities to support programs.
It has taken time to convince the University Regents that if
they have to shift funding from a program to maintain a
roof, that that is what they have to do.
Representative Davies questioned how politics would be put
into the process by the change to AS 14.11.113.
Representative Mulder explained that problems would occur if
the legislature could decide to knock a program off the
list.
Co-Chair Therriault emphasized that politics would occur if
scoring could be disregarded. He stressed that if projects
are not on the list then politics would be kept at arm's
length.
Representative Davies argued that politics would not be
involved if projects were simply taken as they occur on the
list, based on scoring criteria.
Representative Mulder stated that it was the Task Forces'
intent that projects not be on the list if they do not have
a recognized maintenance program. To be eligible for state
aid, as a community or school, the criteria should be
followed.
In response to a question by Representative Davies, Mr.
Morgan explained that there are some big districts that do
not follow the criteria on the list. He noted that the
Anchorage School District indicated on their maintenance
manual that they do not do roofs. He did not know how many
districts would be currently eligible. He observed that the
legislation has a one-year implementation period and that
school districts have been responsive. Districts have also
expressed frustration that there has not been significant
state funding. The Department of Education supports the
concept that school districts need to have maintenance
programs.
Mr. Morgan pointed out that on page 2 line 8 a coma is
missing between the words "program" and "cardex".
Representative Davies noted that there were additional
places in the bill that should also have a coma.
Co-Chair Therriault MOVED to ADOPT an amendment to add comas
where needed between "program" and "cardex". There being NO
OBJECTION, it was so ordered.
KEVIN RITCHIE, ALASKA MUNICIPAL LEAGUE, ALASKA CONFERENCE OF
MAYORS, JUNEAU noted that deferred maintenance is a top
priority of both entities. He spoke in support of the
legislation. He cautioned that the legislation be
implemented in a way that is sensitive to the capabilities
of various municipalities. He noted that municipalities
have varying capabilities for implementing technology. He
stressed that the deferred maintenance requirement is within
the constitutional mandate and appropriate. He emphasized
that the lack of resources creates deferred maintenance
problems. The program is tied to school funding.
Representative Davies emphasized that the intent is to have
preventive maintenance.
Representative Martin asserted that deferred maintenance
problems have occurred because funding was used for other
purposes.
Representative Foster MOVED to report CSHB 313 (FIN) out of
Committee with the accompanying fiscal note. There being NO
OBJECTION, it was so ordered.
CSHB 313 (FIN) was REPORTED out of Committee with a "do
pass" recommendation and with a zero fiscal note by the
Office of the Governor, dated 2/25/98 and a fiscal impact
note by the Department of Education, dated 2/25/98.
HOUSE BILL NO. 315
"An Act relating to operating appropriations for annual
maintenance and repair and periodic renewal and
replacement of public buildings and facilities; and
providing for an effective date."
DENNY DEWITT, STAFF, REPRESENTATIVE MULDER noted that HB 315
is an attempt to change the way the State budgets
maintenance. The legislature creates a maintenance and
operations budget in addition to the program budget and the
capital budget. The Task Force found that there is a
difference in opinion regarding how budgetary decisions are
made and cause deferred maintenance. Currently, funding for
programs and building maintenance are contained in the same
budget. Subcommittees discuss the balance of the two
components. Program managers face situations where they
must chose between operating items and deferred maintenance,
such as trimming back a program or painting a building. In
such a scenario a program manager would probably chose not
to paint the building, while a facilities manager would
probably opt to paint the building. The Task Force
recommended that the two be separated. The Administration
would articulate the need for deferred maintenance. The
need would be debated and there would be a clear indication
of the amounts for program management and operations and
facility maintenance. He stressed that the legislation's
intent is to focus the issue of maintenance in terms of
state agencies, the Alaska Court System and the University
of Alaska.
Co-Chair Therriault questioned how the maintenance budget
would be prevented from becoming a capital budget. Mr.
DeWitt emphasized that funding is for the operation side.
Co-Chair Therriault stated that "replacement" implies
capital improvements. Mr. DeWitt agreed that "replacement"
could probably be removed.
Representative Davies questioned if major renewal and
replacements would be in the capital budget. He stressed
that the capital budget is not as systematic an approach as
the operating budget. He asked if there would be three
items in the appropriation bill: operations, maintenance,
and renewal and replacement. Mr. DeWitt explained that the
intent was for all three to be included as one item.
Representative Martin asserted that the State should commit
itself to a line item for annual maintenance of 3 to 4
percent of the facility.
In response to a question by Representative Grussendorf, Co-
Chair Therriault observed that the definition of "renewal"
is included on page 2.
Representative Davis spoke in support of separating
maintenance from operational expenses.
Mr. DeWitt stated that the Task Force concluded that there
should be separate components in the appropriation bill for
deferred maintenance and operation, as opposed to two
separate appropriation bills.
Co-Chair Therriault questioned if maintenance would be
highlighted in a way that would show that the cost of
maintenance is going up and that replacement would be
expected. Mr. DeWitt stated that he expected that
maintenance would be highlighted in a way that would show
the increasing cost. He added that it would also show if
maintenance had been under-funded. If there are significant
problems with a building it could be demonstrated that the
facility was under-funded or that management did not
properly maintain the building. Results based budgeting
would be used to identify if the deferred maintenance
problem is being solved or created.
Mr. DeWitt observed that the intent is to limit replacement
to major, worn-out building components as opposed to the
building itself.
Representative Davis observed that it is a systems or
component replacement as opposed to a building replacement.
Representative Martin stressed the need for proper insurance
programs and noted that a good deferred maintenance program
would reduce insurance costs. He stressed that agencies
need to be able to save for larger maintenance needs.
Representative Davies observed that there is a struggle
between major repairs and replacement.
(Tape Change, HFC 98 - 124, Side 2)
Representative Davies stated that it is generally understood
that the legislation refers to smaller items that are
important to be replaced on a systematic basis to prevent
deferred maintenance.
Representative Grussendorf observed that the use of
"replacement" in the title creates a problem.
JACK KREINHEDER, OFFICE OF MANAGEMENT AND BUDGET, OFFICE OF
THE GOVERNOR observed that the Administration supports the
intent of the legislation. The Administration is concerned
with how effective the legislation would be at achieving its
goal. He expressed concern that agencies would lose
flexibility. He stressed that funding has been shifted from
operating expenses to cover maintenance. He observed that
maintenance funding has been limited. He stated that
renewal and replacement of agency components is an
appropriate element of the operating budget.
Mr. Kreinheder observed that the Director of the Office of
Management and Budget put out a memorandum directing state
agencies to account for facility expenditures on a building
by building basis. He questioned if expenditures should be
in a separate appropriation. He observed that agencies need
a way to save up for major maintenance that is only needed
every 10 to 15 years. Appropriations lapse every year. He
recommended the Committee consider HB 463, which would
establish a rental fund that would allow money to be
accumulated for major maintenance.
In response to a question by Representative Martin, Mr.
DeWitt observed that the Task Force did not address
insurance coverage. The state of Alaska is self-insured.
Representative Mulder MOVED to amend the title to renewal
and replacement "for components" of public buildings. Co-
Chair Therriault questioned if the language should be
included in the text. Representative Mulder amended his
amendment to include revisions in the text. There being NO
OBJECTION, it was so ordered.
Representative Mulder MOVED to report CSHB 315 (FIN) out of
Committee with the accompanying fiscal note. There being NO
OBJECTION, it was so ordered.
CSHB 315 (FIN) was REPORTED out of Committee with a "do
pass" recommendation and with two zero fiscal notes, one by
the Office of the Governor and one by the Department of
Education, both dated 2/25/98.
ADJOURNMENT
The meeting adjourned at 10:15 a.m.
House Finance Committee 7 4/24/98 a.m.
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