Legislature(1995 - 1996)

02/28/1996 02:40 PM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
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                     HOUSE FINANCE COMMITTEE                                   
                        FEBRUARY 28, 1996                                      
                            2:40 P.M.                                          
                                                                               
  TAPE HFC 96 - 53, Side 1, #000 - end.                                        
  TAPE HFC 96 - 53, Side 2, #000 - end.                                        
  TAPE HFC 96 - 54, Side 1, #000 - end.                                        
  TAPE HFC 96 - 54, Side 2, #000 - #526.                                       
                                                                               
  CALL TO ORDER                                                                
                                                                               
  Co-Chair  Mark  Hanley called  the  House Finance  Committee                 
  meeting to order at 2:40 P.M.                                                
                                                                               
  PRESENT                                                                      
                                                                               
  Co-Chair Hanley               Representative Martin                          
  Co-Chair Foster               Representative Mulder                          
  Representative Brown          Representative Navarre                         
  Representative Grussendorf    Representative Parnell                         
  Representative Kelly          Representative Therriault                      
  Representative Kohring                                                       
                                                                               
  ALSO PRESENT                                                                 
                                                                               
  Jerry   Shriner,   Special    Assistant,   Office   of   the                 
  Commissioner, Department of  Corrections; Pat Smutz,  Alaska                 
  State Legislative  Director,  AFL-CIO;  Denny  DeWitt,  Aid,                 
  Representative Eldon Mulder.                                                 
                                                                               
  SUMMARY                                                                      
                                                                               
  HB 428    An  Act   giving  notice   of   and  approving   a                 
            lease-purchase  agreement  for   construction  and                 
            operation of  a correctional facility in the Third                 
            Judicial  District,  and  setting  conditions  and                 
            limitations  on  the  facility's construction  and                 
            operation.                                                         
                                                                               
            CS HB 428 (FIN) was reported out of Committee with                 
  a "do          pass" recommendation  and with a  fiscal note                 
                 by the Department of  Corrections and a  zero                 
                 fiscal note  by  the  Department  of  Revenue                 
                 dated 2/05/96.                                                
  HOUSE BILL 428                                                               
                                                                               
       "An Act giving notice of and approving a lease-purchase                 
       agreement   for  construction   and   operation  of   a                 
       correctional facility  in the Third  Judicial District,                 
       and   setting   conditions  and   limitations   on  the                 
                                                                               
                                1                                              
                                                                               
                                                                               
       facility's construction and operation."                                 
                                                                               
  Representative  Mulder MOVED  that  work draft  #9-LS1338\U,                 
  Chenoweth,  2/13/96, be  the  version before  the Committee.                 
  There being NO OBJECTION, it was so ordered.                                 
                                                                               
  Representative Mulder explained the  differences between the                 
  original version  and  the  committee  substitute  including                 
  those  recommendations  proposed   by  the  Commissioner  of                 
  Corrections:                                                                 
                                                                               
       1.   The   committee   substitute   would  remove   the                 
            requirement  that  contract  facilities  abide  by                 
            court orders.                                                      
                                                                               
       2.   The restriction  on maximum  security housing  was                 
            removed.                                                           
                                                                               
       3.   The Department recommended that  the accreditation                 
            language be removed; it was.                                       
                                                                               
       4.   The  inclusion  of  "design" listed  in  the total                 
            construction costs.                                                
                                                                               
  Representative  Mulder  acknowledged   that  the  bill   was                 
  "permissive".  It was not a mandate ordering  the Department                 
  to build  the facility.   He pointed  out the  inconsistency                 
  between statute  and the  Alaska Administrative  Code.   The                 
  bill would allow the Commissioner of Corrections appropriate                 
  authority.   Representative Mulder  reported that the needed                 
  projected bed space by 2002 would be 1000 additional beds.                   
                                                                               
  Representative Mulder reemphasized that it was essential for                 
  the State to  explore creative ways  of saving revenue.   He                 
  pointed out that  the Department  of Corrections budget  has                 
  grown  exponentially.  He  thought those costs  could be cut                 
  through  privatization.    The  proposed  legislation  would                 
  provide the Department an allowance to explore an additional                 
  alternative.                                                                 
                                                                               
  Representative  Martin  voiced  concern  with  inclusion  of                 
  Alaska Housing Finance Corporation (AHFC) or Alaska Import &                 
  Export Authority (AIDEA)  money being used for  the project.                 
  Representative  Mulder noted that at this  time, there is no                 
  state   commitment  for   funding,  pointing   out  that   a                 
  lease/purchase option was written into the bill.                             
                                                                               
  Representative  Brown  questioned  if the  Subcommittee  had                 
  considered  broadening  the legislation  in  order  that the                 
  Department could use it as a  tool to expand their own plan.                 
  That plan includes expansion and regionalization  of current                 
  facilities.    Representative  Mulder   responded  that  the                 
                                                                               
                                2                                              
                                                                               
                                                                               
  Subcommittee did not give consideration to the State's plan,                 
  as that plan has not yet been released.                                      
                                                                               
  He concluded, the  proposed legislation  would focus on  the                 
  lease/purchase aspect of the  package.  Representative Brown                 
  inquired why that  option was being considered  for only the                 
  Third Judicial District.  Representative Mulder advised that                 
  area has had the highest criminal traffic and involvement.                   
                                                                               
  Representative Brown  recommended that the "context"  of the                 
  problems should be  considered, including the draft  plan to                 
  be  distributed by  the  Department.   Representative  Brown                 
  noted Page  2, Lines  25  -27, questioning  the effect  that                 
  language would have  on the  community residential  centers.                 
  Representative Mulder  said the  language would broaden  the                 
  Commissioner of Corrections capabilities to research private                 
  half-way houses.                                                             
                                                                               
  Representative Brown disagreed, explaining that the language                 
  would create  a limitation  between  contracts with  private                 
  agencies.  Representative Mulder noted  inclusion of "only",                 
  which would not allow the Commissioner to "focus the  intent                 
  down", thus making it less cost effective.                                   
                                                                               
  Representative Navarre pointed out that  if the facility was                 
  owned by the private sector and paid for by the State, taxes                 
  would be  paid  for  by  the  State,  benefiting  the  local                 
  municipality.   He recommended  that action  on the bill  be                 
  postponed, until  the Department had distributed their plan.                 
  Representative   Mulder  reputed  that   the  plan  was  not                 
  available at this  time.  He  added that the proposal  would                 
  include  a  400  bed facility.    That  facility  would cost                 
  approximately  $104  million   dollars  to  build,  whereas,                 
  private  industry  could  build  a  1000  bed  facility  for                 
  approximately  $65  million  dollars.    He  emphasized  the                 
  disparity, and the State's need to save money.                               
                                                                               
  Co-Chair  Hanley   reiterated  that   the  legislation   was                 
  "permissive" and that the Commissioner would not be required                 
  to implement it,  echoing that the Department's plan was not                 
  available at this time as  promised.  Representative Navarre                 
  emphasized that the Commissioner of Corrections has promised                 
  that the plan would be available by March 4, 1996, stressing                 
  that a "plan" exists and that it will be released.                           
                                                                               
  Representative  Therriault  referenced  Section  3, Page  7,                 
  language regarding  the  construction  of  the  correctional                 
  facility under the  Project Labor  Agreement (PLA) and  what                 
  determination would be  used for a  "hire through the  local                 
  union hall".  Representative Mulder  noted that "local union                 
  hall"  would  reflect the  entire  State, thus  intending to                 
  maximize Alaska hire.                                                        
                                                                               
                                3                                              
                                                                               
                                                                               
  Representative Therriault questioned the description of  the                 
  facility expansion.   Representative Mulder  reiterated that                 
  determination of an allowance for expansion would be decided                 
  if  money  could be  saved given  the  economy at  scale and                 
  centralization.                                                              
                                                                               
  Representative  Therriault  stressed that  local communities                 
  want  jobs  established  within  their  boundaries.    Those                 
  communities would not  want to see the expansion isolated to                 
  one area.  Representative Mulder  replied that small, remote                 
  prisons are expensive.  The  legislation focuses on ways  to                 
  address  incarceration  efficiently.    Decisions should  be                 
  driven by cost.                                                              
                                                                               
  Representative Therriault  asked  if the  operator would  be                 
  self insured.  Representative Mulder replied that currently,                 
  private corporations  operating throughout the  country have                 
  their own insurance coverage.                                                
                                                                               
  Representative  Brown explained  Amendment #1.   [Attachment                 
  "maximum hire" of Alaska State residents in the building and                 
  operations of the  facility.  Co-Chair Hanley  questioned if                 
  the language was  constitutionally correct.   Representative                 
  Brown  responded  that legal  sources  have stated  that the                 
  language "may  be" unconstitutional,  although  it would  be                 
  good policy.  Co-Chair Hanley  asked if Representative Brown                 
  could  imagine  that  option  being  required in  all  State                 
  agencies.                                                                    
                                                                               
  Representative  Brown requested  to  hold the  amendment, in                 
  order to "clean up" the language, making it constitutionally                 
  correct.  Amendment #1 was HELD in Committee.                                
                                                                               
  Representative   Brown   MOVED   to  adopt   Amendment   #2.                 
  [Attachment  #2].   She  explained  that Amendment  #2 would                 
  address  construction  of  the correctional  facility  as  a                 
  public project.   Adoption  of the  amendment would  require                 
  that the project be subject to prevailing wage standards and                 
  would then apply existing public construction law.                           
                                                                               
  Representative  Mulder  OBJECTED,  pointing   out  that  the                 
  private  facility  would be  built  under the  Project Labor                 
  Agreement (PLA).                                                             
                                                                               
  (Tape Change, HFC 96-53, Side 2).                                            
                                                                               
  Representative Mulder indicated  that prevailing wage  would                 
  be determined  between the  contractor and  the union  hall.                 
  Representative Brown  questioned  why the  bill stated  that                 
  prevailing wages  would be paid, suggesting  the application                 
                                                                               
                                4                                              
                                                                               
                                                                               
  of existing  law to  the proposed  project.   Representative                 
  Mulder replied that public officials  should not dictate the                 
  terms between the union hall and the contractor.                             
                                                                               
  Representative Therriault  observed that  the provisions  of                 
  the amendment  could weaken protection  in the bill  to hire                 
  union  employees.   Representative  Brown  disagreed, noting                 
  that  the  amendment  would guarantee  that  prevailing wage                 
  would   be   paid   to   the   union    employee   involved.                 
  Representative Navarre added, it  was already required under                 
  existing  statutes,  and  recommended  including  it  in the                 
  legislation  to   guarantee  that  operations   are  legally                 
  correct.    He  inquired  if   a  construction  company  was                 
  contracted from  out-of-State, would  they then  be able  to                 
  bring employees from out-of-state.                                           
                                                                               
  PAT  SMUTZ,  ALASKA  STATE  LEGISLATIVE  DIRECTOR,  AFL-CIO,                 
  replied that  if it  was a local  building trade  agreement,                 
  local hire would  be required.  The  out-of-state contractor                 
  would have to go through local hiring halls and unions.                      
                                                                               
  A roll call was taken on the MOTION to adopt Amendment #2.                   
                                                                               
       IN FAVOR:      Brown.                                                   
       OPPOSED:       Kelly, Kohring, Martin, Mulder, Parnell,                 
                      Therriault, Hanley, Foster.                              
                                                                               
  Representatives Grussendorf and Navarre were not present for                 
  the vote.                                                                    
                                                                               
  The MOTION FAILED (1-8).                                                     
                                                                               
  Representative   Brown   MOVED   to  adopt   Amendment   #3.                 
  [Attachment   #3].      Representative    Mulder   OBJECTED.                 
  Representative  Brown  explained  that  Amendment  #3  would                 
  require a feasibility  study to examine the  various methods                 
  available to the State to relieve prison over- crowding.                     
                                                                               
  JERRY   SHRINER,   SPECIAL    ASSISTANT,   OFFICE   OF   THE                 
  COMMISSIONER, DEPARTMENT OF  CORRECTIONS, explained that  it                 
  would  be  assumed  that  labor  contracts would  require  a                 
  feasibility study when  closing facilities.   He noted  that                 
  the Department's plan addresses a  variety of locations, and                 
  would take into consideration correctional populations.   He                 
  advised  that  the  outcomes  recommended  would  change  by                 
  locating all bed needs in one location.                                      
                                                                               
  Co-Chair Hanley asked if a cost-ratio benefit comparison had                 
  been  provided  under the  Department's  plan.   Mr. Shriner                 
  noted that the  Department has  not provided a  cost-benefit                 
  with regard to  private prisons.   Mr. Shriner added that  a                 
  400 bed facility was part of the plan.                                       
                                                                               
                                5                                              
                                                                               
                                                                               
  Mr.  Shriner  informed  members  that  the   Department,  in                 
  determining   a  plan,   established   where  the   greatest                 
  population  needs   are  located  and   are  most   extreme.                 
  Representative  Martin   and  Mr.   Shriner  discussed   the                 
  feasibility study and the cost benefit analysis.                             
                                                                               
  Representative Brown  confirmed that other states which have                 
  incorporated privatization, have incorporated safeguards for                 
  guaranteeing that  the state  government would  be receiving                 
  the "best deal".  She felt that Amendment #3 would provide a                 
  minimal safeguard.                                                           
                                                                               
  A roll call was taken on the MOTION to adopt Amendment #3.                   
                                                                               
       IN FAVOR:      Navarre, Brown.                                          
       OPPOSED:       Kohring,   Martin,    Mulder,   Parnell,                 
                      Therriault, Foster, Hanley.                              
                                                                               
  Representatives Grussendorf and  Kelly were not  present for                 
  the vote.                                                                    
                                                                               
  The MOTION FAILED (2-7).                                                     
                                                                               
  Representative   Brown   MOVED   to   adopt  Amendment   #4.                 
  [Attachment   #4].      Representative    Mulder   OBJECTED.                 
  Representative Brown briefed the Committee that Amendment #4                 
  would require evidence that a cost savings of at least 5% in                 
  construction costs be met before the project was begun.  She                 
  indicated that other states have this statutory requirement.                 
                                                                               
                                                                               
  Co-Chair  Hanley asked  if  Project  Labor Agreements  would                 
  always  be  required on  state  construction projects.   Mr.                 
  Shriner did not  know.  Co-Chair  Hanley noted that type  of                 
  agreement would not save  money.  Representative  Therriault                 
  added that the amendment would prevent  operational savings.                 
  Representative Brown asked to WITHDRAW Amendment #4 in order                 
  to refine the  language.  There  being NO OBJECTION, it  was                 
  withdrawn.                                                                   
                                                                               
  Representative  Brown addressed  Amendment #5.   [Attachment                 
  operating cost savings.  Representative Mulder noted that he                 
  would  concur with  the amendment,  if Representative  Brown                 
  would include  the  addendum  that it  be  compared  to  the                 
  average  daily  per  diem  rate of  $107  dollars  per  day.                 
  Representative Brown reminded Representative Mulder that the                 
  Department  could  become more  efficient, which  would then                 
  lower those costs.  Representative Mulder warned that was an                 
  arbitrary concept.                                                           
                                                                               
                                                                               
                                6                                              
                                                                               
                                                                               
  Representative  Martin  requested  a  friendly amendment  to                 
  Amendment #5, adding language to follow  Line 8, "as of FY97                 
  Department  of Corrections  budget".   Following discussion,                 
  Representative  Martin  withdrew the  proposed  amendment to                 
  Amendment #5.                                                                
                                                                               
  Mr. Shriner commented that other states  have dealt with the                 
  situation through statute.   Most states establish  that the                 
  cost must be  at least equal to, and if it is not, they then                 
  must establish a bench mark for  the costs of the facilities                 
  proposed to be built.                                                        
                                                                               
  Representative  Therriault  suggested  that   the  amendment                 
  language was to  "simplistic".  Representative Brown  stated                 
  that the Commissioner  would need  to make written  analysis                 
  and findings.   She stressed  that savings  must be  insured                 
  before  the   undertaking.     Discussion  continued   among                 
  Committee members regarding the planning process required to                 
  achieve the guaranteed savings.                                              
                                                                               
  Representative Brown  advised that  it would  make sense  to                 
  have the cost comparison done after the bids, although noted                 
  that she would  be more  comfortable having the  feasibility                 
  study provided before the process.  Amendment #5 was HELD.                   
                                                                               
  (Tape Change, HFC 96-54, Side 2).                                            
                                                                               
  Representative   Brown   MOVED   to   adopt  Amendment   #6.                 
  [Attachment   #6].      Representative    Mulder   OBJECTED.                 
  Representative  Therriault noted  that the  costs associated                 
  with  operating  a facility  was a  direct  link to  how the                 
  facility was constructed.  He  thought that efficiency would                 
  be lost  in not combining  the two.   Representative Navarre                 
  explained that the  amendment would  not preclude that  from                 
  happening.                                                                   
                                                                               
  Mr. Shriner commented that the  Department would prefer that                 
  the two issues  be separated.  DOC would not want to be tied                 
  to a facility, and consequently tied  to the operator for 20                 
  years, until  they (the Department) owned the  building.  He                 
  suggested that the process  should be separated; an RFP  for                 
  construction and a separate RFP for operations.                              
                                                                               
  Representative Navarre noted language on  Page 4, Section 4,                 
  and  asked  if   persons  employed  by  the   Department  of                 
  Corrections  could become  the  contractors of  a  facility.                 
  Representative  Mulder replied  that a  collective group  of                 
  employees,  bidding  on a  project  would not  be precluded.                 
  Representative Navarre recommended that language be changed.                 
                                                                               
                                                                               
  Representative Brown  asked if  an Internal  Revenue Service                 
                                                                               
                                7                                              
                                                                               
                                                                               
  (IRS)  law  existed  which  would  prohibit the  State  from                 
  entering into a  contract longer than a  specified period of                 
  time.                                                                        
                                                                               
  DENNY DEWITT,  AID, REPRESENTATIVE  ELDON MULDER,  responded                 
  that  their office  had been  advised through  a variety  of                 
  bonding counsels that the lease/purchase of a facility would                 
  need to be a separate contract from the  operational portion                 
  of the activity.   The operational portion would need  to be                 
  rebid at the end of five years.                                              
                                                                               
  A roll call was taken on the MOTION to adopt Amendment #6.                   
                                                                               
       IN FAVOR:      Navarre, Brown, Grussendorf.                             
       OPPOSED:       Kelly,    Kohring,   Mulder,    Parnell,                 
                      Therriault, Foster.                                      
                                                                               
  Representatives Hanley and  Martin were not present  for the                 
  vote.                                                                        
                                                                               
  The MOTION FAILED (3-6).                                                     
                                                                               
  Representative  Brown   MOVED   to   adopt   Amendment   #7.                 
  [Attachment   #7].      Representative    Mulder   OBJECTED.                 
  Representative  Brown  explained  that  the amendment  would                 
  allow the State to temporarily take over operations  if they                 
  could  do it for  less costs.   Representative Mulder argued                 
  that if the State could operate  the facility for less, they                 
  would be entitled to come back to the Legislature to request                 
  that.                                                                        
                                                                               
  Representative  Therriault  asked  if  the  amendment  would                 
  affect the bidding  rates.   Representative Brown offered  a                 
  scenario in which the contractor hyped up the costs; at that                 
  time, a provision would need to be included to address those                 
  operational concerns.   Without the amendment, options would                 
  be limited.   Representative  Mulder disclosed  that in  the                 
  "lower 48", contract bids were  lower than those received by                 
  state  governments.  If  a breech  existed, the  state would                 
  temporarily take it over.                                                    
                                                                               
  Representative Navarre pointed out to Committee members that                 
  the amendment would provide  a check on the  competitive bid                 
  process.   The  State  could not  arbitrarily take  over the                 
  project and violate  the terms of the contract.   Discussion                 
  followed among Committee members regarding options available                 
  during the competitive bid process.                                          
                                                                               
  Representative Navarre MOVED a friendly amendment to Page 3,                 
  Line 23, deletion of  "temporarily".  He thought that  would                 
  technically address the problem.   There was NO OBJECTION to                 
  the deletion of the language.                                                
                                                                               
                                8                                              
                                                                               
                                                                               
  A roll call was taken on the MOTION to adopt Amendment #7.                   
                                                                               
       IN FAVOR:      Navarre, Brown, Grussendorf.                             
       OPPOSED:       Kohring,   Martin,    Mulder,   Parnell,                 
  Therriault,                   Kelly, Hanley.                                 
                                                                               
  Representative Hanley was not present for the vote.                          
                                                                               
  The MOTION FAILED (3-7).                                                     
                                                                               
  Representative   Brown   MOVED   to  adopt   Amendment   #8.                 
  [Attachment   #8].      Representative    Mulder   OBJECTED.                 
  Representative Brown  explained  that  the  amendment  would                 
  address  concerns  in  establishing  limits  for  operation.                 
  Representative  Mulder   was  more   comfortable  with   the                 
  limitation  being  made   through  a  policy  call   by  the                 
  Legislature   than   one   made   by   the   Administration.                 
  Representative  Brown  reminded  Representative Mulder  that                 
  getting action done through the  Legislature was not an easy                 
  or  timely  option.    She  concluded, the  amendment  would                 
  provide  for  temporary operations.    Representative Mulder                 
  suggested that Page  3, Line  27, adequately addressed  that                 
  concern.                                                                     
                                                                               
  Co-Chair Hanley stated  that the amendment language  was too                 
  "broad".    Representative  Brown  offered  to  redraft  the                 
  amendment.   Following discussion  that it  was the  Chair's                 
  intent to move the  legislation, Representative Brown  MOVED                 
  to adopt Amendment #8 as drafted.                                            
                                                                               
  A roll call was taken on the MOTION.                                         
                                                                               
       IN FAVOR:      Navarre, Brown, Grussendorf.                             
       OPPOSED:       Martin,  Mulder,   Parnell,  Therriault,                 
  Kelly,                   Kohring, Hanley, Foster.                            
                                                                               
  The MOTION FAILED (3-8).                                                     
                                                                               
  Representative   Brown   MOVED   to   adopt  Amendment   #9.                 
  [Attachment #9].  Representative Mulder OBJECTED.                            
                                                                               
  (Tape Change, HFC 96-54, Side 2).                                            
                                                                               
  Representative  Brown  questioned  that in  the  event  of a                 
  default, why  the facility  would be  operated by the  State                 
  only "temporarily".   Representative  Mulder responded  that                 
  the intent of the legislation was to keep it private.                        
                                                                               
  A roll call was taken on the MOTION to adopt Amendment #9.                   
                                                                               
       IN FAVOR:      Navarre, Brown, Grussendorf.                             
                                                                               
                                9                                              
                                                                               
                                                                               
       OPPOSED:       Mulder,   Parnell,   Therriault,  Kelly,                 
                      Kohring, Martin, Foster, Hanley.                         
                                                                               
  The MOTION FAILED (3-8).                                                     
                                                                               
  Representative   Brown  MOVED   to   adopt  Amendment   #10.                 
  [Attachment   #10].      Representative   Mulder   OBJECTED.                 
  Representative Brown noted that  the amendment would  insure                 
  that correctional  officers  and other  staff  are  properly                 
  trained to  work with  incarcerated felons.   Representative                 
  Mulder commented that concern was  addressed on Page 3, Line                 
  31  and Page  4, Lines  1 &  2.   He added  that  record and                 
  background checks would be a part of the contract  language.                 
  He concluded,  that the concern would be handled between the                 
  Commissioner of Corrections and the private contractor.                      
                                                                               
  Representative Brown  WITHDREW Amendment #10,  agreeing that                 
  it  had been addressed.  There being NO OBJECTION, Amendment                 
                                                                               
  Representative   Brown  MOVED   to   adopt  Amendment   #11.                 
  [Attachment   #11].      Representative   Mulder   OBJECTED.                 
  Representative Brown  explained that Amendment  #11 contains                 
  standard language  used by the Department  of Administration                 
  (DOA) in contracts to deal with  non-performance on the part                 
  of  the  contractor.    Representative  Mulder  stated  that                 
  information   should   be   specified  in   the   contracts.                 
  Representative Brown suggested that by  placing the language                 
  in statute, would  automatically place it in  "any" contract                 
  entered into.                                                                
                                                                               
  Representative Parnell thought that "resulting excess costs"                 
  would be standard language.   Representative Navarre MOVED a                 
  "friendly" amendment to Amendment #11, removing the language                 
  "for any reason  whatsoever" and "any resulting  excess" and                 
  inserting "reasonable".  The language  would clarify that if                 
  a default by a contractor should occur, the State would then                 
  continue  the   operations,   charting   back   the   costs.                 
  Representative   Mulder  advised   that  concern   had  been                 
  addressed  in  the  procurement statutes.    There  being NO                 
  OBJECTION to Representative Navarre's  "friendly" amendment,                 
  the language was changed.                                                    
                                                                               
  A roll call  was taken on the MOTION to  adopt Amendment #11                 
  as changed.                                                                  
                                                                               
       IN FAVOR:      Navarre, Parnell, Brown, Grussendorf.                    
       OPPOSED:       Therriault,   Kelly,  Kohring,   Martin,                 
                      Mulder, Hanley, Foster.                                  
                                                                               
  The MOTION FAILED (4-7).                                                     
                                                                               
                                                                               
                               10                                              
                                                                               
                                                                               
  Representative   Brown   MOVED  to   adopt   Amendment  #12.                 
  [Attachment   #12].      Representative   Mulder   OBJECTED.                 
  Representative Brown noted that  the amendment would provide                 
  that the facility  could be built  in a district other  than                 
  the Third Judicial District.                                                 
                                                                               
  Representative  Brown  MOVED a  language  change to  Page 3,                 
  Lines  9  and  10,  which  would  read  "related   costs  to                 
  establishing  correctional facilities  may  not exceed  $100                 
  million  dollars".   Representative Martin  OBJECTED to  the                 
  conceptual amendment.  Representative Mulder identified that                 
  the Third Judicial  District had been specified  because the                 
  pressure  and expansion needs within the correctional system                 
  are  located within  that district.   He reiterated  that in                 
  order to  maximize the efficiency through centralization and                 
  size,  building  a facility  in that  area would  avoid some                 
  transportation and other hidden costs.                                       
                                                                               
  Representative Brown MOVED TO WITHDREW Amendment #12.  There                 
  being NO OBJECTION, it was withdrawn.                                        
                                                                               
  Representative   Brown   MOVED   to   adopt  Amendment   #5.                 
  [Attachment   #5].      Representative    Mulder   OBJECTED.                 
  Representative Brown noted that Amendment #5 would require a                 
  5% operational savings.                                                      
                                                                               
  A roll call was taken on the MOTION to adopt Amendment #5.                   
                                                                               
       IN FAVOR:      Navarre, Brown, Grussendorf.                             
       OPPOSED:       Kohring,   Martin,    Mulder,   Parnell,                 
                      Therriault, Kelly, Foster.                               
                                                                               
  Co-Chair Hanley was not present for the vote.                                
                                                                               
  The MOTION FAILED (3-7).                                                     
                                                                               
  Representative Mulder recommended  adopting a $300  thousand                 
  dollar  fiscal  note  in  lieu of  the  other  fiscal  notes                 
  submitted.   He  believed that  the  costs incurred  by  the                 
  Department of Transportation  and Public Facilities  (DOTPF)                 
  and the Department  of Administration (DOA) could  be rolled                 
  into the cost  of financing.  The  Department of Corrections                 
  would  require  only a  $300  thousand dollar  allocation in                 
  order  to  prepare  the  Request   For  Proposal  (RFP)  and                 
  determine staffing operational requirements.                                 
                                                                               
  Representative Navarre  recommended that each  Department be                 
  consulted to provide testimony regarding the fiscal impacts.                 
                                                                               
                                                                               
  Mr.  Shriner  addressed  the  fiscal  differences   to  that                 
  Department.    The  Department of  Corrections  (DOC)  would                 
                                                                               
                               11                                              
                                                                               
                                                                               
  receive  the total  allocation and  then each  of  the other                 
  departments would receive funds through an RSA from DOC.  He                 
  thought  some costs  could be  capitalized through  bonding.                 
  Bonding costs should remain in the fiscal note.  Mr. Shriner                 
  warned  that  $300  thousand  dollars  would not  cover  all                 
  necessary costs.                                                             
                                                                               
  Representative   Mulder   disagreed,    noting   that    the                 
  Commissioner of Corrections  had projected cost needs  for a                 
  thorough analysis of the entire proposal.  He suggested that                 
  was a "smoke  screen" to delay the  legislative process, and                 
  emphasized  that   the  $300   thousand  dollars   would  be                 
  sufficient in providing  for staff  and comparison time  and                 
  the design  expertise for  the RFP.   Representative  Martin                 
  suggested that more money would require more time.                           
                                                                               
  Representative  Grussendorf  questioned  inclusion   of  the                 
  maintenance  concern.   Representative  Mulder replied  that                 
  maintenance should  be required by the  private contractors,                 
  and  that the  contractor would  be required  to return  the                 
  facility to the "same condition" it was in before occupancy.                 
  Representative Mulder reiterated that would be a contractual                 
  item.   Representative Martin  added that private enterprise                 
  always includes maintenance as part  of the operating costs.                 
                                                                               
                                                                               
  Representative  Mulder MOVED the $300 thousand dollar fiscal                 
  note  for  the Department  of  Corrections.   Representative                 
  Navarre OBJECTED to the fiscal  note.  Following discussion,                 
  Representative Navarre WITHDREW the objection to  the fiscal                 
  note, noting his  objection to  the legislation moving  from                 
  Committee before  overviewing the Department  of Corrections                 
  long term plan.                                                              
                                                                               
  Representative Mulder  MOVED to adopt  CS HB 428  (FIN) with                 
  the  individual recommendations  and  with the  accompanying                 
  fiscal notes.  Representative Navarre OBJECTED.                              
                                                                               
  Representative  Navarre  stated  that  he  does  not  oppose                 
  privatization   and   that   with  appropriate   safeguards,                 
  privatization could save the State money.  He emphasized the                 
  need for safeguards.   He reminded members  that the savings                 
  and loans industry  was a private industry  which ultimately                 
  caused the tax payers billions of dollars.                                   
                                                                               
  Representative   Navarre   advised   that  the   legislation                 
  established "no constraints".   Once the facility  is built,                 
  the cost of operations  would be out of their  hands, except                 
  through  the  RFP   process.     He  suspected  that   major                 
  maintenance would be deferred for the first five years.                      
                                                                               
  Representative Navarre summarized  that constraints must  be                 
                                                                               
                               12                                              
                                                                               
                                                                               
  added to the bill.   Privatization is not good at  any cost.                 
  Privatization   is   only   good   when   constraints    and                 
  constrictions are added to save  money.  He reiterated  that                 
  the  Department of  Corrections  plan should  be  considered                 
  along with the proposed legislation.                                         
                                                                               
  A roll call  was taken on the  MOTION to MOVE the  bill from                 
  Committee.                                                                   
                                                                               
       IN FAVOR:      Martin,  Mulder.  Parnell,   Therriault,                 
                      Kelly, Kohring, Foster.                                  
       OPPOSED:       Navarre, Brown, Grussendorf.                             
                                                                               
  Co-Chair Hanley was not present for the vote.                                
                                                                               
  The MOTION PASSED (7-3).                                                     
                                                                               
  CS  HB 428 (FIN)  was reported out  of Committee  with a "do                 
  pass"  recommendation  and   with  a  fiscal  note   by  the                 
  Department  of Corrections  and a  zero fiscal  note by  the                 
  Department of Revenue dated 2/05/96.                                         
  ADJOURNMENT                                                                  
                                                                               
  The meeting adjourned at 5:20 P.M.                                           
                                                                               
                                                                               
                     HOUSE FINANCE COMMITTEE                                   
                        FEBRUARY 28, 1996                                      
                            2:40 P.M.                                          
                                                                               
  TAPE HFC 96 - 53, Side 1, #000 - end.                                        
  TAPE HFC 96 - 53, Side 2, #000 - end.                                        
  TAPE HFC 96 - 54, Side 1, #000 - end.                                        
  TAPE HFC 96 - 54, Side 2, #000 - #526.                                       
                                                                               
  CALL TO ORDER                                                                
                                                                               
  Co-Chair  Mark Hanley  called  the House  Finance  Committee                 
  meeting to order at 2:40 P.M.                                                
                                                                               
  PRESENT                                                                      
                                                                               
  Co-Chair Hanley               Representative Martin                          
  Co-Chair Foster               Representative Mulder                          
  Representative Brown          Representative Navarre                         
  Representative Grussendorf    Representative Parnell                         
  Representative Kelly          Representative Therriault                      
  Representative Kohring                                                       
                                                                               
  ALSO PRESENT                                                                 
                                                                               
                                                                               
                               13                                              
                                                                               
                                                                               
  Jerry   Shriner,   Special   Assistant,    Office   of   the                 
  Commissioner, Department  of Corrections; Pat  Smutz, Alaska                 
  State  Legislative  Director,  AFL-CIO; Denny  DeWitt,  Aid,                 
  Representative Eldon Mulder.                                                 
                                                                               
  SUMMARY                                                                      
                                                                               
  HB 428    An   Act  giving   notice  of   and   approving  a                 
            lease-purchase  agreement  for   construction  and                 
            operation of a correctional  facility in the Third                 
            Judicial  District,  and  setting  conditions  and                 
            limitations  on  the  facility's construction  and                 
            operation.                                                         
                                                                               
            CS HB 428 (FIN) was reported out of Committee with                 
  a "do          pass" recommendation and  with a fiscal  note                 
                 by the  Department of Corrections and  a zero                 
                 fiscal  note  by  the Department  of  Revenue                 
                 dated 2/05/96.                                                
                                                                               
  HOUSE BILL 428                                                               
                                                                               
       "An Act giving notice of and approving a lease-purchase                 
       agreement   for  construction   and   operation  of   a                 
       correctional facility in  the Third Judicial  District,                 
       and   setting  conditions   and   limitations  on   the                 
       facility's construction and operation."                                 
                                                                               
  Representative  Mulder MOVED  that  work draft  #9-LS1338\U,                 
  Chenoweth, 2/13/96,  be  the version  before the  Committee.                 
  There being NO OBJECTION, it was so ordered.                                 
                                                                               
  Representative Mulder explained  the differences between the                 
  original  version  and  the  committee substitute  including                 
  those  recommendations  proposed  by  the  Commissioner   of                 
  Corrections:                                                                 
                                                                               
       1.   The   committee   substitute   would  remove   the                 
            requirement  that  contract  facilities  abide  by                 
            court orders.                                                      
                                                                               
       2.   The  restriction on  maximum security  housing was                 
            removed.                                                           
                                                                               
       3.   The Department recommended that  the accreditation                 
            language be removed; it was.                                       
                                                                               
       4.   The  inclusion  of "design"  listed  in the  total                 
            construction costs.                                                
                                                                               
  Representative  Mulder   acknowledged  that  the   bill  was                 
  "permissive".  It was not a  mandate ordering the Department                 
                                                                               
                               14                                              
                                                                               
                                                                               
  to build  the facility.   He  pointed out the  inconsistency                 
  between statute  and the  Alaska Administrative  Code.   The                 
  bill would allow the Commissioner of Corrections appropriate                 
  authority.   Representative Mulder reported  that the needed                 
  projected bed space by 2002 would be 1000 additional beds.                   
                                                                               
  Representative Mulder reemphasized that it was essential for                 
  the State to  explore creative ways  of saving revenue.   He                 
  pointed out that  the Department  of Corrections budget  has                 
  grown exponentially.   He thought those  costs could be  cut                 
  through  privatization.    The  proposed  legislation  would                 
  provide the Department an allowance to explore an additional                 
  alternative.                                                                 
                                                                               
  Representative  Martin  voiced  concern  with  inclusion  of                 
  Alaska Housing Finance Corporation (AHFC) or Alaska Import &                 
  Export Authority (AIDEA)  money being used for  the project.                 
  Representative Mulder noted  that at this time, there  is no                 
  state   commitment  for   funding,  pointing   out  that   a                 
  lease/purchase option was written into the bill.                             
                                                                               
  Representative  Brown  questioned  if  the Subcommittee  had                 
  considered broadening  the  legislation in  order  that  the                 
  Department could use it as a tool to expand  their own plan.                 
  That plan includes expansion and regionalization of  current                 
  facilities.    Representative  Mulder  responded  that   the                 
  Subcommittee did not give consideration to the State's plan,                 
  as that plan has not yet been released.                                      
                                                                               
  He concluded, the  proposed legislation  would focus on  the                 
  lease/purchase aspect of the  package.  Representative Brown                 
  inquired why that option  was being considered for only  the                 
  Third Judicial District.  Representative Mulder advised that                 
  area has had the highest criminal traffic and involvement.                   
                                                                               
  Representative Brown recommended that  the "context" of  the                 
  problems should be  considered, including the draft  plan to                 
  be  distributed by  the  Department.   Representative  Brown                 
  noted Page  2,  Lines 25  -27, questioning  the effect  that                 
  language would  have on  the community  residential centers.                 
  Representative  Mulder said  the language would  broaden the                 
  Commissioner of Corrections capabilities to research private                 
  half-way houses.                                                             
                                                                               
  Representative Brown disagreed, explaining that the language                 
  would  create a  limitation  between contracts  with private                 
  agencies.  Representative Mulder  noted inclusion of "only",                 
  which would not allow the Commissioner to  "focus the intent                 
  down", thus making it less cost effective.                                   
                                                                               
  Representative Navarre pointed out that  if the facility was                 
  owned by the private sector and paid for by the State, taxes                 
                                                                               
                               15                                              
                                                                               
                                                                               
  would  be  paid for  by  the  State,  benefiting  the  local                 
  municipality.   He recommended  that action  on the  bill be                 
  postponed, until the Department  had distributed their plan.                 
  Representative  Mulder   reputed  that  the   plan  was  not                 
  available at this  time.  He  added that the proposal  would                 
  include  a  400 bed  facility.    That facility  would  cost                 
  approximately  $104  million  dollars   to  build,  whereas,                 
  private  industry  could  build  a  1000  bed  facility  for                 
  approximately  $65  million  dollars.    He  emphasized  the                 
  disparity, and the State's need to save money.                               
                                                                               
  Co-Chair   Hanley  reiterated   that  the   legislation  was                 
  "permissive" and that the Commissioner would not be required                 
  to implement it,  echoing that the Department's plan was not                 
  available at this time as  promised.  Representative Navarre                 
  emphasized that the Commissioner of Corrections has promised                 
  that the plan would be available by March 4, 1996, stressing                 
  that a "plan" exists and that it will be released.                           
                                                                               
  Representative Therriault  referenced  Section  3,  Page  7,                 
  language  regarding  the  construction of  the  correctional                 
  facility under the  Project Labor  Agreement (PLA) and  what                 
  determination would  be used for  a "hire through  the local                 
  union hall".  Representative Mulder  noted that "local union                 
  hall"  would  reflect the  entire  State, thus  intending to                 
  maximize Alaska hire.                                                        
                                                                               
  Representative Therriault questioned the  description of the                 
  facility expansion.   Representative Mulder  reiterated that                 
  determination of an allowance for expansion would be decided                 
  if  money  could be  saved given  the  economy at  scale and                 
  centralization.                                                              
                                                                               
  Representative  Therriault  stressed that  local communities                 
  want  jobs  established  within  their  boundaries.    Those                 
  communities  would not want to see the expansion isolated to                 
  one area.  Representative Mulder  replied that small, remote                 
  prisons are expensive.   The legislation focuses  on ways to                 
  address  incarceration  efficiently.   Decisions  should  be                 
  driven by cost.                                                              
                                                                               
  Representative  Therriault  asked if  the operator  would be                 
  self insured.  Representative Mulder replied that currently,                 
  private corporations  operating throughout the  country have                 
  their own insurance coverage.                                                
                                                                               
  Representative Brown  explained Amendment  #1.   [Attachment                 
  "maximum hire" of Alaska State residents in the building and                 
  operations of the  facility.  Co-Chair Hanley  questioned if                 
  the language  was constitutionally correct.   Representative                 
  Brown  responded  that legal  sources  have stated  that the                 
                                                                               
                               16                                              
                                                                               
                                                                               
  language  "may be"  unconstitutional, although  it  would be                 
  good policy.  Co-Chair Hanley  asked if Representative Brown                 
  could  imagine  that  option  being  required in  all  State                 
  agencies.                                                                    
                                                                               
  Representative Brown  requested to  hold  the amendment,  in                 
  order to "clean up" the language, making it constitutionally                 
  correct.  Amendment #1 was HELD in Committee.                                
                                                                               
  Representative   Brown   MOVED   to   adopt  Amendment   #2.                 
  [Attachment  #2].   She  explained  that Amendment  #2 would                 
  address  construction  of  the correctional  facility  as  a                 
  public project.   Adoption  of the  amendment would  require                 
  that the project be subject to prevailing wage standards and                 
  would then apply existing public construction law.                           
                                                                               
  Representative  Mulder  OBJECTED,  pointing  out  that   the                 
  private  facility  would be  built  under the  Project Labor                 
  Agreement (PLA).                                                             
                                                                               
  (Tape Change, HFC 96-53, Side 2).                                            
                                                                               
  Representative Mulder  indicated that prevailing  wage would                 
  be determined  between the  contractor and  the union  hall.                 
  Representative  Brown questioned  why  the bill  stated that                 
  prevailing wages  would be paid, suggesting  the application                 
  of existing  law to  the proposed  project.   Representative                 
  Mulder replied that public officials  should not dictate the                 
  terms between the union hall and the contractor.                             
                                                                               
  Representative Therriault  observed that  the provisions  of                 
  the amendment  could weaken protection  in the bill  to hire                 
  union  employees.   Representative  Brown disagreed,  noting                 
  that  the  amendment would  guarantee  that prevailing  wage                 
  would   be   paid   to   the    union   employee   involved.                 
  Representative Navarre  added, it was already required under                 
  existing  statutes,  and  recommended  including  it in  the                 
  legislation  to   guarantee  that  operations   are  legally                 
  correct.    He  inquired  if   a  construction  company  was                 
  contracted from  out-of-State, would  they then  be able  to                 
  bring employees from out-of-state.                                           
                                                                               
  PAT  SMUTZ,  ALASKA  STATE  LEGISLATIVE  DIRECTOR,  AFL-CIO,                 
  replied that  if it was  a local  building trade  agreement,                 
  local hire would  be required.  The  out-of-state contractor                 
  would have to go through local hiring halls and unions.                      
                                                                               
  A roll call was taken on the MOTION to adopt Amendment #2.                   
                                                                               
       IN FAVOR:      Brown.                                                   
       OPPOSED:       Kelly, Kohring, Martin, Mulder, Parnell,                 
                      Therriault, Hanley, Foster.                              
                                                                               
                               17                                              
                                                                               
                                                                               
  Representatives Grussendorf and Navarre were not present for                 
  the vote.                                                                    
                                                                               
  The MOTION FAILED (1-8).                                                     
                                                                               
  Representative   Brown   MOVED   to   adopt  Amendment   #3.                 
  [Attachment   #3].      Representative    Mulder   OBJECTED.                 
  Representative  Brown  explained  that  Amendment  #3  would                 
  require a feasibility  study to examine the  various methods                 
  available to the State to relieve prison over- crowding.                     
                                                                               
  JERRY   SHRINER,   SPECIAL   ASSISTANT,    OFFICE   OF   THE                 
  COMMISSIONER, DEPARTMENT  OF CORRECTIONS, explained  that it                 
  would  be  assumed  that  labor  contracts would  require  a                 
  feasibility study when  closing facilities.   He noted  that                 
  the Department's plan addresses a  variety of locations, and                 
  would take into consideration correctional populations.   He                 
  advised  that  the  outcomes  recommended  would  change  by                 
  locating all bed needs in one location.                                      
                                                                               
  Co-Chair Hanley asked if a cost-ratio benefit comparison had                 
  been  provided  under the  Department's  plan.   Mr. Shriner                 
  noted that the  Department has  not provided a  cost-benefit                 
  with regard to  private prisons.   Mr. Shriner added that  a                 
  400 bed facility was part of the plan.                                       
                                                                               
  Mr.  Shriner  informed  members  that   the  Department,  in                 
  determining   a  plan,   established   where  the   greatest                 
  population   needs  are  located   and  are   most  extreme.                 
  Representative  Martin   and  Mr.   Shriner  discussed   the                 
  feasibility study and the cost benefit analysis.                             
                                                                               
  Representative  Brown confirmed that other states which have                 
  incorporated privatization, have incorporated safeguards for                 
  guaranteeing that  the state  government would be  receiving                 
  the "best deal".  She felt that Amendment #3 would provide a                 
  minimal safeguard.                                                           
                                                                               
  A roll call was taken on the MOTION to adopt Amendment #3.                   
                                                                               
       IN FAVOR:      Navarre, Brown.                                          
       OPPOSED:       Kohring,   Martin,   Mulder,    Parnell,                 
                      Therriault, Foster, Hanley.                              
                                                                               
  Representatives Grussendorf  and Kelly were  not present for                 
  the vote.                                                                    
                                                                               
  The MOTION FAILED (2-7).                                                     
                                                                               
  Representative   Brown   MOVED   to  adopt   Amendment   #4.                 
  [Attachment   #4].      Representative    Mulder   OBJECTED.                 
                                                                               
                               18                                              
                                                                               
                                                                               
  Representative Brown briefed the Committee that Amendment #4                 
  would require evidence that a cost savings of at least 5% in                 
  construction costs be met before the project was begun.  She                 
  indicated that other states have this statutory requirement.                 
                                                                               
                                                                               
  Co-Chair  Hanley  asked if  Project  Labor  Agreements would                 
  always  be  required on  state  construction projects.   Mr.                 
  Shriner did not  know.  Co-Chair  Hanley noted that type  of                 
  agreement would  not save money.   Representative Therriault                 
  added that the amendment would prevent operational  savings.                 
  Representative Brown asked to WITHDRAW Amendment #4 in order                 
  to refine the  language.  There  being NO OBJECTION, it  was                 
  withdrawn.                                                                   
                                                                               
  Representative Brown  addressed Amendment  #5.   [Attachment                 
  operating cost savings.  Representative Mulder noted that he                 
  would  concur with  the amendment,  if Representative  Brown                 
  would  include  the addendum  that  it  be compared  to  the                 
  average  daily  per  diem  rate  of  $107 dollars  per  day.                 
  Representative Brown reminded Representative Mulder that the                 
  Department could  become  more efficient,  which would  then                 
  lower those costs.  Representative Mulder warned that was an                 
  arbitrary concept.                                                           
                                                                               
  Representative  Martin  requested  a friendly  amendment  to                 
  Amendment #5, adding language to follow  Line 8, "as of FY97                 
  Department of  Corrections budget".   Following  discussion,                 
  Representative  Martin withdrew  the  proposed amendment  to                 
  Amendment #5.                                                                
                                                                               
  Mr. Shriner commented that other  states have dealt with the                 
  situation through statute.   Most states establish  that the                 
  cost must be  at least equal to, and if it is not, they then                 
  must establish a bench mark for  the costs of the facilities                 
  proposed to be built.                                                        
                                                                               
  Representative  Therriault  suggested  that   the  amendment                 
  language was  to "simplistic".  Representative  Brown stated                 
  that the Commissioner  would need  to make written  analysis                 
  and findings.   She  stressed that  savings must  be insured                 
  before  the   undertaking.     Discussion  continued   among                 
  Committee members regarding the planning process required to                 
  achieve the guaranteed savings.                                              
                                                                               
  Representative Brown  advised that  it would  make sense  to                 
  have the cost comparison done after the bids, although noted                 
  that she would  be more  comfortable having the  feasibility                 
  study provided before the process.  Amendment #5 was HELD.                   
                                                                               
  (Tape Change, HFC 96-54, Side 2).                                            
                                                                               
                               19                                              
                                                                               
                                                                               
  Representative  Brown   MOVED   to   adopt   Amendment   #6.                 
  [Attachment   #6].      Representative    Mulder   OBJECTED.                 
  Representative Therriault  noted that  the costs  associated                 
  with  operating  a facility  was a  direct  link to  how the                 
  facility was constructed.  He  thought that efficiency would                 
  be lost in  not combining the  two.  Representative  Navarre                 
  explained that the  amendment would  not preclude that  from                 
  happening.                                                                   
                                                                               
  Mr. Shriner commented that the  Department would prefer that                 
  the two issues be separated.  DOC would not want to  be tied                 
  to a facility, and consequently tied  to the operator for 20                 
  years, until they (the  Department) owned the building.   He                 
  suggested that the  process should be separated;  an RFP for                 
  construction and a separate RFP for operations.                              
                                                                               
  Representative Navarre noted language on  Page 4, Section 4,                 
  and  asked  if   persons  employed  by  the   Department  of                 
  Corrections  could  become the  contractors  of a  facility.                 
  Representative  Mulder  replied that  a collective  group of                 
  employees,  bidding  on a  project  would not  be precluded.                 
  Representative Navarre recommended that language be changed.                 
                                                                               
                                                                               
  Representative Brown  asked if  an Internal  Revenue Service                 
  (IRS)  law  existed  which  would  prohibit the  State  from                 
  entering  into a contract longer  than a specified period of                 
  time.                                                                        
                                                                               
  DENNY DEWITT,  AID, REPRESENTATIVE  ELDON MULDER,  responded                 
  that their  office had  been advised  through  a variety  of                 
  bonding counsels that the lease/purchase of a facility would                 
  need to be a separate contract  from the operational portion                 
  of the activity.   The operational portion would need  to be                 
  rebid at the end of five years.                                              
                                                                               
  A roll call was taken on the MOTION to adopt Amendment #6.                   
                                                                               
       IN FAVOR:      Navarre, Brown, Grussendorf.                             
       OPPOSED:       Kelly,    Kohring,   Mulder,    Parnell,                 
                      Therriault, Foster.                                      
                                                                               
  Representatives Hanley and  Martin were not present  for the                 
  vote.                                                                        
                                                                               
  The MOTION FAILED (3-6).                                                     
                                                                               
  Representative   Brown   MOVED   to   adopt  Amendment   #7.                 
  [Attachment   #7].      Representative    Mulder   OBJECTED.                 
  Representative  Brown  explained  that the  amendment  would                 
  allow the State to temporarily take  over operations if they                 
                                                                               
                               20                                              
                                                                               
                                                                               
  could do it  for less costs.   Representative Mulder  argued                 
  that if the State could operate  the facility for less, they                 
  would be entitled to come back to the Legislature to request                 
  that.                                                                        
                                                                               
  Representative  Therriault  asked  if  the  amendment  would                 
  affect the bidding  rates.   Representative Brown offered  a                 
  scenario in which the contractor hyped up the costs; at that                 
  time, a provision would need to be included to address those                 
  operational concerns.  Without  the amendment, options would                 
  be limited.   Representative  Mulder disclosed  that in  the                 
  "lower 48", contract bids were lower than  those received by                 
  state  governments.   If a breech  existed, the  state would                 
  temporarily take it over.                                                    
                                                                               
  Representative Navarre pointed out to Committee members that                 
  the  amendment would provide a check  on the competitive bid                 
  process.   The  State could  not  arbitrarily take  over the                 
  project  and violate the terms  of the contract.  Discussion                 
  followed among Committee members regarding options available                 
  during the competitive bid process.                                          
                                                                               
  Representative Navarre MOVED a friendly amendment to Page 3,                 
  Line 23, deletion  of "temporarily".  He  thought that would                 
  technically address the problem.  There  was NO OBJECTION to                 
  the deletion of the language.                                                
                                                                               
  A roll call was taken on the MOTION to adopt Amendment #7.                   
                                                                               
       IN FAVOR:      Navarre, Brown, Grussendorf.                             
       OPPOSED:       Kohring,   Martin,   Mulder,    Parnell,                 
  Therriault,                   Kelly, Hanley.                                 
                                                                               
  Representative Hanley was not present for the vote.                          
                                                                               
  The MOTION FAILED (3-7).                                                     
                                                                               
  Representative  Brown   MOVED   to   adopt   Amendment   #8.                 
  [Attachment   #8].      Representative    Mulder   OBJECTED.                 
  Representative  Brown  explained  that  the amendment  would                 
  address  concerns  in  establishing  limits  for  operation.                 
  Representative   Mulder  was   more  comfortable   with  the                 
  limitation  being  made   through  a  policy  call   by  the                 
  Legislature   than   one   made   by   the   Administration.                 
  Representative  Brown  reminded  Representative Mulder  that                 
  getting action done  through the Legislature was not an easy                 
  or  timely  option.    She  concluded, the  amendment  would                 
  provide  for temporary  operations.   Representative  Mulder                 
  suggested that Page  3, Line  27, adequately addressed  that                 
  concern.                                                                     
                                                                               
  Co-Chair Hanley stated  that the amendment language  was too                 
                                                                               
                               21                                              
                                                                               
                                                                               
  "broad".    Representative  Brown  offered  to  redraft  the                 
  amendment.   Following discussion  that it  was the  Chair's                 
  intent to  move the legislation, Representative  Brown MOVED                 
  to adopt Amendment #8 as drafted.                                            
                                                                               
  A roll call was taken on the MOTION.                                         
                                                                               
       IN FAVOR:      Navarre, Brown, Grussendorf.                             
       OPPOSED:       Martin,  Mulder,   Parnell,  Therriault,                 
  Kelly,                   Kohring, Hanley, Foster.                            
                                                                               
  The MOTION FAILED (3-8).                                                     
                                                                               
  Representative  Brown   MOVED   to   adopt   Amendment   #9.                 
  [Attachment #9].  Representative Mulder OBJECTED.                            
                                                                               
  (Tape Change, HFC 96-54, Side 2).                                            
                                                                               
  Representative  Brown  questioned  that in  the  event  of a                 
  default, why  the facility  would be  operated by  the State                 
  only  "temporarily".   Representative Mulder  responded that                 
  the intent of the legislation was to keep it private.                        
                                                                               
  A roll call was taken on the MOTION to adopt Amendment #9.                   
                                                                               
       IN FAVOR:      Navarre, Brown, Grussendorf.                             
       OPPOSED:       Mulder,   Parnell,  Therriault,   Kelly,                 
                      Kohring, Martin, Foster, Hanley.                         
                                                                               
  The MOTION FAILED (3-8).                                                     
                                                                               
  Representative   Brown  MOVED   to   adopt  Amendment   #10.                 
  [Attachment   #10].      Representative   Mulder   OBJECTED.                 
  Representative Brown noted  that the amendment  would insure                 
  that  correctional  officers and  other  staff  are properly                 
  trained to  work with  incarcerated felons.   Representative                 
  Mulder commented that  concern was addressed on Page 3, Line                 
  31  and Page  4, Lines  1 &  2.   He added  that  record and                 
  background checks would be a part of  the contract language.                 
  He concluded, that the concern would be handled between  the                 
  Commissioner of Corrections and the private contractor.                      
                                                                               
  Representative Brown WITHDREW  Amendment #10, agreeing  that                 
  it had been addressed.  There being NO  OBJECTION, Amendment                 
                                                                               
  Representative   Brown  MOVED   to   adopt  Amendment   #11.                 
  [Attachment   #11].      Representative   Mulder   OBJECTED.                 
  Representative Brown explained  that Amendment #11  contains                 
  standard language used by  the Department of  Administration                 
  (DOA) in contracts to deal  with non-performance on the part                 
  of  the  contractor.    Representative  Mulder  stated  that                 
                                                                               
                               22                                              
                                                                               
                                                                               
  information   should   be   specified   in  the   contracts.                 
  Representative Brown suggested that by placing  the language                 
  in statute, would  automatically place it in  "any" contract                 
  entered into.                                                                
                                                                               
  Representative Parnell thought that "resulting excess costs"                 
  would be standard language.   Representative Navarre MOVED a                 
  "friendly" amendment to Amendment #11, removing the language                 
  "for any reason  whatsoever" and "any resulting  excess" and                 
  inserting "reasonable".  The language  would clarify that if                 
  a default by a contractor should occur, the State would then                 
  continue   the   operations,   charting  back   the   costs.                 
  Representative  Mulder   advised  that   concern  had   been                 
  addressed  in  the  procurement statutes.    There  being NO                 
  OBJECTION to Representative Navarre's  "friendly" amendment,                 
  the language was changed.                                                    
                                                                               
  A roll call was taken  on the MOTION to adopt Amendment  #11                 
  as changed.                                                                  
                                                                               
       IN FAVOR:      Navarre, Parnell, Brown, Grussendorf.                    
       OPPOSED:       Therriault,   Kelly,   Kohring,  Martin,                 
                      Mulder, Hanley, Foster.                                  
                                                                               
  The MOTION FAILED (4-7).                                                     
                                                                               
  Representative   Brown  MOVED   to   adopt  Amendment   #12.                 
  [Attachment   #12].      Representative   Mulder   OBJECTED.                 
  Representative Brown  noted that the amendment would provide                 
  that the facility  could be built  in a district other  than                 
  the Third Judicial District.                                                 
                                                                               
  Representative  Brown  MOVED a  language  change to  Page 3,                 
  Lines  9  and  10,  which  would   read  "related  costs  to                 
  establishing  correctional facilities  may  not exceed  $100                 
  million  dollars".   Representative Martin  OBJECTED  to the                 
  conceptual amendment.  Representative Mulder identified that                 
  the Third Judicial  District had been specified  because the                 
  pressure and expansion needs within the correctional  system                 
  are  located within  that district.   He reiterated  that in                 
  order  to maximize the efficiency through centralization and                 
  size,  building a  facility in  that area  would avoid  some                 
  transportation and other hidden costs.                                       
                                                                               
  Representative Brown MOVED TO WITHDREW Amendment #12.  There                 
  being NO OBJECTION, it was withdrawn.                                        
                                                                               
  Representative   Brown   MOVED   to  adopt   Amendment   #5.                 
  [Attachment   #5].      Representative    Mulder   OBJECTED.                 
  Representative Brown noted that Amendment #5 would require a                 
  5% operational savings.                                                      
                                                                               
                                                                               
                               23                                              
                                                                               
                                                                               
  A roll call was taken on the MOTION to adopt Amendment #5.                   
                                                                               
       IN FAVOR:      Navarre, Brown, Grussendorf.                             
       OPPOSED:       Kohring,   Martin,   Mulder,    Parnell,                 
                      Therriault, Kelly, Foster.                               
                                                                               
  Co-Chair Hanley was not present for the vote.                                
                                                                               
  The MOTION FAILED (3-7).                                                     
                                                                               
  Representative Mulder  recommended adopting a  $300 thousand                 
  dollar  fiscal  note  in  lieu  of  the other  fiscal  notes                 
  submitted.    He believed  that  the costs  incurred  by the                 
  Department of  Transportation and Public  Facilities (DOTPF)                 
  and the Department  of Administration (DOA) could  be rolled                 
  into the cost of  financing.  The Department  of Corrections                 
  would  require  only a  $300  thousand dollar  allocation in                 
  order  to  prepare  the  Request   For  Proposal  (RFP)  and                 
  determine staffing operational requirements.                                 
                                                                               
  Representative Navarre  recommended that each  Department be                 
  consulted to provide testimony regarding the fiscal impacts.                 
                                                                               
                                                                               
  Mr.  Shriner  addressed  the  fiscal  differences  to   that                 
  Department.    The  Department of  Corrections  (DOC)  would                 
  receive  the total  allocation and  then  each of  the other                 
  departments would receive funds through an RSA from DOC.  He                 
  thought  some costs  could be  capitalized  through bonding.                 
  Bonding costs should remain in the fiscal note.  Mr. Shriner                 
  warned  that  $300  thousand  dollars  would not  cover  all                 
  necessary costs.                                                             
                                                                               
  Representative   Mulder   disagreed,    noting   that    the                 
  Commissioner of Corrections  had projected cost needs  for a                 
  thorough analysis of the entire proposal.  He suggested that                 
  was  a "smoke screen" to  delay the legislative process, and                 
  emphasized  that   the  $300   thousand  dollars   would  be                 
  sufficient in providing  for staff  and comparison time  and                 
  the design  expertise for  the RFP.   Representative  Martin                 
  suggested that more money would require more time.                           
                                                                               
  Representative  Grussendorf  questioned  inclusion   of  the                 
  maintenance  concern.   Representative  Mulder replied  that                 
  maintenance should  be required by the  private contractors,                 
  and  that the  contractor would  be required  to  return the                 
  facility to the "same condition" it was in before occupancy.                 
  Representative Mulder reiterated that would be a contractual                 
  item.  Representative  Martin added that private  enterprise                 
  always includes maintenance as part  of the operating costs.                 
                                                                               
                                                                               
                               24                                              
                                                                               
                                                                               
  Representative Mulder  MOVED the $300 thousand dollar fiscal                 
  note for  the  Department of  Corrections.    Representative                 
  Navarre OBJECTED to the fiscal  note.  Following discussion,                 
  Representative Navarre WITHDREW the objection to the  fiscal                 
  note, noting his  objection to  the legislation moving  from                 
  Committee before  overviewing the Department  of Corrections                 
  long term plan.                                                              
                                                                               
  Representative  Mulder MOVED to  adopt CS HB  428 (FIN) with                 
  the  individual  recommendations and  with  the accompanying                 
  fiscal notes.  Representative Navarre OBJECTED.                              
                                                                               
  Representative  Navarre  stated  that  he  does  not  oppose                 
  privatization   and   that   with  appropriate   safeguards,                 
  privatization could save the State money.  He emphasized the                 
  need for safeguards.   He reminded members that  the savings                 
  and loans industry  was a private industry  which ultimately                 
  caused the tax payers billions of dollars.                                   
                                                                               
  Representative   Navarre   advised   that  the   legislation                 
  established "no constraints".   Once the facility  is built,                 
  the cost of operations  would be out of their  hands, except                 
  through  the  RFP   process.     He  suspected  that   major                 
  maintenance would be deferred for the first five years.                      
                                                                               
  Representative Navarre  summarized that constraints  must be                 
  added  to the bill.  Privatization is  not good at any cost.                 
  Privatization   is   only   good    when   constraints   and                 
  constrictions are added  to save money.   He reiterated that                 
  the Department  of  Corrections plan  should  be  considered                 
  along with the proposed legislation.                                         
                                                                               
  A roll call  was taken on the  MOTION to MOVE the  bill from                 
  Committee.                                                                   
                                                                               
       IN FAVOR:      Martin,  Mulder.   Parnell,  Therriault,                 
                      Kelly, Kohring, Foster.                                  
       OPPOSED:       Navarre, Brown, Grussendorf.                             
                                                                               
  Co-Chair Hanley was not present for the vote.                                
                                                                               
  The MOTION PASSED (7-3).                                                     
                                                                               
  CS HB  428 (FIN) was  reported out  of Committee with  a "do                 
  pass"  recommendation  and   with  a  fiscal  note   by  the                 
  Department  of Corrections  and a  zero fiscal  note  by the                 
  Department of Revenue dated 2/05/96.                                         
                                                                               
  ADJOURNMENT                                                                  
                                                                               
  The meeting adjourned at 5:20 P.M.                                           
                                                                               
                                                                               
                               25                                              

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