Legislature(2013 - 2014)HOUSE FINANCE 519

01/31/2013 01:30 PM FINANCE

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01:30:26 PM Start
01:31:39 PM HB30
02:09:57 PM HB65 || HB66
02:10:31 PM Department Overview: Department of Labor and Workforce Development
02:49:55 PM Department Overview: Department of Law
03:23:18 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Heard & Held
Heard & Held
+ Governor's FY14 Budget Overview: TELECONFERENCED
- Dept. of Labor & Workforce Development
- Dept. of Law
Heard & Held; Assigned to Subcommittee
+ Bills Previously Heard/Scheduled TELECONFERENCED
                  HOUSE FINANCE COMMITTEE                                                                                       
                     January 31, 2013                                                                                           
                         1:30 p.m.                                                                                              
1:30:26 PM                                                                                                                    
CALL TO ORDER                                                                                                                 
Co-Chair Stoltze called the  House Finance Committee meeting                                                                    
to order at 1:30 p.m.                                                                                                           
MEMBERS PRESENT                                                                                                               
Representative Alan Austerman, Co-Chair                                                                                         
Representative Bill Stoltze, Co-Chair                                                                                           
Representative Mark Neuman, Vice-Chair                                                                                          
Representative Mia Costello                                                                                                     
Representative Bryce Edgmon                                                                                                     
Representative Les Gara                                                                                                         
Representative Lindsey Holmes                                                                                                   
Representative Scott Kawasaki, Alternate                                                                                        
Representative Cathy Munoz                                                                                                      
Representative Steve Thompson                                                                                                   
Representative Tammie Wilson                                                                                                    
MEMBERS ABSENT                                                                                                                
Representative David Guttenberg                                                                                                 
ALSO PRESENT                                                                                                                  
Representative   Mike   Chenault;   Sharon   Kelly,   Staff,                                                                    
Representative   Chenault;   Diane   Blumer,   Commissioner,                                                                    
Department  of  Labor   and  Workforce  Development;  Paloma                                                                    
Harbour,    Acting    Division   Director,    Division    of                                                                    
Administrative Services,  Department of Labor  and Workforce                                                                    
Development;    Greg    Cashen,   Assistant    Commissioner,                                                                    
Department  of  Labor  and  Workforce  Development;  Michael                                                                    
Geraghty, Attorney General, Department of Law.                                                                                  
HB 30     STATE AGENCY PERFORMANCE AUDITS                                                                                       
          HB 30 was HEARD and HELD in committee for further                                                                     
HB 65     APPROP: OPERATING BUDGET/LOANS/FUNDS                                                                                  
          HB 65 was HEARD and HELD in committee for further                                                                     
HB 66     APPROP: MENTAL HEALTH BUDGET                                                                                          
          HB 66 was HEARD and HELD in committee for further                                                                     
DEPARTMENT OVERVIEWS:                                                                                                           
     DEPARTMENT OF LABOR and WORKFORCE DEVELOPMENT                                                                              
     DEPARTMENT OF LAW                                                                                                          
HOUSE BILL NO. 30                                                                                                             
     "An Act  relating to  performance reviews,  audits, and                                                                    
     termination   of  executive   and  legislative   branch                                                                    
     agencies,  the University  of  Alaska,  and the  Alaska                                                                    
    Court System; and providing for an effective date."                                                                         
1:31:39 PM                                                                                                                    
REPRESENTATIVE MIKE CHENAULT, introduced  HB 30. He declared                                                                    
that HB 30  was an investment in Alaska's  future. He stated                                                                    
that the performance audits had  been in statute since 1977,                                                                    
but the  statute did not  allow the program to  continue. He                                                                    
stated that  a bill was  introduced in 2009 that  would have                                                                    
reinstated the program. That bill  passed the House, but did                                                                    
not get  taken up in  the Senate.  If that bill  had passed,                                                                    
the  first  department  on  the   list  of  audits  was  the                                                                    
Department of  Corrections (DOC).  He felt  that performance                                                                    
audits  were necessary,  in order  to accurately  review and                                                                    
approve  a  budget.  He  felt   that  HB  30  would  provide                                                                    
effective  changes to  the  budgeting  process. He  stressed                                                                    
that the job  of legislators was to ensure  that funding was                                                                    
accurate for the right service  or project. He added that it                                                                    
was  not   the  legislature's   job  to  micro   manage  the                                                                    
departments. He declared that HB  30 would cause a review of                                                                    
current  department administrations;  and  compare those  to                                                                    
the best  practices from other  states and experts  in order                                                                    
to   effectively   and   efficiently   meet   constitutional                                                                    
mandates. He  remarked that revenue projections  had changed                                                                    
significantly;  oil production  had dropped;  and the  state                                                                    
was at  the mercy of oil  price changes. The State  loses an                                                                    
equivalent to  $1 billion,  when the price  of oil  drops by                                                                    
$10  a  barrel. He  stressed  that  HB  30 would  start  the                                                                    
process  that would  significantly  enhance  the ability  to                                                                    
handle the responsibility of the finances of Alaska.                                                                            
Co-Chair Stoltze pointed out that HB 30 would be referred                                                                       
to a subcommittee, before it would be considered for                                                                            
passage from the House Finance Committee (HFIN).                                                                                
1:36:48 PM                                                                                                                    
30. She referred to the Sponsor Statement (copy on file).                                                                       
     In 1977 the Alaska State  Legislature found there was a                                                                    
     need   for  an   effective   and   regular  system   of                                                                    
     scrutinizing the  programs and activities of  all State                                                                    
     agencies,  boards  and   commissions.  The  legislature                                                                    
     further found  that the establishment  of a  system for                                                                    
     periodic  review  by  the  public,  the  executive  and                                                                    
     legislative branches of  certain state agencies, boards                                                                    
     and  commissions  would  help   the  governor  and  the                                                                    
     legislature  determine  the   need  for  the  continued                                                                    
     existence  of each.  Under AS  44.66,  this review  has                                                                    
     continued since  1977 for  boards and  commissions. The                                                                    
     dates  to review  programs and  agencies  of the  state                                                                    
     ended in 1983 and were never reenacted.                                                                                    
     Low  oil  revenues  contained budget  growth  from  the                                                                    
     early   Eighties  to   2004.     State  revenues   grew                                                                    
     dramatically when  the price of  oil rose in  2004, and                                                                    
     the  budget grew  accordingly. The  current legislative                                                                    
     budget process  mainly looks at increments  and without                                                                    
     a regular  system of scrutiny, annual  budgets continue                                                                    
     to  grow. Other  states  have incorporated  performance                                                                    
     reviews  that have  resulted  in significant  budgetary                                                                    
     This legislation  will renew the effective  and regular                                                                    
     system of  scrutiny of  our departments  by authorizing                                                                    
     performance reviews.  The  legislation has been crafted                                                                    
     to  model  some of  the  aspects  of the  Texas  Sunset                                                                    
     Commission  reviews,  but  utilizes minimal  staff  and                                                                    
     outsourced  independent contract  work to  complete the                                                                    
     process  under the  auspices of  the Legislative  Audit                                                                    
     The information provided by  these reviews will include                                                                    
     authority,  accountability,  effectiveness,  efficiency                                                                    
     and necessity  of departments  and their  programs. The                                                                    
     report,  along with  draft legislation  to fix  issues,                                                                    
     will provide  the House  and Senate  Finance Committees                                                                    
     with in-depth information needed  to fund state budgets                                                                    
     Alaskans  will be  the  ultimate  beneficiary of  these                                                                    
     reviews.     This   process   will   ensure  that   our                                                                    
     governmental agencies  are working  for Alaskans  in an                                                                    
     efficient manner.                                                                                                          
1:38:23 PM                                                                                                                    
Ms. Kelly explained the difference  HB 30, and the bill that                                                                    
was introduced to  the legislature two years  prior: HB 166.                                                                    
She   stated  that   two  changes   were  proposed   by  the                                                                    
legislative auditor,  and one was  a technical  date change.                                                                    
The  first  change in  Section  1  stated that  the  savings                                                                    
calculations   that   resulted    from   implemented   audit                                                                    
recommendations  would  be   completed  by  the  Legislative                                                                    
Finance Division (LFD). The second  change was in Section 6,                                                                    
page 6, line 30, which changed  the word, "will" to "may" of                                                                    
items that  would appear  in the  final report.  That change                                                                    
would give LFD the flexibility  to adopt the report elements                                                                    
for   each  department,   as  determined   necessary  and/or                                                                    
appropriate. She restated  that the last change  was to move                                                                    
the  dates  two  dates  forward.  The  order  of  department                                                                    
reviews was  agreed upon  in the  subcommittee work  of HFIN                                                                    
two years prior.                                                                                                                
Vice-Chair  Neuman  wondered  Legislative Budget  and  Audit                                                                    
(LB&A) had  the authority  to review  the audits  for budget                                                                    
analysis.  Ms.  Kelly  replied   that  HB  30  provided  the                                                                    
opportunity for  LB&A to  review the  department increments,                                                                    
so the subcommittees can analyze the information.                                                                               
Vice-Chair  Neuman   assumed  that  LB&A  already   had  the                                                                    
authority  to  effectuate   performance  audits  within  the                                                                    
departments. Ms.  Kelly replied that LB&A  had the authority                                                                    
to  have an  audit request  presented  to them.  In 1977,  a                                                                    
periodic  review was  set in  statute. The  statute did  not                                                                    
continue, because the statute  did not carry forward. Unless                                                                    
the  performance  audits  were   written  in  statute,  some                                                                    
departments' audits may be overlooked.                                                                                          
Vice-Chair   Neuman  felt   that  performance   audits  were                                                                    
necessary, but he expressed  concern regarding the authority                                                                    
power of LB&A.                                                                                                                  
Co-Chair Stoltze declared  that he would not  have signed on                                                                    
as  a cosigner  of the  bill,  if it  were a  constitutional                                                                    
amendment to  amend the legislature's  appropriation powers.                                                                    
He felt that HB 30 would  enable another agency to carry out                                                                    
the audits.                                                                                                                     
1:43:23 PM                                                                                                                    
Representative  Chenault  agreed,  and  reiterated  Co-Chair                                                                    
Stoltze's comments.                                                                                                             
Representative  Edgmon  looked  at  page 4  of  HB  30,  and                                                                    
wondered if  there was  any consideration  towards advancing                                                                    
the  auditing  schedule. Ms.  Kelly  responded  that it  was                                                                    
possible to  advance the auditing schedule.  She shared that                                                                    
the   departments  with   the  largest   budgets  were   the                                                                    
Department  of  Health  and   Social  Services  (DHSS),  the                                                                    
University of  Alaska (UA), the Department  of Education and                                                                    
Early   Development   (DEED),    and   the   Department   of                                                                    
Transportation and Public Facilities  (DOT). She stated that                                                                    
the first  on the list  was Department of  Natural Resources                                                                    
(DNR), because it had a  medium sized budget. The reason for                                                                    
this  decision   was  to  ensure  some   experience,  before                                                                    
auditing the larger departments.                                                                                                
Representative Munoz  noted that  the fiscal  note indicated                                                                    
three  full  time  staff  by   FY  15;  and  $1  million  in                                                                    
contractual fees.  She wondered why there  was an additional                                                                    
$1 million in contractual fees.  Ms. Kelly replied that LB&A                                                                    
prepared  the fiscal  note,  with the  intent  to have  some                                                                    
performance auditors  on staff. She furthered  that the bill                                                                    
gave the  ability to  use experts  in the  field to  get the                                                                    
experience of the best practices.                                                                                               
1:48:58 PM                                                                                                                    
Co-Chair  Austerman  looked  at  page 6  of  the  bill,  and                                                                    
queried the  changes from the previous  year's similar bill.                                                                    
Ms. Kelly replied  that page 6, line 36 stated  that "in the                                                                    
report, the review team may";  in the prior bill that phrase                                                                    
said  that  "in  the  report, the  review  team  will."  She                                                                    
explained that the  change was made at the  request of LB&A,                                                                    
so  the final  report  could only  highlight  the large  and                                                                    
important legislative items.                                                                                                    
Co-Chair   Austerman    mirrored   Representative   Edgmon's                                                                    
concerns related to the auditing schedule.                                                                                      
Representative Costello  wondered what the funds  for out of                                                                    
state travel  would specifically  be used toward.  Ms. Kelly                                                                    
replied that the legislative auditor  added the out of state                                                                    
travel funding to  the fiscal note in case there  was a need                                                                    
to examine another state's system.                                                                                              
Representative Gara expressed support  of HB 30. He surmised                                                                    
that the  bill would not  affect the governor's  budget. Ms.                                                                    
Kelly agreed.                                                                                                                   
Representative Gara looked at page  5, lines 7 through 14 of                                                                    
the bill.  He wondered what  programs would be  examined, if                                                                    
there was  not a  possible 10 percent  cut under  the bill's                                                                    
standards. Ms.  Kelly replied  that it  was a  guideline, in                                                                    
order  to  provide  a  possible  list  that  would  cut  the                                                                    
department  by 10  percent, and  then the  legislature would                                                                    
determine where the cuts could be made.                                                                                         
1:53:48 PM                                                                                                                    
Representative  Gara  wondered  what  would  happen  if  the                                                                    
agency could  not find 10  percent worth of cuts.  Ms. Kelly                                                                    
pointed   out  that   all  information   submitted  to   the                                                                    
legislature would  state that the  financial plans  would be                                                                    
prioritized. She  remarked that the manager  prioritizes the                                                                    
program, but  could argue  that the items  that were  low on                                                                    
the list were still constitutionally mandated.                                                                                  
Representative Gara  wondered if a provision  could be added                                                                    
that would  require the department  to explain why  it could                                                                    
not   find  10   percent   of   the  programs   unnecessary.                                                                    
Representative  Chenault  replied   that  the  criteria  was                                                                    
merely  a guideline,  so the  department would  be urged  to                                                                    
prioritize there programs.                                                                                                      
1:58:00 PM                                                                                                                    
Representative Gara  reiterated his  desire for  a provision                                                                    
that  allows the  department the  ability  to explain  their                                                                    
reasoning for  not making  specific cuts  to programs.   Ms.                                                                    
Kelly  responded that  the intent  of  the bill  was to  ask                                                                    
departments  to  objectively   examine  their  budgets,  and                                                                    
identify 10  percent. She understood that  there were larger                                                                    
items  that could  not be  cut, but  there was  nothing that                                                                    
mandated a requirement of the  legislature to decrease those                                                                    
Co-Chair  Stoltze stressed  that  there should  always be  a                                                                    
benchmark for the departments' budgets.                                                                                         
Representative   Kawasaki  wondered   where   and  how   the                                                                    
performance  metrics would  evolve. Ms.  Kelly replied  that                                                                    
the metrics would  evolve in the process  of the legislative                                                                    
auditor  looking  at  the way  that  other  states'  metrics                                                                    
evolve.  She pointed  out that  there  were various  metrics                                                                    
that  states  utilize,  and the  legislative  auditor  would                                                                    
determine if those metrics applied to Alaska.                                                                                   
Representative Kawasaki  wondered what  would happen  if the                                                                    
governor's  metric was  in  conflict  with the  legislature.                                                                    
Representative Chenault  responded that it was  the privy of                                                                    
the legislature to  construct a bill, and  furthered that he                                                                    
would like  to work with DOA  to come to an  agreement based                                                                    
on continuity.                                                                                                                  
2:03:38 PM                                                                                                                    
Co-Chair Stoltze remarked that  the governor could not "veto                                                                    
money   into  the   budget."  He   pointed   out  that   the                                                                    
legislature's primary role was  appropriation, and it should                                                                    
be a collaborative effort.                                                                                                      
Vice-Chair Neuman looked at page 4,  line 5 of the bill, and                                                                    
suggested the  words "have  to" instead  of the  words "may"                                                                    
and "shall." He  looked at the fiscal note,  and wondered if                                                                    
the  department would  be restricted  to the  personnel that                                                                    
were  already  in place,  while  the  performance audit  was                                                                    
conducted. Ms.  Kelly responded that  OMB agreed  that there                                                                    
may be  added work, but they  agreed to move forward  with a                                                                    
zero  fiscal note.  She remarked  that the  fiscal note  may                                                                    
Co-Chair Stoltze suggested  language about direction related                                                                    
to managing the performance audits.                                                                                             
Representative  Chenault thanked  the committee,  and looked                                                                    
forward  to   developing  a  proper   way  to   conduct  the                                                                    
performance audits.                                                                                                             
Co-Chair  Stedman appointed  Representative  Costello to  be                                                                    
the   subcommittee   Chair   for  the   Performance   Audits                                                                    
subcommittee;   with   members:  Representative   Austerman,                                                                    
Representative Wilson, and Representative Gara.                                                                                 
HB  30  was   HEARD  and  HELD  in   committee  for  further                                                                    
2:08:35 PM                                                                                                                    
AT EASE                                                                                                                         
2:09:21 PM                                                                                                                    
Co-Chair Stoltze handed the gavel to Co-Chair Austerman.                                                                        
HOUSE BILL NO. 65                                                                                                             
"An  Act making  appropriations for  the operating  and loan                                                                    
program  expenses  of  state   government  and  for  certain                                                                    
programs, capitalizing  funds, amending  appropriations, and                                                                    
making  reappropriations;  and  providing for  an  effective                                                                    
HOUSE BILL NO. 66                                                                                                             
"An Act making appropriations  for the operating and capital                                                                    
expenses  of  the  state's integrated  comprehensive  mental                                                                    
health program; and providing for an effective date."                                                                           
2:09:57 PM                                                                                                                    
^DEPARTMENT  OVERVIEW:  DEPARTMENT  OF LABOR  and  WORKFORCE                                                                  
2:10:31 PM                                                                                                                    
DIANE   BLUMER,  COMMISSIONER,   DEPARTMENT  OF   LABOR  AND                                                                    
WORKFORCE DEVELOPMENT, introduced herself.                                                                                      
Commissioner Blumer  discussed the  PowerPoint presentation,                                                                    
"Alaska  Department  of  Labor  and  Workforce  Development;                                                                    
House  Finance;  Department  Overview;  Commissioner  Dianne                                                                    
Blumer; January 31, 2013" (copy on file).                                                                                       
Commissioner Blumer looked at  slide 2, "Department of Labor                                                                    
and Workforce Development."                                                                                                     
     Mission: Provide safe and legal working conditions and                                                                     
     advance opportunities for employment.                                                                                      
     Core Services:                                                                                                             
     -Protect Alaska's workers through statutory and                                                                            
     regulatory assistance and enforcement.                                                                                     
     -Income replacement for injured, unemployed, and                                                                           
     permanently disabled workers.                                                                                              
     -Workforce development to support Alaska hire and                                                                          
     economic development.                                                                                                      
Commissioner Blumer discussed slide  3, "Department of Labor                                                                    
and Workforce  Development, Organization Chart."  She stated                                                                    
that the  commissioner oversaw  the deputy  commissioner and                                                                    
the assistant commissioner.  The deputy commissioner oversaw                                                                    
the Administrative Services  Division; the Alaska Vocational                                                                    
Technical  Center; the  Business Partnerships  Division; the                                                                    
Employment  and Training  Services; Unemployment  Insurance;                                                                    
Adult  Basic   Education;  and  the   Workers'  Compensation                                                                    
Division.  She  explained  that the  assistant  commissioner                                                                    
oversaw  the Alaska  Workforce Investment  Board; the  Labor                                                                    
Standards    and    Safety    Division;    the    Vocational                                                                    
Rehabilitation Division; the  Alaska Labor Relations Agency;                                                                    
and the  Disability Determination,  which was also  known as                                                                    
the Vocational Rehabilitation Division.                                                                                         
2:15:46 PM                                                                                                                    
Commissioner  Blumer   looked  at  slide  4,   "Services  by                                                                    
Location."  She  stated  that  there  were  Job  Centers  in                                                                    
Barrow, Kotzebue,  Nome, Bethel, Dillingham,  Kodiak, Homer,                                                                    
Kenai,  Anchorage,  Wasilla,  Eagle River,  Seward,  Valdez,                                                                    
Glennallen,  Tok, Fairbanks,  Juneau, Sitka,  and Ketchikan.                                                                    
She  stated  that  Vocational  Rehabilitation  Centers  were                                                                    
located  in  Fairbanks,  Wasilla,  Eagle  River,  Anchorage,                                                                    
Kenai,  Kodiak, Juneau,  Sitka,  and  Ketchikan. She  shared                                                                    
that the  Alaska Vocational  and Technical  Education Center                                                                    
(AVTEC) was located in Seward.                                                                                                  
Commissioner Blumer  discussed slide  5, "State  and Private                                                                    
     State Partners                                                                                                             
          Veteran Services                                                                                                      
          -Department of Military and Veterans Affairs                                                                          
         Economic and Demographic Data Production                                                                               
         -Department of Health and Social Services                                                                              
          -Department of Commerce, Community and Economic                                                                       
          -Department of Education and Early Development                                                                        
          Prisoner Reentry                                                                                                      
          -Department of Corrections                                                                                            
          Training and Education Program Outcomes                                                                               
          -Department of Education and Early Development                                                                        
          -University of Alaska                                                                                                 
          -Commission on Postsecondary Education                                                                                
2:19:43 PM                                                                                                                    
Commissioner Blumer highlighted slide 6, "State and Private                                                                     
     Private Partners:                                                                                                          
          Training and Education                                                                                                
          -Construction Education Foundation                                                                                    
          -Alaska Works Partnership                                                                                             
          -School Districts                                                                                                     
          -Association of General Contractors                                                                                   
          -Home Building Associations                                                                                           
          -Regional Training Centers                                                                                            
          Private   Sector   Membership    on   Boards   and                                                                    
          -Alaska Labor Relations Agency Board                                                                                  
          -Alaska Safety Advisory Council                                                                                       
          -Alaska Workers' Compensation Board                                                                                   
          -Alaska Workforce Investment Board                                                                                    
          -Fishermen's Fund Advisory and Appeals Council                                                                        
          -Occupational Safety and Health Review Board                                                                          
          -State Vocational Rehabilitation Committee                                                                            
          -Statewide Independent Living Council                                                                                 
         -Workers' Compensation Appeals Commission                                                                              
          -Workers' Compensation Medical Services Review                                                                        
Commissioner Blumer looked at  slide 7, "Department of Labor                                                                    
and  Workforce  Development  Challenges."  She  stated  that                                                                    
maintaining  services to  Alaskans  while  managing flat  or                                                                    
declining federal revenue  and increasing operating expenses                                                                    
were  challenges  for DLWFD  because  of  flat or  declining                                                                    
federal revenue; and increasing operating expenses.                                                                             
PALOMA  HARBOUR,  ACTING   DIVISION  DIRECTOR,  DIVISION  OF                                                                    
ADMINISTRATIVE SERVICES,  DEPARTMENT OF LABOR  AND WORKFORCE                                                                    
DEVELOPMENT,  discussed  slide  8,  "Protect  Workers."  She                                                                    
stated  that the  Labor and  Standards  Safety Vision  (Grey                                                                    
Mitchel,  Director) oversaw  wage  and hour  administration;                                                                    
mechanical inspection;  and occupational safety  and health.                                                                    
She also  stated that  the department  had the  Alaska Labor                                                                    
Relations  Agency,  with  Mark   Torgerson  serving  as  the                                                                    
Ms. Harbour looked at slide 9, "Protect Workers."                                                                               
          The five-year moving average rate of workplace                                                                        
          fatalities per 100,000 employees declined from                                                                        
         1.61 (FY 07-FY 11) to 1.48 (FY 08-FY 12).                                                                              
Ms. Harbour discussed slide 10, "Income Replacement."                                                                           
     Workers' Compensation Division; Michael Monagle,                                                                           
          Workers' Compensation                                                                                                 
         Workers' Compensation Appeals Commission                                                                               
          Workers' Compensation Benefits Guaranty Fund                                                                          
          Second Injury Fund                                                                                                    
          Fishermen's Fund                                                                                                      
     Employment Security Division; Paul Dick, Director                                                                          
          Unemployment Insurance                                                                                                
     Vocational Rehabilitation Division; Cheryl Walsh,                                                                          
          Disability Determination                                                                                              
2:24:35 PM                                                                                                                    
Ms. Harbour highlighted slide 11, "Income Replacement."                                                                         
     -In  FY2012,  the  number  of  employers  brought  into                                                                    
     compliance with the Workers'  Compensation Act was 387.                                                                    
     This was an increase from the prior year total of 319.                                                                     
     -In calendar  year 2011, Alaska processed  92.5 percent                                                                    
     of  initial unemployment  insurance payments  within 21                                                                    
Ms. Harbour highlighted slide 12, "Workforce Development."                                                                      
     Vocational   Rehabilitation  Division;   Cheryl  Walsh,                                                                    
          -Client Services                                                                                                      
          -Independent Living                                                                                                   
          -Special Projects                                                                                                     
     Employment Security Division; Paul Dick, Director                                                                          
          -Employment and Training Services                                                                                     
          -Adult Basic Education                                                                                                
     Business   Partnerships   Division;   Corine   Geldhof,                                                                    
     Alaska   Workforce  Investment   Board;  Jeff   Selvey,                                                                    
     Executive Director                                                                                                         
     Alaska  Vocational  Technical  Center;  Fred  Esposito,                                                                    
Ms. Harbour looked at slide 13, "Workforce Development."                                                                        
     -In  FY   12,  637  of  the   individuals  exiting  the                                                                    
     vocational  rehabilitation program  were employed  upon                                                                    
     exit. This  represents a record  level and  exceeds the                                                                    
     prior  year  performance  of   569  individuals  by  12                                                                    
     -In FY  12, 85 percent  of Alaska  Vocational Technical                                                                    
     Center  (AVTEC)  long-term   (longer  than  six  weeks)                                                                    
     program  students graduated.  This exceeded  the target                                                                    
     graduation  rate  of  80 percent  and  the  accrediting                                                                    
     benchmark of 60 percent.                                                                                                   
Ms. Harbour highlighted slide 14, "Total Funding Comparison                                                                     
by Fund Group."                                                                                                                 
     Between FY 05 and FY 14:                                                                                                   
     -UGF increased by $21.6 million (156.5 percent)                                                                            
     -DGF increased by $11.8 million (54.2 percent)                                                                             
    -Other funds increased by $4.3 million (19 percent)                                                                         
     -Federal Funds remained  relatively flat, increasing by                                                                    
     $0.1 million (0.1 percent)                                                                                                 
Ms. Harbour highlighted slide 15, "Share of Total Agency                                                                        
     -The  department's general  fund budget  grew by  $33.4                                                                    
     million between FY05 and the  FY14 Governor's Request -                                                                    
     an average annual growth rate of 7.6 percent.                                                                              
     -Growth since  FY09 has been $5.5  million (1.7 percent                                                                    
     growth rate).                                                                                                              
     -The department continues to  represent a small portion                                                                    
     of the overall statewide budget.                                                                                           
Ms. Harbour looked at slide 16, "Line Item Distribution."                                                                       
     The majority  of funding in  FY 14 is in  the following                                                                    
     line items:                                                                                                                
          -Personal Services: 46 percent                                                                                        
          -Grants: 31 percent                                                                                                   
     About 55  percent ($34 million)  of the  grants funding                                                                    
     is  in the  Business  Partnerships appropriation  (with                                                                    
     the majority housed in two allocations):                                                                                   
          -$25.6 million in Business Services                                                                                   
         -$3.2 million in the Construction Academy                                                                              
2:29:22 PM                                                                                                                    
Ms. Harbour spoke to slide 17, "Budgeted Positions."                                                                            
     -Between FY 05 and FY 14 the total number of budgeted                                                                      
     positions decreased by 32.                                                                                                 
     -Reduction   in  permanent   full-time  and   part-time                                                                    
     positions since FY 05 is  due to flat or declining base                                                                    
     operating federal funds and  the expiration of one-time                                                                    
     federal grant funds.                                                                                                       
Ms. Harbour  highlighted slide 18, "FY  2014 Budget Request:                                                                    
194,404.9; ($35,363.0  UGF; $33,696.4 DGF;  $26,566.7 Other;                                                                    
$98,778.8  Federal)."   She  stated   that  the   pie  chart                                                                    
displayed   the   budget   by   priority   program:   Income                                                                    
Replacement, 27  percent at  $53,248.1 million;  the Protect                                                                    
Workers,  7  percent  at $13,681.3  million;  and  Workforce                                                                    
Development, 66  percent at  $127,475.5 million.  She stated                                                                    
that  there  were  869  full-time  positions,  77  part-time                                                                    
positions, and 14 temporary positions.                                                                                          
Ms.   Harbour  discussed   slide   19,  "Governor's   Budget                                                                    
     FY2013 Operating Supplemental:                                                                                             
          Department-wide lease cost increases                                                                                  
          -$942.9 UGF for  increasing ongoing lease expenses                                                                    
          with a department-wide impact                                                                                         
     FY2014 Operating Budget                                                                                                    
          Department-wide lease cost increases                                                                                  
          -$984.5 UGF for  increasing ongoing lease expenses                                                                    
          with a department-wide impact                                                                                         
          Department-wide core service cost increases                                                                           
          -$65.0  UGF for  increasing ongoing  core services                                                                    
          provided by the  Department of Administration with                                                                    
          a department-wide impact                                                                                              
          Division of Vocational Rehabilitation                                                                                 
          -$100.0 UGF  to strengthen the  Independent Living                                                                    
          network in Alaska                                                                                                     
          Alaska Vocational Technical Center (AVTEC)                                                                            
          -$200.0  UGF   continuation  of   one-time  FY2013                                                                    
          appropriation  for  increasing operating  expenses                                                                    
          at AVTEC                                                                                                              
Ms. Harbour looked at slide 20, "Governor's Budget                                                                              
     FY2014 Capital Budget                                                                                                      
          Heavy  Equipment/Diesel/Pipe   Welding  Relocation                                                                    
          Phase 1 of 3                                                                                                          
          -$6,000.0 this phase,  $15,000.0 all three phases,                                                                    
          replaces a training facility with safety issues                                                                       
          Deferred Maintenance                                                                                                  
          -$968.4   UGF   for   reducing  the   backlog   of                                                                    
          maintenance   needs  on   the  Alaska   Vocational                                                                    
          Technical Center's (AVTEC) aging infrastructure                                                                       
          Mobile Mine Machine Simulator                                                                                         
          -$1,800.0 UGF grant to  the University of Alaska's                                                                    
          Mining and Petroleum  Training Services program to                                                                    
          train across Alaska                                                                                                   
          Maritime Simulator Ice  Navigation Upgrade Phase 1                                                                    
          of 3                                                                                                                  
          -$375.0  UGF   this  phase,  $1,050.0   all  three                                                                    
          phases, hardware upgrades  are required to support                                                                    
          this software                                                                                                         
Ms. Harbour discussed slide 21, "Ten Year Plan."                                                                                
     The department's general fund budget grew by $33.4                                                                         
     million between FY05 and the FY14 Governor's Request -                                                                     
     an average annual growth rate of 7.6 percent.                                                                              
     Growth since FY09 has been $5.5 million (1.7 percent                                                                       
     growth rate).                                                                                                              
     The department's ten year plan equates to an average                                                                       
     annual growth rate of 0.6 percent.                                                                                         
2:34:56 PM                                                                                                                    
Ms. Harbour spoke to slide 22, "Ten Year Plan." She stated                                                                      
that the graph displayed a representation of all funds,                                                                         
instead of only GF.                                                                                                             
Co-Chair Austerman looked at slide  11, and noted that there                                                                    
were   approximately  300   employers   who   were  not   in                                                                    
compliance. He wondered if the  state was required to annual                                                                    
fund  the employer  compliance  cases.  Ms. Harbour  replied                                                                    
that   there  was   a  fraud   division  that   investigated                                                                    
complaints related  to policy cancellations or  workers that                                                                    
stated that they are not  covered. She stated that there was                                                                    
approximately  400 per  year, and  announced  that the  year                                                                    
prior had  a slightly  lower number  of cases.  She stressed                                                                    
the importance of funding continual fraud investigation.                                                                        
Vice-Chair Neuman  looked at  the Legislative  Analysis book                                                                    
related  to federal  withholdings and  vocational education,                                                                    
and  wondered  why those  not  included  in the  legislative                                                                    
review book.  He asked  whether all  10 programs  in statute                                                                    
were receiving equal funding.                                                                                                   
GREG  CASHEN, ASSISTANT  COMMISSIONER,  DEPARTMENT OF  LABOR                                                                    
AND  WORKFORCE   DEVELOPMENT,  answered  the   programs  had                                                                    
varying  percentages, and  agreed to  provide more  detailed                                                                    
Vice-Chair Neuman  would appreciate it. He  pointed to AVTEC                                                                    
and the cost  of delivery thought the  program had increased                                                                    
from  $2.50 million  to $3.00  million.  Ms. Harbour  stated                                                                    
that she would follow up on the question.                                                                                       
2:39:19 PM                                                                                                                    
Vice-Chair  Neuman  referred  to discussions  about  the  UA                                                                    
provided funding;  he surmised that  some of the  costs were                                                                    
averaging  $30,000  to  $35,000.  He  requested  information                                                                    
regarding the possibility of UA  providing that funding. Ms.                                                                    
Harbour would follow up with the detail.                                                                                        
Representative Costello asked  about opportunities to reduce                                                                    
duplicated  efforts.  She  hoped  the  department's  auditor                                                                    
could look  at DEED. She discussed  vocational education and                                                                    
wanted  the departments  to work  more  closely together  on                                                                    
some  issues.   She  believed  the  departments   were  both                                                                    
expending efforts  in similar areas related  to benefits for                                                                    
young Alaskans. Commissioner Blumer  answered that there was                                                                    
a technical  education plan  that she  would provide  to the                                                                    
committee. The internal auditor  had been hired primarily to                                                                    
look at  three divisions  within the department  to identify                                                                    
any overlaps internally.                                                                                                        
Representative  Kawasaki agreed  that there  seemed to  be a                                                                    
lot  of   duplication  in  services.  He   asked  about  the                                                                    
department's  budget that  was  relying  heavily on  federal                                                                    
funds. He  pointed to sequestration and  wondered whether it                                                                    
was  part  of  the department's  plan.  Commissioner  Blumer                                                                    
replied that sequestration was not included in the graph.                                                                       
Representative Gara looked  at slide 19. He  wondered if the                                                                    
increase  in  lease  expenses  referred   to  new  space  or                                                                    
existing  space.   Commissioner  Blumer  replied   that  the                                                                    
increase was for existing leases.                                                                                               
Representative Gara  surmised that DEED  did not own  any of                                                                    
the  buildings, because  the  buildings  were all  privately                                                                    
owned. Commissioner Blumer agreed.                                                                                              
Representative  Gara remarked  that  there were  discussions                                                                    
about the possibility of  departments partnering together to                                                                    
occupy state-owned  building. He wondered if  there could be                                                                    
further  discussion between  the  departments, to  determine                                                                    
the  possibility  of  long-term  cost savings  that  may  be                                                                    
achieved  by  owning  a  building,  rather  than  leasing  a                                                                    
building.   Commissioner Blumer  agreed to  have discussions                                                                    
with  other  departments,   specifically  with  Commissioner                                                                    
Hultberg of DOA.                                                                                                                
2:46:36 PM                                                                                                                    
AT EASE                                                                                                                         
2:48:34 PM                                                                                                                    
^DEPARTMENT OVERVIEW: DEPARTMENT OF LAW                                                                                       
2:49:55 PM                                                                                                                    
MICHAEL  GERAGHTY,  ATTORNEY  GENERAL,  DEPARTMENT  OF  LAW,                                                                    
presented the  PowerPoint, "Department of Law;  FY 14 Budget                                                                    
Overview." He began with slide 2, "Core Services."                                                                              
     Protecting the Safety and Financial Well Being of                                                                          
     Fostering Conditions for Responsible Development of                                                                        
     Our Natural Resources                                                                                                      
     Protecting the Fiscal Integrity of the State                                                                               
     Promoting Good Governance                                                                                                  
Attorney  General   Geraghty  highlighted  slide   3,  "Core                                                                    
Services."  He  stated  that  the   core  services  for  the                                                                    
Department  of Law  (DOL) were  separated  into four  budget                                                                    
sections: 61 percent toward  protecting Alaskans; 21 percent                                                                    
toward  state  and  fiscal   protection;  9  percent  toward                                                                    
governance; and  9 percent  toward economic  opportunity and                                                                    
resource development.                                                                                                           
Attorney General Geraghty shared  that the United Cook Inlet                                                                    
Drifters  Association and  Fisherman's Fund  sued the  North                                                                    
Pacific  Council,  because  the North  Pacific  Council  had                                                                    
approved an amendment that seeded  control of federal waters                                                                    
to the  state for  exclusive state-management of  the salmon                                                                    
fisheries.  He remarked  that those  locations were  federal                                                                    
waters,  but the  amendment  would allow  for  the state  to                                                                    
continue  exclusive regulation  of  salmon  fishing in  that                                                                    
area. He stated that the State  of Alaska were going to join                                                                    
in the  effort to  defend the  State of  Alaska's regulatory                                                                    
2:59:11 PM                                                                                                                    
Attorney General Geraghty discussed  slide 4, "Department of                                                                    
Law  organizational  Chart."   The  divisions  included  the                                                                    
Criminal Division  these thirteen offices in  the state; the                                                                    
Administrative Services  Division: Management  and Financial                                                                    
Forecast; and the Civil Division.                                                                                               
Attorney   General  Geraghty   looked  at   slide  5,   "Key                                                                    
     Civil Division: 167 attorneys, 141 support staff, 38                                                                       
     Criminal Division: 131 attorneys, 118 support staff,                                                                       
     249 total.                                                                                                                 
     Administrative Services Division: 1 attorney, 21                                                                           
     support staff, 22 total.                                                                                                   
     Total: 299 attorneys, 280 support staff, 579 complete                                                                      
     DOL staff.                                                                                                                 
Attorney  General Geraghty  displayed slide  6, "Prosecutors                                                                    
in  Statewide   Offices."  He  stated  that   there  were  2                                                                    
prosecutors  in Barrow;  2 in  Kotzebue;  2 in  Nome; 14  in                                                                    
Fairbanks; 11 in Palmer; 7 in  Bethel; 35 in Anchorage; 9 in                                                                    
Kenai;  2 in  Dillingham; 2  in Kodiak;  4 in  Juneau; 1  in                                                                    
Sitka; and 3 in Ketchikan.                                                                                                      
Attorney  General Geraghty  looked  at  slide 7,  "Assistant                                                                    
AG's  Statewide  Offices."  He  explained  that  there  were                                                                    
assistant attorney general (AG)  offices in Nome, Fairbanks,                                                                    
Palmer, Bethel, Anchorage, Kenai, and Juneau.                                                                                   
Attorney General  Geraghty highlighted slide  8, "Department                                                                    
of Law's Share  of Total Agency Operations."  He stated that                                                                    
Department  of  Law's  general fund  budget  grew  by  $32.9                                                                    
million  between FY  05 and  the FY  14 governor's  request,                                                                    
which was  an average  annual growth rate  of 8  percent. He                                                                    
furthered that Department of Law's  total FY 14 general fund                                                                    
request equaled $200 per resident worker.                                                                                       
3:03:07 PM                                                                                                                    
Attorney General Geraghty displayed  slide 8, "Department of                                                                    
Law, Percent  of the Total Department's  Budget Fund Group."                                                                    
He stated  that the graph  displayed DOL's fund  sources. He                                                                    
remarked that  DOL received federal grants.  There were some                                                                    
communities  in the  state that  elected to  fund prosecutor                                                                    
Attorney General  Geraghty spoke to slide  9, "Department of                                                                    
Law, Continued  Budget Growth Compared to  10-year Plan." He                                                                    
stated that  the graph showed  DOL's plan, but he  could not                                                                    
speak to the  details of the graph, because  it was prepared                                                                    
by LFD.                                                                                                                         
Attorney  General Geraghty  discussed slide  13, "Return  on                                                                    
Budget, FY 12." He reiterated  that one of the core missions                                                                    
of DOL was to protect the  fiscal integrity of the state. He                                                                    
shared that  companies or individuals owed  the state money,                                                                    
DOL  would pursue  those claims.  He stressed  that on  many                                                                    
occasions, the return  to the state was based  on that equal                                                                    
recovery of  money. He stated  that the graph  displayed the                                                                    
financial return,  broken down  by the divisions  within the                                                                    
department. He remarked that the  State of Alaska won a case                                                                    
against the  Supreme Court  in FY 12,  and as  a consequence                                                                    
the  Court release  funds that  had been  deposited into  an                                                                    
account to fight the case.  He stated that DOL had convinced                                                                    
the judges  that their calculation of  pre-judgment interest                                                                    
was  incorrect. He  remarked that  the  graph displayed  the                                                                    
total  and cost  of  returns  from the  last  two years.  He                                                                    
stressed that the  money was not wasted, and  was often used                                                                    
toward  recovering funds  that were  owed to  the state.  He                                                                    
added that in FY 13,  DOL had already recovered $255 million                                                                    
from the British Petroleum (BP) case.                                                                                           
Attorney  General  Geraghty  looked  at  slide  14,  "FY  14                                                                    
Operating Budget  Request (millions)." He shared  that there                                                                    
was a  difference between the  way the LFD and  DOL analyzed                                                                    
the budget requests. He concluded his presentation.                                                                             
3:08:43 PM                                                                                                                    
Co-Chair  Austerman referred  to  slide 8,  and he  remarked                                                                    
that the graph was really  about comparing DOL's GF spending                                                                    
in 2005 versus GF spending in  2014. He observed that it had                                                                    
almost  doubled. He  pointed out  that  the legislature  was                                                                    
currently focused on that trend  of almost doubling spending                                                                    
within ten years. He wondered  what DOL's budget projections                                                                    
would be for  the next ten years.  Attorney General Geraghty                                                                    
stated  that barring  something unforeseen  circumstance, he                                                                    
did  not  see  growth  in   terms  of  people,  because  the                                                                    
population  was currently  fairly stable.  He felt  that DOL                                                                    
was well-staffed,  and DOL only projected  a modest ten-year                                                                    
growth plan. He pointed out  that most crimes were committed                                                                    
by individuals  between the  ages of 18  to 35.  He remarked                                                                    
that there was not an  anticipation of population growth for                                                                    
individuals between the ages of 18  to 35, so the crime rate                                                                    
was not  growing. He felt  that DOL's budget  projection was                                                                    
accurate;  and   possibly  even   more  accurate   that  the                                                                    
projection provided by LFD for DOL.                                                                                             
Co-Chair Austerman wondered if  there were additional growth                                                                    
projections, outside of federalism,  that would impact DOL's                                                                    
budget.  Attorney  General  Geraghty  replied  that  it  was                                                                    
difficult  to predict  litigation, but  furthered that  most                                                                    
federalism cases were less than  10 percent of DOL's budget.                                                                    
He stressed  that almost  all of  the federalism  cases were                                                                    
conducted within  DOL, except that  an outside law  firm was                                                                    
assisted to handle the Endangered Species Act case.                                                                             
3:13:16 PM                                                                                                                    
Representative Munoz  queried the status of  RS 2477 claims,                                                                    
and  the  state's  involvement  in  defending  the  historic                                                                    
right-of-ways.  Attorney General  Geraghty replied  that DOL                                                                    
was currently preparing to file  a series of claims under RS                                                                    
2477 to perfect a quiet  title related to the state's right-                                                                    
of-ways, focusing  primarily on  Chicken, Alaska.  He stated                                                                    
that  there had  been long-term  activities in  Chicken, and                                                                    
the  trails were  well-used  and  well-marked. He  explained                                                                    
that  DOL was  planning to  file on  the RS  2477 claims  to                                                                    
quiet-title against  the federal government. He  stated that                                                                    
there  were some  private landowners  that may  be involved,                                                                    
but may file a disclaimer  of interest. He stated that there                                                                    
were  approximately 700  RS 2477  trails in  the state.  The                                                                    
case   was  difficult   to  prove,   because  there   was  a                                                                    
requirement   to  prove   historic   proof  with   testimony                                                                    
leverage.  He  shared that  DNR  had  a section  working  to                                                                    
collect old  pioneers and miners  that could testify  to the                                                                    
trails' historic  uses. He relayed that  DOL defended claims                                                                    
for people  with existing well-known  trails who  claimed to                                                                    
have  superior  interest.  He explained  that  RS  2477  was                                                                    
created under the  mining law in 1864, but  was abolished by                                                                    
the United States Congress in  1974. He shared that if state                                                                    
government could prove  that there was an  existing trail or                                                                    
road  that  were  developed by  pioneers,  the  state  could                                                                    
perfect a  right-of-way against  the federal  government and                                                                    
others who may claim  against the right-of-way. He announced                                                                    
that Utah had asserted approximately 10,000 RS 2477 claims.                                                                     
Vice-Chair Neuman wondered if there  was a way for the state                                                                    
to  recoup  the   costs  when  the  state  was   sued  on  a                                                                    
development  project.  Attorney General  Geraghty  responded                                                                    
that DOL would  recoup attorney fees, but  the costs related                                                                    
to the postponing of projects could not be recovered.                                                                           
3:17:48 PM                                                                                                                    
Vice-Chair Neuman  requested a  list of  lawsuits pertaining                                                                    
to protecting  state's rights,  specifically related  to gun                                                                    
and ammunition  rights. Attorney General Geraghty  agreed to                                                                    
provide that  information. He was  not aware of  any current                                                                    
firearms cases, but there were  some natural resource cases.                                                                    
He  furthered  that  Alaska  was  one  of  the  states  that                                                                    
challenged  the Affordable  Care  Act, and  one  of the  key                                                                    
features  was the  penalty that  was imposed  on individuals                                                                    
who refused  to buy  insurance. He  stated that  the federal                                                                    
government's defense  was based on  the use of  the Commerce                                                                    
Clause, because  medical care was an  intrastate effort. The                                                                    
US Supreme Court rejected that argument.                                                                                        
Vice-Chair  Neuman stated  that the  authority of  navigable                                                                    
waters was  also a current issue.  Attorney General Geraghty                                                                    
stated that  that issue would  be included in the  list that                                                                    
he had previously agreed to provide.                                                                                            
Representative Wilson  wondered if there was  a deadline for                                                                    
when the navigability  in Chicken would be  restored for the                                                                    
miners. Attorney  General Geraghty  shared that there  was a                                                                    
lawsuit regarding  the 30-mile stretch in  the Mosquito Fork                                                                    
that  DOL  contended  was  navigable.  He  stated  that  the                                                                    
federal government  argued that the area  was not navigable,                                                                    
so that issue  was still open. He agreed  to provide further                                                                    
information regarding the specifics of the case.                                                                                
HB  65  was   HEARD  and  HELD  in   committee  for  further                                                                    
HB  66  was   HEARD  and  HELD  in   committee  for  further                                                                    
3:23:18 PM                                                                                                                    
The meeting was adjourned at 3:23 p.m.                                                                                          

Document Name Date/Time Subjects
LAW HFIN OVERVIEW(013113).pdf HFIN 1/31/2013 1:30:00 PM
LAW Overview
DOLWD HFIN Overview 1-31-13 (2).pdf HFIN 1/31/2013 1:30:00 PM
DOLWD Overview 1/31