Legislature(2013 - 2014)HOUSE FINANCE 519

02/12/2013 01:30 PM FINANCE


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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ HB 22 BOARD OF MARINE PILOTS TELECONFERENCED
Moved CSHB 22(L&C) Out of Committee
+ HB 26 EXTEND BOARD OF PUBLIC ACCOUNTANCY TELECONFERENCED
Moved Out of Committee
+ Bills Previously Heard/Scheduled TELECONFERENCED
+= HB 30 STATE AGENCY PERFORMANCE AUDITS TELECONFERENCED
Moved CSHB 30(FIN) Out of Committee
                  HOUSE FINANCE COMMITTEE                                                                                       
                     February 12, 2013                                                                                          
                         1:34 p.m.                                                                                              
                                                                                                                                
                                                                                                                                
1:34:30 PM                                                                                                                    
                                                                                                                                
CALL TO ORDER                                                                                                                 
                                                                                                                                
Co-Chair Stoltze called the  House Finance Committee meeting                                                                    
to order at 1:34 p.m.                                                                                                           
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
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 Alan Austerman, Co-Chair                                                                                         
Representative David Guttenberg                                                                                                 
                                                                                                                                
ALSO PRESENT                                                                                                                  
                                                                                                                                
Representative Mike  Chenault, Sponsor;  Representative Mike                                                                    
Hawker,   Sponsor;  Don   Habegar,  Director,   Division  of                                                                    
Corporations,   Business,    and   Professional   Licensing,                                                                    
Department of Commerce,  Community and Economic Development;                                                                    
Anna Latham, Staff, Representative Kurt Olson.                                                                                  
                                                                                                                                
PRESENT VIA TELECONFERENCE                                                                                                    
                                                                                                                                
Jeff  Johnson,  Certified  Public Accountant,  Chair,  State                                                                    
Board  of  Accountancy,  Fairbanks;  David  Artzt,  Captain,                                                                    
Alaska  Marine Pilots,  Dutch Harbor;  Paul Fuhs,  Lobbyist,                                                                    
Southwest Alaska Pilots Association.                                                                                            
                                                                                                                                
SUMMARY                                                                                                                       
                                                                                                                                
HB 22     BOARD OF MARINE PILOTS                                                                                                
                                                                                                                                
          CSHB 22(L&C) was REPORTED out  of committee with a                                                                    
          "do pass"  recommendation and with one  new fiscal                                                                    
          impact  note  from  the  Department  of  Commerce,                                                                    
          Community and Economic Development.                                                                                   
                                                                                                                                
HB 26     EXTEND BOARD OF PUBLIC ACCOUNTANCY                                                                                    
                                                                                                                                
          HB 26  was REPORTED  out of  committee with  a "do                                                                    
          pass"  recommendation  and   with  one  previously                                                                    
          published zero fiscal note: FN1 (CED).                                                                                
                                                                                                                                
HB 30     STATE AGENCY PERFORMANCE AUDITS                                                                                       
                                                                                                                                
          CSHB 30(FIN) was REPORTED out  of Committee with a                                                                    
          "do pass"  recommendation and with one  new fiscal                                                                    
          impact  note  from  the  Division  of  Legislative                                                                    
          Audit, one  new zero fiscal note  from Legislative                                                                    
          Finance  Division, and  one new  zero fiscal  note                                                                    
         from the Office of Management and Budget.                                                                              
                                                                                                                                
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."                                                                         
                                                                                                                                
1:35:40 PM                                                                                                                    
                                                                                                                                
Co-Chair Stoltze discussed that a pending amendment for HB                                                                      
30 had been discussed at the prior meeting. He MOVED                                                                            
Amendment 1 in Representative Gara's absence.                                                                                   
                                                                                                                                
Representative Wilson OBJECTED.                                                                                                 
                                                                                                                                
Representative Kawasaki asked for an explanation of the                                                                         
amendment.                                                                                                                      
                                                                                                                                
Co-Chair Stoltze remarked he was stalling for time and made                                                                     
several comments about the amendment. He believed the                                                                           
amendment recognized that cutting budgets was tough.                                                                            
                                                                                                                                
Representative Gara joined the meeting.                                                                                         
                                                                                                                                
Co-Chair Stoltze  asked Representative  Gara to  address the                                                                    
amendment.                                                                                                                      
                                                                                                                                
1:38:11 PM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
1:38:40 PM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                
Representative Gara addressed Amendment 1:                                                                                      
                                                                                                                                
     Page 5, following line 21:                                                                                                 
                                                                                                                                
     Insert a new subsection to read:                                                                                           
                                                                                                                                
     "(d) If the  agency is not able to  identify 10 percent                                                                    
     of   the  general   funds   in   the  agency's   budget                                                                    
     appropriated  from  the  general  fund  that  could  be                                                                    
     reduced  or eliminated  using the  criteria set  out in                                                                    
     (c)(2)(A)  -  (C) of  this  section,  the agency  shall                                                                    
     identify which programs or elements  of programs on the                                                                    
     list required under (c)(2) of  this section do not meet                                                                    
     the  criteria  set  out  in (c)(2)(A)  -  (C)  of  this                                                                    
     section."                                                                                                                  
                                                                                                                                
Representative  Gara directed  attention  to page  5 of  the                                                                    
legislation. He  explained that  the amendment  was intended                                                                    
to provide the public  and other legislators with additional                                                                    
information  that would  enable  them to  understand the  10                                                                    
percent budget cut suggestions  required by the legislation.                                                                    
He  considered the  amendment to  be friendly.  He furthered                                                                    
that without  the amendment people would  receive a document                                                                    
listing a series of cuts  totaling 10 percent of an agency's                                                                    
budget.  He  expounded  that  the  bill  asked  agencies  to                                                                    
identify items  that (A) did  not serve a current  need, (B)                                                                    
were  not authorized  by the  state's  constitution, or  (C)                                                                    
were non-essential  to the agency's mission.  He stated that                                                                    
if agencies could not find  cuts under items (A) through (C)                                                                    
they were  directed to find  cuts in low  priority services.                                                                    
The   amendment  specified   that  the   report  issued   by                                                                    
consultants should identify which  of the standards the cuts                                                                    
met.  He  referred  to  an   opposition  argument  that  the                                                                    
amendment was  unnecessary because the report  would already                                                                    
recognize which of  the standards the proposed  cuts met. He                                                                    
countered  that  it may  or  may  not; the  amendment  would                                                                    
require it to do so.  He emphasized that the amendment would                                                                    
allow the  public to see  why the cut had  been recommended.                                                                    
He added that the amendment  would ensure that agencies knew                                                                    
why they had chosen the cuts they had.                                                                                          
                                                                                                                                
1:41:59 PM                                                                                                                    
                                                                                                                                
Representative  Wilson expressed  opposition to  Amendment 1                                                                    
and noted it had also  been heard in a subcommittee meeting.                                                                    
She  was concerned  that cuts  may not  always fit  into one                                                                    
distinct category.  She believed  the point of  the exercise                                                                    
was  to  identify  proposed  cuts   based  on  the  language                                                                    
outlined  in the  bill. She  opined  that providing  further                                                                    
detail on  why something  had or had  not been  proposed for                                                                    
cuts could be confusing.                                                                                                        
                                                                                                                                
Representative  Costello spoke  against  the amendment.  She                                                                    
believed  that  the  amendment  weakened  the  legislation's                                                                    
intention  to   ask  some  very  difficult   questions.  She                                                                    
stressed  that the  legislature, departments,  agencies, and                                                                    
the  public would  all be  asking tough  questions. She  was                                                                    
concerned that allowing the "out"  would avoid the difficult                                                                    
conversation. She  had learned there would  be opportunities                                                                    
for   public   testimony.    She   stressed   that   working                                                                    
collectively would help determine ways  to move forward in a                                                                    
less   certain  budget   situation.   She  appreciated   the                                                                    
amendment's recognition  that the process would  not be easy                                                                    
for anyone.                                                                                                                     
                                                                                                                                
1:44:02 PM                                                                                                                    
                                                                                                                                
Vice-Chair Neuman  surmised that  the amendment  would allow                                                                    
an agency to  opt out of recommending 10 percent  cuts if it                                                                    
could  not meet  the criteria  under (c)(2)(A).  He believed                                                                    
that  public  notice  had  been  addressed.  He  pointed  to                                                                    
language that had been added  in subcommittee (page 2, lines                                                                    
5  through 8)  related  to  the results  of  the review  and                                                                    
providing information  to the  Legislative Budget  and Audit                                                                    
Committee (LB&A). He  stated that the public  would be aware                                                                    
of the results when the audit was released.                                                                                     
                                                                                                                                
Representative  Gara  asserted  that  Amendment  1  was  not                                                                    
intended to have the result  discussed by Vice-Chair Neuman.                                                                    
He explained  that the amendment still  required agencies to                                                                    
identify  10   percent  cuts.  He  stated   that  under  the                                                                    
legislation an  agency would first  look for  items outlined                                                                    
in (c)(2)(A)  through (C) on  page 5;  if cuts could  not be                                                                    
found under the three categories  the agency was required to                                                                    
find other cuts  (page 5, lines 9 and 10).  He stressed that                                                                    
the  amendment would  only require  the disclosure  of where                                                                    
the  cuts had  come from;  the disclosure  would enable  the                                                                    
public to  understand how  the cuts  had been  identified by                                                                    
auditors. He emphasized that the  amendment would not change                                                                    
the 10 percent requirement in the legislation.                                                                                  
                                                                                                                                
Representative Thompson referred to page  5, lines 20 and 21                                                                    
and  read  from  the  bill:  "...including  agency  mission,                                                                    
results-based  measures,  prioritization of  core  services,                                                                    
and  all programs  within the  core services  from the  most                                                                    
important to the least important."                                                                                              
                                                                                                                                
Representative   Thompson  concluded   that  the   provision                                                                    
requiring   the  information   to   be   submitted  to   the                                                                    
legislature [page 5, lines 18  through 21] would likely show                                                                    
where the proposed cuts had come from.                                                                                          
                                                                                                                                
Co-Chair  Stoltze  opined  that the  amendment  provided  an                                                                    
"out"  because it  did not  direct agencies  to find  the 10                                                                    
percent  cuts.  He  stated  that   the  bill  only  required                                                                    
agencies to make  a recommendation; it did  not mandate that                                                                    
the legislature  had to follow  the recommendations.  He saw                                                                    
nothing  wrong with  asking agencies  to designate  the cuts                                                                    
and noted  that agencies could  include a narrative  if they                                                                    
believed the  cuts were not efficacious.  He reiterated that                                                                    
he   was  uncomfortable   giving   agencies   an  out   from                                                                    
identifying the cuts.                                                                                                           
                                                                                                                                
1:50:20 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE   MIKE   CHENAULT,   SPONSOR,   opposed   the                                                                    
amendment. He  clarified that the  review committee  did not                                                                    
make  recommendations  for  agency cuts;  departments  would                                                                    
make recommendations  to the committee. He  believed that if                                                                    
department's  could  not locate  the  10  percent cuts  they                                                                    
would  have the  ability to  provide a  narrative explaining                                                                    
why they believed  items were essential to  their budget. He                                                                    
understood  the  concerns,  but believed  departments  would                                                                    
provide commentary  on the impact  cuts would have  on their                                                                    
current budgets.                                                                                                                
                                                                                                                                
Co-Chair Stoltze remarked that  he agreed with the sentiment                                                                    
he had  seen on a sign  that stated: "if it's  in the yellow                                                                    
pages why is government doing it?"                                                                                              
                                                                                                                                
Representative Kawasaki  voiced support for Amendment  1. He                                                                    
observed  that  if an  agency  was  not  able to  make  cuts                                                                    
specified  in (c)(2)  (A)  through (C)  they  would have  to                                                                    
justify  the remaining  cuts.  He  believed the  information                                                                    
would help the review team  and the legislature to determine                                                                    
if the cuts were feasible.                                                                                                      
                                                                                                                                
Representative Gara  agreed that Co-Chair  Stoltze's concern                                                                    
was valid, but  stressed that the amendment  did not provide                                                                    
an out to agencies. He  clarified that the amendment did not                                                                    
alter  the  bill's  intent;  it  only had  to  do  with  the                                                                    
commentary included  in the report.  He elaborated  that the                                                                    
amendment  would require  disclosure of  where the  cuts had                                                                    
come from  (either from (c)(2)  (A) through (C) or  from the                                                                    
lowest priority services in the  agency). He emphasized that                                                                    
the amendment  would not change the  consultants' proposals.                                                                    
He communicated that the amendment's  purpose was to provide                                                                    
information to the public.                                                                                                      
                                                                                                                                
1:55:36 PM                                                                                                                    
                                                                                                                                
Representative  Chenault underscored  that  the review  team                                                                    
would  not be  responsible  for identifying  the 10  percent                                                                    
cuts; agencies would  be in charge of  bringing cuts forward                                                                    
to the review team.                                                                                                             
                                                                                                                                
Representative Wilson MAINTAINED her OBJECTION.                                                                                 
                                                                                                                                
A roll call vote was taken on the motion.                                                                                       
                                                                                                                                
IN FAVOR: Gara, Kawasaki                                                                                                        
OPPOSED: Costello, Edgmon,  Holmes, Munoz, Neuman, Thompson,                                                                    
Wilson, Stoltze                                                                                                                 
                                                                                                                                
The MOTION FAILED (8/2).                                                                                                        
                                                                                                                                
Representative  Costello addressed  the bill's  three fiscal                                                                    
notes.  The  first  was  a  zero note  from  the  Office  of                                                                    
Management and Budget. The second  note from the Division of                                                                    
Legislative Audit  included $642,300 for three  positions in                                                                    
FY 13,  zero fiscal impact  for FY 14, $1,351,900  for three                                                                    
positions in  FY 15,  $1,198,900 for  three positions  in FY                                                                    
16, $1,324,900 for three positions  in FY 17, and $1,177,900                                                                    
per year for three positions in FY 18 and FY 19.                                                                                
                                                                                                                                
1:58:35 PM                                                                                                                    
                                                                                                                                
Representative Costello relayed that  the last note had zero                                                                    
fiscal  impact  and was  from  the  Division of  Legislative                                                                    
Audit.                                                                                                                          
                                                                                                                                
Co-Chair  Stoltze communicated  that  the  fiscal notes  had                                                                    
been  discussed at  the prior  meeting. The  notes addressed                                                                    
the issue of potential contracting.                                                                                             
                                                                                                                                
Vice-Chair  Neuman  MOVED  to report  CSHB  30(FIN)  out  of                                                                    
Committee   with   individual    recommendations   and   the                                                                    
accompanying fiscal notes. There  being NO OBJECTION, it was                                                                    
so ordered.                                                                                                                     
                                                                                                                                
CSHB 30(FIN) was REPORTED out  of Committee with a "do pass"                                                                    
recommendation  and with  one new  fiscal  impact note  from                                                                    
Division  of Legislative  Audit,  one new  zero fiscal  note                                                                    
from Legislative  Finance Division, and one  new zero fiscal                                                                    
note from the Office of Management and Budget.                                                                                  
                                                                                                                                
1:59:52 PM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
2:00:27 PM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                
HOUSE BILL NO. 26                                                                                                             
                                                                                                                                
     "An Act extending the termination date of the Board of                                                                     
     Public Accountancy; and providing for an effective                                                                         
     date."                                                                                                                     
                                                                                                                                
2:00:37 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  MIKE HAWKER,  SPONSOR,  relayed  that HB  26                                                                    
extended  the  termination  date  for the  Board  of  Public                                                                    
Accountancy  to  June  30,  2021.   He  explained  that  the                                                                    
legislature  routinely designated  sunset  dates for  boards                                                                    
and  commissions; prior  to  the sunset  date  the board  or                                                                    
commission was  reviewed through the legislative  budget and                                                                    
audit process  to ensure that  its services continued  to be                                                                    
needed.  The bill  was supported  by legislative  audit work                                                                    
conducted the prior summer; the  auditor had determined that                                                                    
the board's termination date should  be extended to June 30,                                                                    
2021; that  it was operating  in the public's  interest; and                                                                    
that it  had exercised  appropriate regulatory  oversight of                                                                    
public   accountants.  He   communicated   that  the   audit                                                                    
expressed one  concern related to the  overall operations of                                                                    
the case management system of  the Division of Corporations,                                                                    
Business,  and  Professional  Licensing (CBPL).  The  fiscal                                                                    
note would continue  to fund the board at  its current level                                                                    
with  receipt  supported  services. He  explained  that  the                                                                    
funds  were  taken  from the  regulated  community  for  the                                                                    
purpose of administrating its professional licensing board.                                                                     
                                                                                                                                
2:03:18 PM                                                                                                                    
                                                                                                                                
Co-Chair  Stoltze  asked  CBPL  to  provide  detail  on  the                                                                    
concerns from its perspective.                                                                                                  
                                                                                                                                
DON HABEGAR,  DIRECTOR, DIVISION OF  CORPORATIONS, BUSINESS,                                                                    
AND   PROFESSIONAL   LICENSING,  DEPARTMENT   OF   COMMERCE,                                                                    
COMMUNITY AND  ECONOMIC DEVELOPMENT, addressed the  issue of                                                                    
concern  outlined in  the  audit. He  explained  that a  new                                                                    
database  had   been  installed  into   investigations;  the                                                                    
database had some issues in  the installation and conversion                                                                    
process that  had been caught  by a 2011 special  audit. The                                                                    
division had addressed the issue  by generating a task-force                                                                    
including  a  database  specialist and  the  division's  own                                                                    
investigators  and information  technology staff.  The task-                                                                    
force had come  out with a number of  recommendations to fix                                                                    
the  issues.   He  elaborated  that   CBPL  had   asked  the                                                                    
legislature for a special appropriation  to pay for incurred                                                                    
costs related to the task-force.  The division was currently                                                                    
implementing   the   fixes;   the   software   writing   was                                                                    
anticipated to be completed in  draft form by April 1, 2013.                                                                    
The division  would have 60-plus  days of testing  to ensure                                                                    
that the  system was working  correctly and the  final fixes                                                                    
were scheduled for completion by the end of June 2013.                                                                          
                                                                                                                                
2:06:08 PM                                                                                                                    
                                                                                                                                
Co-Chair  Stoltze  discussed  that most  boards  were  self-                                                                    
supporting,  self-assessed,  and that  legislative  affirmed                                                                    
board members set policies. He  referred to discussions that                                                                    
the  professional wishes  had been  side tracked  related to                                                                    
the use of funds. He asked for clarification on the issue.                                                                      
                                                                                                                                
Mr. Habegar had  heard from the boards that  they wanted the                                                                    
increased  ability to  travel to  out-of-state meetings.  He                                                                    
shared   that  AS   Title   8   included  approximately   40                                                                    
professional  licensing programs;  20  of  the programs  had                                                                    
boards  and   20  had   department  oversight.   The  boards                                                                    
generally  belonged  to national  professional  associations                                                                    
that helped to  steer the profession in  various states. The                                                                    
Alaska boards  liked to  be part  of the  discussions, given                                                                    
that national  associations set  policies that  had national                                                                    
and state  impacts. The division had  approximately $400,000                                                                    
in travel authority in FY  13 (the governor's proposed FY 13                                                                    
request had  been $550,000).  He had  devised a  system that                                                                    
included  travel  to  all   in-state  meetings,  which  were                                                                    
statutorily required.  He had  carved out  a portion  of the                                                                    
funds  for  administrative  purposes  (e.g.  his  travel  to                                                                    
Anchorage to  "steer" staff).  He communicated  that out-of-                                                                    
state travel was parceled out of remaining funds.                                                                               
                                                                                                                                
2:08:34 PM                                                                                                                    
                                                                                                                                
Representative Costello  asked whether the  division planned                                                                    
to provide  licensees with online  visibility in  regards to                                                                    
how their fees were spent. She supported the idea.                                                                              
                                                                                                                                
Mr. Habegar answered  that the division had  been working on                                                                    
bringing its accounts up to speed; it had conducted a 10-                                                                       
year review of  all the boards' revenue  and expense reports                                                                    
and  had  reconciled the  reports  to  the state  accounting                                                                    
system. He furthered that  quarterly reports were reconciled                                                                    
to  the state  accounting system  and were  provided to  the                                                                    
boards. He  believed putting the  reports online was  a good                                                                    
suggestion   and   the   division   would   take   it   into                                                                    
consideration.                                                                                                                  
                                                                                                                                
REPRESENTATIVE   STEVE  THOMPSON,   SPONSOR  pointed   to  a                                                                    
reconciliation showing  excess funds carried forward  by the                                                                    
Board of  Accountancy, which showed $147,000  accumulated in                                                                    
its account.  He observed that  the board's request  to send                                                                    
two CPAs to the national  conference had been denied because                                                                    
it had  not fit in  the budget; however, there  was $147,000                                                                    
in  the board's  account. He  asked if  there should  be two                                                                    
line items in the budget for department travel and for pre-                                                                     
paid professional  board travel. He thought  the distinction                                                                    
may prevent the misconception  that general funds were being                                                                    
saved  when the  travel budget  was cut.  He discussed  that                                                                    
other  boards  had  used state  travel  funds  for  national                                                                    
conferences;  subsequently, the  funds were  reimbursed, but                                                                    
instead of going  back into the board's  travel account, the                                                                    
funds were deposited  into the state's general  fund. He was                                                                    
concerned  that  the  issue   was  creating  a  problem  and                                                                    
wondered about a solution.                                                                                                      
                                                                                                                                
2:11:41 PM                                                                                                                    
                                                                                                                                
Mr. Habegar  replied that he  had spoken with all  20 boards                                                                    
about the  issue at  some point  in time.  He felt  that the                                                                    
$400,000 provided by the legislature  could not be overspent                                                                    
even if  the division  collected other revenue  sources. For                                                                    
example,  professionals paid  licensing fees  on a  biennial                                                                    
basis;  two  years of  revenue  was  typically collected  in                                                                    
advance  of  two years  of  expenses;  therefore, a  program                                                                    
could  have a  surplus at  any one  time. He  expounded that                                                                    
programs may  have a carryover  if expenses came in  as less                                                                    
than revenue; after analysis by  the division, the carryover                                                                    
may  be  used  to  reduce  fees or  to  pay  for  additional                                                                    
anticipated expenses (i.e. for a court case or other).                                                                          
                                                                                                                                
Mr.  Habegar addressed  the  second  part of  Representative                                                                    
Thompson's  question  related to  third-party  reimbursement                                                                    
for  travel.  He  relayed that  state  policy  required  the                                                                    
division to  show the costs  on revenue expense  reports. He                                                                    
agreed that the incurred  expenses records should be public;                                                                    
therefore  the division  paid for  the travel  up front.  He                                                                    
confirmed   that    when   third-parties    (e.g.   national                                                                    
organizations) reimbursed for travel  expenses the money was                                                                    
deposited into the general fund.                                                                                                
                                                                                                                                
2:14:36 PM                                                                                                                    
                                                                                                                                
Representative Thompson found it  hard to believe that board                                                                    
members  paying into  a travel  account were  denied out-of-                                                                    
state  travel  and  that instead  the  division  recommended                                                                    
reducing  fees when  excess revenue  accrued from  licensing                                                                    
fees. He  saw confusion  arising because licensees  were not                                                                    
able to  use the  money designated  for travel.  He asserted                                                                    
that pre-paid  professional travel fees should  be separated                                                                    
from the department's general fund expenditures.                                                                                
                                                                                                                                
Representative   Hawker  had   met  with   members  of   the                                                                    
Corporations Board  who claimed  that they had  been granted                                                                    
insufficient  spending authority  for the  receipt supported                                                                    
services (RSS) funds  collected in aggregate for  all of the                                                                    
state's boards  and commissions.  The issue resulted  in the                                                                    
agency's need  to ration the  amount of RSS funds  that were                                                                    
collected from  each of the boards.  Additionally, boards or                                                                    
commissions  (paying   their  own  way  through   RSS)  were                                                                    
prevented from accessing all of  the money that was assessed                                                                    
and taken  by the state.  He asserted that the  practice was                                                                    
"confiscation  and  impoundment"  of  money  paid  by  self-                                                                    
supporting  organizations  into   the  state's  custody  who                                                                    
expected  it to  be  available for  the  operation of  their                                                                    
boards  and commissions.  He agreed  that  the practice  was                                                                    
tantamount to theft if the  agency did not have authority to                                                                    
spend its  money. He noted  that the issue was  scheduled to                                                                    
be discussed  in subcommittee. He emphasized  that the funds                                                                    
came from RSS and not the general fund.                                                                                         
                                                                                                                                
Representative  Hawker  recommended  that  in  the  case  of                                                                    
third-party reimbursement  for travel, the  operating budget                                                                    
language section  should specify  that an  appropriation for                                                                    
RSS   includes   the    monetary   appropriation   and   any                                                                    
reimbursement  of  funds  from  national  organizations.  He                                                                    
stressed that  the solution  was very  simple. He  asked the                                                                    
committee   to  consider   ensuring  that   the  legislature                                                                    
authorized  the spending  of all  money taken  from Alaska's                                                                    
citizens and  that the state  was not stealing  travel money                                                                    
from the organizations.                                                                                                         
                                                                                                                                
2:19:18 PM                                                                                                                    
                                                                                                                                
Co-Chair   Stoltze  believed   the   discussion  point   was                                                                    
appropriate.                                                                                                                    
                                                                                                                                
Representative Hawker noted  that the conversation pertained                                                                    
to  an operation  of the  board of  corporations and  public                                                                    
licensing;  it  had  nothing  to  do  with  HB  26  and  the                                                                    
reauthorization of the Board of Accountancy.                                                                                    
                                                                                                                                
Representative Gara  asked for  verification that  the Board                                                                    
of  Accountancy's operations  were  paid  for by  membership                                                                    
fees and not with general  fund dollars. Mr. Habegar replied                                                                    
in the affirmative.                                                                                                             
                                                                                                                                
Representative  Gara asked  if  travel money  had been  held                                                                    
back  due to  a dispute  (within the  profession) that  more                                                                    
money should be  spent on investigation and  less on travel.                                                                    
Mr.  Habegar answered  in the  negative.  He furthered  that                                                                    
investigations   were  fully   funded  with   fee  supported                                                                    
services. The issue pertained to travel authorization.                                                                          
                                                                                                                                
Representative Gara  asked how  long the  proposed extension                                                                    
was.                                                                                                                            
                                                                                                                                
Co-Chair  Stoltze responded  that  the audit  recommendation                                                                    
was for an eight-year extension.                                                                                                
                                                                                                                                
Representative  Gara read  the last  sentence of  a one-page                                                                    
Division of Legislative Audit document  (copy on file): "The                                                                    
noted deficiencies hamper the  division's ability to provide                                                                    
adequate investigative  support to  the board."  He believed                                                                    
the  statement   warranted  concern.  He  wondered   if  the                                                                    
deficiency should be fixed prior to granting the extension.                                                                     
                                                                                                                                
2:22:03 PM                                                                                                                    
                                                                                                                                
Representative  Hawker  argued  that waiting  to  grant  the                                                                    
extension would  be "punishing the innocent  and letting the                                                                    
guilty go free." He stated  that AS 08.03.020(c) allowed the                                                                    
legislature to  extend the board's  termination date  for up                                                                    
to eight  years. He  accentuated that  the problem  noted in                                                                    
the Division  of Legislative Audit  document had  nothing to                                                                    
do with  the operation of  the Board of  Public Accountancy;                                                                    
it had to do with a  larger unsolved problem within CBPL. He                                                                    
relayed  that  the  time  and   work  put  into  the  sunset                                                                    
authorizations by  the legislative auditor  was significant;                                                                    
the authorizations additionally  were expensive and required                                                                    
substantial "man  power" that took away  from the division's                                                                    
ability  to  pursue  other  requests  (particularly  special                                                                    
audits requested  by legislators). He believed  the Board of                                                                    
Public  Accountancy had  sufficiently  demonstrated that  it                                                                    
merited  the 8-year  extension. He  stated that  the problem                                                                    
identified lay  with CBPL;  a special  audit related  to the                                                                    
problems  had been  released by  the Legislative  Budget and                                                                    
Audit Committee on June 29,  2011. He acknowledged that CBPL                                                                    
had  been  working  diligently to  resolve  the  issues.  He                                                                    
believed  the  division  needed   to  be  working  with  the                                                                    
legislature  to resolve  the budget  issues and  to continue                                                                    
work  with  legislative  oversight to  remedy  its  internal                                                                    
operation problems.                                                                                                             
                                                                                                                                
2:25:15 PM                                                                                                                    
                                                                                                                                
Co-Chair  Stoltze remarked  that the  Professional Licensing                                                                    
Board had done a good  job making improvements over the past                                                                    
several  years. He  added that  in the  past there  had been                                                                    
some "wild audit reports" that had been highly frustrating.                                                                     
                                                                                                                                
Vice-Chair Neuman  asked whether  there were  any repetitive                                                                    
issues brought  to the  Board of  Public Accountancy  by its                                                                    
members.  Mr. Habegar  replied that  there were  issues, but                                                                    
they  were part  of  the  normal course  of  business for  a                                                                    
professional  board  (e.g.  granting  licenses,  determining                                                                    
whether  licensing violations  had  occurred, regulation  of                                                                    
the profession, and other); the  board handled the issues on                                                                    
a  quarterly basis.  He furthered  that the  board was  busy                                                                    
with routine business.  He did not see  any anomalies before                                                                    
the board.                                                                                                                      
                                                                                                                                
Co-Chair Stoltze OPENED public testimony.                                                                                       
                                                                                                                                
JEFF JOHNSON,  CERTIFIED PUBLIC ACCOUNTANT and  CHAIR, STATE                                                                    
BOARD  of   ACCOUNTANCY,  FAIRBANKS   (via  teleconference),                                                                    
appreciated the  discussion. He  had been  on the  board for                                                                    
several years  and had learned  from other members  that the                                                                    
investigative process had been  greatly improved in the past                                                                    
couple of  years. He  believed the board  was headed  in the                                                                    
right direction and mentioned  the improved reporting system                                                                    
that should be operational in  the spring of 2013. He stated                                                                    
that  in  the  past  there  had  been  a  problem  with  the                                                                    
timeliness of investigations and  protection of the public's                                                                    
interest. He  reiterated that the  board felt it  was headed                                                                    
in the right direction.                                                                                                         
                                                                                                                                
2:28:40 PM                                                                                                                    
                                                                                                                                
Co-Chair  Stoltze   asked  if  Mr.  Johnson   supported  the                                                                    
legislation. Mr. Johnson replied in the affirmative.                                                                            
                                                                                                                                
Co-Chair Stoltze CLOSED public testimony.                                                                                       
                                                                                                                                
Representative Costello  discussed the fiscal note  from the                                                                    
Department of  Commerce, Community and  Economic Development                                                                    
for receipt  services in the  annual amount of  $161,700 for                                                                    
FY 14 through FY 19 and one full-time position.                                                                                 
                                                                                                                                
Vice-Chair Neuman  MOVED to  REPORT HB  26 out  of committee                                                                    
with individual recommendations  and the accompanying fiscal                                                                    
note.                                                                                                                           
                                                                                                                                
Representative  Gara  OBJECTED  for discussion.  He  made  a                                                                    
remark about an "attorney barb" and WITHDREW his OBJECTION.                                                                     
                                                                                                                                
Representative Hawker  commented that  he would  come before                                                                    
the committee during session with  an Alaska Bar Association                                                                    
reauthorization bill.                                                                                                           
                                                                                                                                
There being NO further OBJECTION,  HB 26 was REPORTED out of                                                                    
committee  with  a "do  pass"  recommendation  and with  one                                                                    
previously published zero fiscal note: FN1 (CED).                                                                               
                                                                                                                                
2:31:11 PM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
2:33:11 PM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                
HOUSE BILL NO. 22                                                                                                             
                                                                                                                                
     "An Act extending the termination date of the Board of                                                                     
     Marine Pilots; and providing for an effective date."                                                                       
                                                                                                                                
2:33:15 PM                                                                                                                    
                                                                                                                                
ANNA  LATHAM, STAFF,  REPRESENTATIVE  KURT OLSON,  discussed                                                                    
that HB  22 would extend  the termination date of  the Board                                                                    
of Marine Pilots (BMP) to June  30, 2019. She stated that in                                                                    
accordance with  AS Titles 24  and 44  the board was  set to                                                                    
expire on  June 30, 2013.  She relayed that  the Legislative                                                                    
Budget  and Audit  Committee had  determined that  the board                                                                    
should  be extended  because its  activities demonstrated  a                                                                    
public  need and  it operated  in an  efficient manner.  She                                                                    
stated  that  regulating   and  licensing  qualified  marine                                                                    
pilots  benefited  the  public's   safety  and  welfare  and                                                                    
protected the  marine environment. She explained  that HB 22                                                                    
had been pre-filed with an  estimated extension date of June                                                                    
30,  2018.  She furthered  that  after  reviewing the  audit                                                                    
Representative  Olson  had  requested  a  CS  to  align  the                                                                    
termination date with the date suggested in the audit.                                                                          
                                                                                                                                
Vice-Chair  Neuman MOVED  to ADOPT  the  Labor and  Commerce                                                                    
Committee CS. There being NO OBJECTION, it was so ordered.                                                                      
                                                                                                                                
Representative   Thompson   referred   to  a   Division   of                                                                    
Legislative  Audit  document (copy  on  file)  and read  its                                                                    
recommendation: "While  the board has  successfully resolved                                                                    
many of  the issues  identified in  the prior  sunset audit,                                                                    
current  analysis  of   BMP  operational  activities  showed                                                                    
administrative   deficiencies   regarding   public   meeting                                                                    
notifications,  licensing  documentation, and  oversight  of                                                                    
the  pilot  associations'  drug and  alcohol  programs."  He                                                                    
wondered  whether measures  had  been taken  to rectify  the                                                                    
issues.                                                                                                                         
                                                                                                                                
Ms.  Latham  replied  that  at  the time  of  the  audit  in                                                                    
November 2011 the marine pilot  coordinator who oversees the                                                                    
mentioned  issues had  been in  his position  for under  one                                                                    
year; he  had been  unaware of the  operational deficiencies                                                                    
noted in  the audit. Subsequently, the  board was developing                                                                    
a  desk  manual  and  written  procedure  to  codify  needed                                                                    
primary  functions. She  detailed that  the coordinator  was                                                                    
developing  appropriate  documentation   and  checklists  to                                                                    
ensure that an adequate oversight process was in place.                                                                         
                                                                                                                                
2:37:02 PM                                                                                                                    
                                                                                                                                
Co-Chair  Stoltze  asked about  the  length  of the  board's                                                                    
prior sunset extension. Ms. Latham  responded that the board                                                                    
had been extended in 2007.                                                                                                      
                                                                                                                                
Co-Chair Stoltze asked  Mr. Habegar for any  comments on the                                                                    
audit conclusions.  Mr. Habegar  answered that  the previous                                                                    
marine  pilot coordinator  had  departed  from the  position                                                                    
with  little notice;  it had  put the  board in  a bind  and                                                                    
subsequently  items  had  been   noted  in  the  audit  that                                                                    
occurred while the new coordinator  had been in training. He                                                                    
believed the  recommendation was  appropriate. As  a result,                                                                    
the  board was  implementing  administrative backstops.  For                                                                    
example, one  of the issues involved  providing ample public                                                                    
notice for board meetings.                                                                                                      
                                                                                                                                
Co-Chair  Stoltze asked  whether was  any challenge  getting                                                                    
board members  together. Mr. Habegar  replied that  the only                                                                    
challenge had  to do with  meeting during the height  of the                                                                    
summer  maritime  season  when special  issues  arose  (e.g.                                                                    
investigative    issues   requiring    board   input).    He                                                                    
communicated  that  teleconferencing   normally  solved  the                                                                    
issue.                                                                                                                          
                                                                                                                                
Co-Chair  Stoltze wondered  if  Alaska's  entry into  Arctic                                                                    
waters  and the  role  of  marine pilots  had  been a  board                                                                    
discussion point.  Mr. Habegar  affirmed that the  board had                                                                    
discussed  Arctic access,  but  he had  not  seen any  final                                                                    
conclusions.                                                                                                                    
                                                                                                                                
2:40:13 PM                                                                                                                    
                                                                                                                                
Representative Munoz asked for  an explanation of yacht fees                                                                    
that  appeared  in  the  revenues  and  expenditures  budget                                                                    
breakdown  from  2007  to 2012.  Mr.  Habegar  replied  that                                                                    
foreign pleasure crafts of a  certain tonnage or length were                                                                    
statutorily  required   to  have  a  pilot.   A  waiver  was                                                                    
possible,  but  certain  fees  payable  to  the  state  were                                                                    
required.                                                                                                                       
                                                                                                                                
Representative   Munoz  asked   if  the   yacht  fees   were                                                                    
applicable  to  vessels  of  a  certain  size.  Mr.  Habegar                                                                    
believed the  requirement applied to foreign  pleasure craft                                                                    
vessels between 75 feet and 150 feet.                                                                                           
                                                                                                                                
Representative  Munoz asked  for verification  that the  fee                                                                    
structure  was   biennial.  Mr.  Habegar  answered   in  the                                                                    
affirmative. He  noted that all of  the state's professional                                                                    
licensing programs were biennial.                                                                                               
                                                                                                                                
Representative Munoz  asked for the fee  amount. Mr. Habegar                                                                    
replied that the biennial pilot  fee was $2,500 and the ship                                                                    
agent fee was $800.                                                                                                             
                                                                                                                                
Representative Gara  asked what percentage of  marine pilots                                                                    
were Alaskans.  Mr. Habegar responded  that he  would follow                                                                    
up on the question.                                                                                                             
                                                                                                                                
Representative   Gara  observed   that  the   board  oversaw                                                                    
trainings and approved training  programs for marine pilots.                                                                    
He wondered if the board  had considered doing anything that                                                                    
would  increase the  number of  Alaskan pilots.  Mr. Habegar                                                                    
was not aware of any  board action that would require Alaska                                                                    
hire of pilots.                                                                                                                 
                                                                                                                                
Representative Gara  noted that  Alaska hire  would probably                                                                    
be illegal. He  surmised the training function  would be the                                                                    
only avenue  to explore  that could  increase the  number of                                                                    
Alaskan pilots;  he asked  for the  department to  follow up                                                                    
with the board on the  issue. He requested the percentage of                                                                    
Alaskan and non-Alaskan marine pilots.  He would like to see                                                                    
the  positions filled  with more  Alaskans,  given that  the                                                                    
jobs were good and high paying.                                                                                                 
                                                                                                                                
Co-Chair  Stoltze remarked  that it  would also  be good  to                                                                    
know  how many  marine pilots  were Alaskans  who had  moved                                                                    
out-of-state.                                                                                                                   
                                                                                                                                
2:44:49 PM                                                                                                                    
                                                                                                                                
DAVID  ARTZT, CAPTAIN,  ALASKA MARINE  PILOTS, DUTCH  HARBOR                                                                    
(via  teleconference), described  his  marine pilot  service                                                                    
region. He was happy to answer any questions.                                                                                   
                                                                                                                                
Co-Chair  Stoltze asked  about  Alaska's  entry into  Arctic                                                                    
waters and  the role of  marine pilots in safety  issues. He                                                                    
wondered  about federal  government  requirement. Mr.  Artzt                                                                    
replied  that  currently  statutes  required  state-licensed                                                                    
pilots   onboard  specific   vessels   within  the   state's                                                                    
boundaries (typically within three  miles of the coastline).                                                                    
Federal waters  were overseen  by the  U.S. Coast  Guard. He                                                                    
stated that any activity  within state water boundaries fell                                                                    
under current regulations requiring pilots on vessels.                                                                          
                                                                                                                                
2:47:17 PM                                                                                                                    
                                                                                                                                
Representative Edgmon referred to  the Northern Waters Task-                                                                    
Force that  had provided its  report to the  legislature the                                                                    
prior  year.  He  noted  that marine  pilots  had  not  been                                                                    
included  in the  final report;  however,  members had  been                                                                    
supportive of  marine pilots' involvement in  areas like the                                                                    
Arctic.                                                                                                                         
                                                                                                                                
PAUL  FUHS, LOBBYIST,  SOUTHWEST  ALASKA PILOTS  ASSOCIATION                                                                    
(via teleconference), voiced support for the bill.                                                                              
                                                                                                                                
Co-Chair Stoltze CLOSED public  testimony. He asked if there                                                                    
were any amendments.                                                                                                            
                                                                                                                                
Representative Costello  pointed out that the  first line on                                                                    
page 2 of the DCCED fiscal  note should be corrected to read                                                                    
June  30, 2019  instead of  2018. The  fiscal note  included                                                                    
receipt services in the annual  amount of $151,200 for FY 14                                                                    
through FY 19 and one full-time position.                                                                                       
                                                                                                                                
2:50:49 PM                                                                                                                    
                                                                                                                                
Vice-Chair  Neuman  MOVED  to REPORT  CSHB  22(L&C)  out  of                                                                    
committee   with   individual    recommendations   and   the                                                                    
accompanying fiscal  note. There being NO  OBJECTION, it was                                                                    
so ordered.                                                                                                                     
                                                                                                                                
CSHB 22(L&C) was REPORTED out  of committee with a "do pass"                                                                    
recommendation and with one new  fiscal impact note from the                                                                    
Department of Commerce, Community and Economic Development.                                                                     
                                                                                                                                
Co-Chair Stoltze  discussed the  schedule for  the following                                                                    
day.                                                                                                                            
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
2:52:17 PM                                                                                                                    
                                                                                                                                
The meeting was adjourned at 2:52 p.m.                                                                                          
                                                                                                                                
                                                                                                                                

Document Name Date/Time Subjects
HB22 Supporting Documents-Audit Summary.pdf HFIN 2/12/2013 1:30:00 PM
HB 22
HB22 Supporting Documents-Audit 08-20076-13.pdf HFIN 2/12/2013 1:30:00 PM
HB 22
HB 22 Sponsor Statement.pdf HFIN 2/12/2013 1:30:00 PM
HB 22
HB 26 Sponsor Statement.pdf HFIN 2/12/2013 1:30:00 PM
HB 26
HB26 Audit Report Digest.pdf HFIN 2/12/2013 1:30:00 PM
HB 26
HB22 Supporting Documents.pdf HFIN 2/12/2013 1:30:00 PM
HB 22
HB26 Audit Public Accountantcy.pdf HFIN 2/12/2013 1:30:00 PM
HB 26
HB 30FN.3-Leg Audit-2-11-13.pdf HFIN 2/12/2013 1:30:00 PM
HB 30
CSHB 30 Gara-1- Amendment.pdf HFIN 2/12/2013 1:30:00 PM
HB 30