Legislature(1999 - 2000)
03/22/2000 01:50 PM House FIN
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE FINANCE COMMITTEE
March 22, 2000
1:50 P.M.
TAPE HFC 00 - 78, Side 1
TAPE HFC 00 - 78, Side 2
TAPE HFC 00 - 79, Side 1
RECONVENED
Co-Chair Therriault called the House Finance Committee
meeting to order at 1:50 p.m.
PRESENT
Co-Chair Mulder Representative Foster
Co-Chair Therriault Representative Grussendorf
Vice Chair Bunde Representative Moses
Representative J. Davies Representative Phillips
Representative G. Davis Representative Williams
Representative Austerman was absent from the meeting.
ALSO PRESENT
Representative Lisa Murkowski; Mike Tibbles, Staff,
Representative Therriault; Ken Freeman, Executive Director,
Resource Development Council; Steven Daugherty, Assistant
Attorney General, Department of Law Patrick Galvin,
Director, Division of Governmental Coordination, Office of
Management and Budget, Office of the Governor; Jack
Kreinheder, Senior Policy Analyst, Office of Management and
Budget; Barbara Frank, Director, Division of Administrative
Services, Department of Environmental Conservation; Karen
Brand, Vice President, Alaska State Chamber of Commerce,
Juneau; Jack Fargnoli, Policy Analyst, Office of Management
and Budget; Ginger Blaisdell, Fiscal Analyst, Legislative
Finance Division; Traci Carpenter, Fiscal Analyst,
Legislative Finance Division; Tamara Cook, Director,
Legislative Legal and Research Section, Legislative Affairs
Agency; Karla Schofield, Deputy Director, Administrative
Services, Legislative Affairs Agency.
TESTIFIED VIA TELECONFERENCE
Karen Cowart, General Manager, Alaska Support Industry
Alliance (The Alliance), Anchorage: Janice Adair, Director,
Division of Environmental Health, Department of
Environmental Conservation; Cheryl Fresca, Alaska Policy
Council, Anchorage; Sharon Young, State Recorder, State
Recorder's Office, Department of Natural Resources,
Anchorage; Linda Kesterson, Assistant Attorney General,
Department of Law; Donald Rapson, Drafting Committee on
Article IX; Jerry Kurtz, Attorney, Anchorage; Mark Langland,
President, Fiscal Policy Council, Anchorage;
SUMMARY
HB 239 "An Act relating to the Uniform Commercial Code;
relating to secured transactions; amending Rule
79, Alaska Rules of Civil Procedure; and providing
for an effective date."
CSHB 239 (FIN) was REPORTED out of Committee with
a "do pass" recommendation and with fiscal impact
note by the Department of Natural Resources,
publish date 2/11/00.
HB 265 "An Act extending the termination date of the
Alaska regional economic assistance program; and
providing for an effective date."
HB 265 was postponed.
HB 350 "An Act repealing the statutory bars to the State
of Alaska's prosecution of a criminal act that
resulted in a conviction or acquittal by the
United States, another state, or territory."
HB 350 was postponed.
HB 361 "An Act relating to charges for state services;
requiring that fees levied by resource agencies
for designated regulatory services be based on the
actual and reasonable direct cost of providing the
services, except in the case of certain negotiated
or fixed fees; relating to negotiated or fixed
fees of resource agencies; relating to invoices
for designated regulatory services; establishing a
petition process regarding fees charged by
resource agencies for regulatory services; and
providing for an effective date."
CSHB 361 (FIN) was REPORTED out of Committee with
a "do pass" recommendation.
HJR 2 Proposing amendments to the Constitution of the
State of Alaska relating to a biennial state
budget, to the appropriation limit, and to
appropriations from the budget reserve fund.
HJR 2 was heard and HELD in Committee for further
consideration.
HOUSE BILL NO. 361
"An Act relating to charges for state services;
requiring that fees levied by resource agencies for
designated regulatory services be based on the actual
and reasonable direct cost of providing the services,
except in the case of certain negotiated or fixed fees;
relating to negotiated or fixed fees of resource
agencies; relating to invoices for designated
regulatory services; establishing a petition process
regarding fees charged by resource agencies for
regulatory services; and providing for an effective
date."
Co-Chair Therriault provided members with Amendment 2 (copy
on file).
MIKE TIBBLES, STAFF, REPRESENTATIVE THERRIAULT provided
information on Amendment 2. He observed that the amendment
was drafted in response to concerns expressed by the
Department of Environmental Conservation, Department of
Natural Resources and the Department of Law.
Mr. Tibbles discussed amendment 2. On Page 2, line 10
"sales" was deleted and "sale or lease" inserted. The change
makes sure that the limitation on fees does not apply to the
state of Alaska's interest in leases on property. This was
in response to concerns of the Department of Natural
Resources.
On page 4, line 3 "serve upon" was deleted and "provide to"
inserted. This was in response to concerns expressed by
Representative J. Davies. This clarifies that the
determination would be provided to the applicant.
A new subsection was added on page 4, line 10: "(f) No
action taken by a resource agency or the Office of
Management and Budget under (c) of this section is subject
to AS 44.62 (Administrative Procedure Act)." This assures
that no one is required to establish fees in regulations.
On page 7, line 16 "for" was added before "associated with"
to clarify that if there is a pipeline right-away-lease that
other fees associated with the lease would not be included.
The last change was on page 8, line 31. The Office of
Management and Budget was added to section 4, which gives
each agency involved the authority to adopt regulations to
implement the act.
Co-Chair Therriault reiterated that the amendment addresses
concerns by the Department of Natural Resources, Department
of Law and by Representative J. Davies.
Co-Chair Therriault MOVED to ADOPT Amendment 2.
KEN FREEMAN, EXECUTIVE DIRECTOR, RESOURCE DEVELOPMENT
COUNCIL (RDC) observed that RDC is in support of the
amendment.
In response to a question by Representative Williams, Co-
Chair Therriault explained that the Office of Management and
Budget was given the authorization to adopt regulation at
the request of the Department of Law.
STEVEN DAUGHERTY, ASSISTANT ATTORNEY GENERAL, DEPARTMENT OF
LAW explained that the legislation previously referenced
only the natural resource agencies and gave them the
authority to adopt regulations. The Office of Management and
Budget was given responsibility, but was not included under
the definition of a natural resource agency and therefore
did not have regulation adoption authority. He emphasized
that regulation adoption authority is needed for
implementation of the bill.
Co-Chair Therriault clarified that the regulation adoption
authority is only given for implementation of HB 341.
PATRICK GALVIN, DIRECTOR, DIVISION OF GOVERNMENTAL
CORDINATION (DGC), OFFICE OF MANAGEMENT AND BUDGET, OFFICE
OF THE GOVERNOR explained that DGC would carry out the
petition portion of the Office of Management and Budget's
functions that are recognized in the legislation. He spoke
in support of Amendment 2 and noted that DGC was uncertain
if regulations would be needed to fulfill their legislative
mandate. He stated that he would be uncomfortable if DGC
were precluded from adopting regulation through omission of
regulatory authority.
JACK KREINHEDER, SENIOR POLICY ANALYST, OFFICE OF MANAGEMENT
AND BUDGET, OFFICE OF THE GOVERNOR observed that the Office
of the Governor did not submit an updated fiscal note. The
original fiscal note requested two positions at $157.6
thousand dollars. Contractual costs of $20 thousand dollars
were also included. He acknowledged that the committee
substitute would reduce their fiscal cost by authorizing
appeals at the agency level. He emphasized the difficulty of
predicting the workload.
There being NO OBJECTION, Amendment 2 was adopted.
Representative Phillips MOVED to ADOPT Amendment 3:
Page 6, line 31:
Delete " or"
Page 7, line 2, following "provided;"
Insert "or (G) travel expenses for inspecting
businesses having not more 6 than 20 employees;"
Representative Phillips explained that the amendment is an
attempt to help small miners in Alaska, who are located in
very remote, rural areas.
Co-Chair Therriault expressed concern that the amendment
would carve out one section of the regulated industry, but
emphasized small operations would have had to pay for the
cost of flying someone to remote sites and that he is
sensitive to the needs of small placer miners.
Vice Chair Bunde observed that small mining operations pay
only 20 percent of what it actually costs the state to
permit and supervise them. He questioned if more expenses
would be put on large mining operations to exempt the small
miners.
Co-Chair Therriault stated that the amendment would retain
the status quo for small miners. Vice Chair Bunde pointed
out that the status quo is being changed for the rest (of
the mining operations). He questioned how long miners would
be subsidized.
There being NO OBJECTION, Amendment 3 was adopted.
Representative J. Davies MOVED to ADOPT Amendment 4: insert
on page 6, line 12 "food, drugs, and cosmetics under AS
17.20." He explained that the amendment would bring the
inspection of restaurants under the legislation. He
maintained that the amendment fits under the legislation.
The Department of Environmental Conservation could implement
the amendment with a minimal of additional work.
Co-Chair Therriault pointed out that drugs and cosmetics
would be added. Representative J. Davies explained that
drugs and cosmetics were included because they are part of
the statutory site.
Mr. Freeman stated that the Resource Development Council
would have difficulty supporting the amendment. He stated
that he had envisioned the bill as a model that could be
applied to other programs. He maintained that the best
approach would be to look at the four programs that are
currently within the regulatory services. These are the
programs that RDC has worked with. He stressed that there
would be complexities with the addition of restaurant and
hair salon inspections. He spoke in support of addressing
restaurant inspections in other legislation.
Co-Chair Therriault spoke against the amendment. He
emphasized that the food industry had not had sufficient
time to respond to the amendment.
Representative J. Davies spoke in support of the amendment.
He felt that the food industry would support the amendment.
Co-Chair Therriault stressed that resource industries have
good associations for collecting and disseminating
information. He did not think that there was sufficient time
to disseminate the information to the restaurant industry.
He stated that he would like to see more participation by
the restaurant industry.
Representative J. Davies pointed out that significant budget
impacts were made on the industry, in increasing fee rates
while decreasing service, without their input. He stressed
that the amendment would level the playing field and give
them the same kind of protections in terms of the
development of fees. He felt that the food industry would be
supportive.
JANICE ADAIR, DIRECTOR, DIVISION OF ENVIRONMENTAL HEALTH,
DEPARTMENT OF ENVIRONMENTAL CONSERVATION testified via
teleconference. She observed that the amendment would result
in lower permitting fees for food facilities in the state.
The food industry is currently assessed a flat fee. She
clarified that the department does not charge fees to
hairdressers or salons. The amendment would eliminate some
of the items that are currently included in fees from the
fee structure.
Co-Chair Therriault questioned if the hospitality industry
had reached a unified decision on which direction they wish
to pursue.
Ms. Adair stressed that she had not heard from a single
business that did not support the reduction of fees. She
noted that there is recognition, in the food industry, that
state oversight of food service and processing is needed.
There is also a strong desire to see fees reduced.
Mr. Freeman acknowledged that fees need to be addressed from
a broader perspective, but emphasized that it has taken two
years to get to the current point with the four programs
included in the legislation. He expressed concern that
additional programs would inhibit the legislation's chance
to be enacted.
In response to a question by Representative J. Davies, Ms.
Adair pointed out that the Department of Environmental
Conservation's overriding concern with the bill is the issue
of equity. She acknowledged that there needs to be an
overriding policy on setting fees. The restaurant industry
has a lot of small operators that are paying as much as 93
percent of the cost to the state to oversee the industry.
There should be a rational basis for any inequity in fee
structures. This would be the only other program in the
Department of Environmental Conservation that would not be
covered. She did not think that the inclusion of the food
industry would be difficult to administer.
Representative J. Davies maintained that inclusion of the
food industry would round out the bill and bring all aspects
that are under the Department of Environmental Conservation
under the legislation. He observed that the legislation was
limited to the Department of Environmental Conservation and
the Department of Fish and Game. He maintained that the food
industry is the only obvious piece, left out, that fits in
the purview.
Co-Chair Therriault questioned the impact of the amendment
on the fiscal note. Ms. Adair responded that the fiscal cost
would be approximately $300 thousand dollars with the
adoption of Amendment 3 and $250 thousand dollars without
Amendment 3.
Representative G. Davis observed that restaurant fees are a
problem throughout the state. He felt that the industry
would support the amendment.
Co-Chair Therriault clarified that there were no discussions
with the food industry. He observed that the addition would
increase the fiscal cost.
In response to a question by Representative G. Davis, Ms.
Adair reiterated that the Department of Environmental
Conservation does not have authority for fees on drugs or
cosmetics.
A roll call vote was taken on the motion to adopt Amendment
4.
IN FAVOR: Davies, Foster, Grussendorf, Moses
OPPOSED: Phillips, Williams, Bunde, Therriault
The MOTION FAILED (4-5).
BARBARA FRANK, DIRECTOR, DIVISION OF ADMINISTRATIVE
SERVICES, DEPARTMENT OF ENVIRONMENTAL CONSERVATION observed
that the fiscal note would have to be reviewed and
resubmitted to reflect changes made in the committee
substitute. She noted that there would be different sets of
fees for small and large facilitates (based on Amendment 3).
There would be no change in the first year. Support for a
paralegal would be reduced by approximately $55 thousand
dollars. The revenue projections would reflect a loss of $75
thousand dollars. In the water quality program $256 thousand
dollars in statutory designated program receipts would be
changed to general fund program receipts. She noted that the
department could not anticipate the mix between fixed fees,
time and materials, and negotiated agreements.
Co-Chair Therriault suggested that the legislation could be
moved from committee and that the updated fiscal notes could
follow.
Vice Chair Bunde MOVED to report CSHB 361 (FIN) out of
Committee with individual recommendations.
CSHB 361 (FIN) was REPORTED out of Committee with a "do
pass" recommendation.
There being NO OBJECTION, it was so ordered.
HOUSE BILL NO. 239
"An Act relating to the Uniform Commercial Code;
relating to secured transactions; amending Rule 79,
Alaska Rules of Civil Procedure; and providing for an
effective date."
Co-Chair Therriault provided members with proposed committee
substitute, work draft 1-LS0455\K, 2/17/00 (copy on file).
Vice Chair Bunde MOVED to ADOPT work draft 1-LS0455\K,
2/17/00. There being NO OBJECTION, it was so ordered.
REPRESENTATIVE LISA MURKOWSKI testified in support of the
legislation. She explained that the committee substitute
incorporates minor technical changes submitted by the
National Conference of Commissioners on Uniform State Laws.
She observed that it is the first time that the code has
been updated in 25 years. She maintained that all interested
parties reviewed the legislation. The legislation
accommodates electronic filing and centralized filing
systems, expands the scope of property for secured
transactions, and updates the uniform commercial code (UCC).
The bill would take affect July 1, 2001. The House Labor and
Commerce and Judiciary committees passed the legislation
with "do pass" recommendations.
SHARON YOUNG, STATE RECORDER, STATE RECORDER'S OFFICE,
DEPARTMENT OF NATURAL RESOURCES, ANCHORAGE testified via
teleconference in support of the legislation. She maintained
that the legislation would simplify and modernize the filing
system and would benefit users with a modest fiscal cost.
Most of the operational impacts could be handled internally.
(TAPE CHANGE, HFC 00 - 78, SIDE 2)
Ms. Young review the contractual expense. Programming
changes would be needed to bring the system into compliance
with the legislation. The central filing system would need
to implement the usage of check digits, as a means to verify
accuracy of a file number. The contractual costs in FY01
would be $10.5 thousand dollars. There would be additional
programming costs of $20 thousand dollars in the second
year, related to electronic filing of applications.
In response to a question by Representative J. Davies, Ms.
Young explained that procedures for the secured transactions
would be largely the same. The legislation changes where the
filings occur. Alaska currently has a convoluted system of
filing. The bulk of filings are done in the central filing
office. Many lenders also file at the local level due to
their uncertainty regarding filing requirements. This
results in unnecessary dual filings and duplication. The
legislation would eliminate the bulk of local filings. There
are 35 local filing locations. The legislation includes a
lengthy transition period. She did not think that any policy
issues were addressed in the legislation.
Representative J. Davies questioned who makes the filings
and if the legislation would make filings easier. Ms. Young
noted that the user groups are principally financial
institutions, including out-of-state lending institutions.
Ms. Young explained that the system is currently paper
based. Electronic filing would do away with signature
requirements. Lenders in and out-of-state could do
electronic filings.
Representative Foster questioned if the legislation would
affect the Nome Office. Ms. Young stated that most of the
rural offices do not do a lot of UCC filings. She did not
think that the remote offices (with the possible exception
of Bethel) would be significantly impacted. The major impact
would be in urban areas.
Vice Chair Bunde observed that the entire component
generates more than it takes for operation. Ms. Young
clarified that their agency does not receive the benefit of
the funds that they generate.
LINDA KESTERSON, ASSISTANT ATTORNEY GENERAL, DEPARTMENT OF
LAW testified via teleconference. She stated that the only
policy decision is to change filings from local areas around
the state to a central location. She noted that there has
been a general policy shift around the country toward the
use of central filing locations. Changes to the UCC are to
bring it up to date; there are no substantive changes beyond
an attempt to make it easier and better to use. She reviewed
the articles affected by the legislation. She maintained
that there are no significant legal shifts in any of the
articles. She observed that the intent is for the changes to
be enacted throughout the nation by July 1, 2001.
Representative J. Davies questioned if the legislation has
been reviewed in depth. Ms. Kesterson assured him that the
Department of Law reviewed the legislation in depth.
JERRY KURTZ, ATTORNEY, ANCHORAGE testified via
teleconference in support of the legislation. He gave a
brief review of his credentials. He was Alaska's
representative to the National Conference of Commissioners
on Uniform State Law. The legislation gives security for
lenders and debtors. He maintained that no major policy
changes have been made by the legislation. He stressed that
the balance between creditors and debtors has not been
changed. Some additional protections were added for debtors.
Creditors must act in good faith.
DONALD RAPSON, DRAFTING COMMITTEE ON ARTICLE IX, NATIONAL
CONFERENCE OF COMMISSIONERS ON UNIFORM STATE LAW testified
via teleconference in support of the legislation. He
explained that he has been involved with this body of law
for 50 years. He observed that the body of law has been in
existence for a long time. The law serves the needs of
business: lenders and debtors. The legislation updates the
law to take advantage of new technology, such as financial
software. It allows the use of healthcare insurance
receivables as a form of collateral. He agreed that there
have been no major policy changes and observed that all
sides discussed the changes with care. He stressed that the
legislation requires a bank or lending company with offices
in multiple locations throughout the United States to file
only in the state in which it is incorporated. Currently,
filings are required in every state in which the entity is
in business.
Representative Foster MOVED to report CSHB 239 (FIN) out of
Committee with the accompanying fiscal note. There being NO
OBJECTION, it was so ordered.
Vice Chair Bunde maintained that since the filing fees
generated more than they cost that they could be reduced.
CSHB 239 (FIN) was REPORTED out of Committee with a "do
pass" recommendation and with fiscal impact note by the
Department of Natural Resources, publish date 2/11/00.
HOUSE JOINT RESOLUTION NO. 2
Proposing amendments to the Constitution of the State
of Alaska relating to a biennial state budget, to the
appropriation limit, and to appropriations from the
budget reserve fund.
Representative Phillips, Sponsor, spoke in support of the
legislation. She noted that HJR 2 proposes an amendment to
Alaska's Constitution to allow for biennial budgeting, and
authorizes the governor to present the legislature with a
budget encompassing two fiscal years. As written, the
first session of the Legislature would be dedicated to
writing a two-year budget. Supplemental budgets could
address necessary adjustments, when needed.
Representative Phillips maintained that Alaska's annual
budget cycle is an arduous process, taking up most of the
year. "Every year hundreds of people from State agencies
spend countless hours preparing for budget presentations to
the Legislature through hearings, debates and closeouts.
There is no doubt that the budget is the single most
important piece of legislation that legislators produce for
the people of Alaska."
"Changing this process to a biennial budget cycle would be
very beneficial to our State. Significant cost savings for
the Legislature, Administration and the agencies could be
achieved as well as far greater efficiencies and
productivity by all. Savings are measured in actual dollars
and employee productivity. Costs savings are realized in
travel and per diem dollars. Significant productivity
savings will be achieved in time that can be utilized for
programs rather than budget preparation."
"A biennial state budget system would allow us to address
the budget in the first year of session and focus primarily
on legislation in the second year. A biennial state budget
process would also work hand-in-hand with the results-based
budget concept pursued by the legislature. State agencies
would have a chance to initiate advance-planning efforts -
something, which is very difficult under the present annual
state budget system. Alaska would not be unique in adopting
a biennial legislative budget cycle."
"Research demonstrates that twenty other states operate
under a Biennial State Budget system. Systems of other
states could be used as a viable guide for Alaska's
transition into a biennial budget process. The Legislature
loses no control over the budget process by changing to a
biennial budget cycle."
Representative Phillips continued: "Sound public policy is
paramount to a smooth transition into a new state budget
system. Legislative control over the process is mandatory
in a biennial state budget system. This may suggest a
legislative transition team composed of joint member
legislators, and the Administration."
"In my opinion and as proven in other states where the
biennial cycle is already in place, the greatest benefit of
a biennial budget process is the increased efficiency and
productivity that can be achieved by State agencies.
Alaskans statewide constantly implore us to become more
efficient and increase our productivity. Besides achieving
these goals, and the actual costs savings of approximately
(and very conservatively, I might add) $2.5 million dollars,
associate with a shortened session in the second year, the
proposed biennial budget system is a win-win concept for
Alaska." She concluded that the biennial system would be in
keeping with the restructuring of government: cutting waste,
privatization, results based budgeting, consolidation of and
services. She maintained that biennial budgeting would enjoy
greater efficiencies and provide major savings in time and
money."
Vice Chair Bunde observed that there are fluctuations in
Alaska's oil based income and questioned how a biennial
legislature could cope with changes in the price of oil.
Representative Phillips pointed out that there are other
states that have biennial budgets.
Representative G. Davis suggested that biennial budgeting
would give legislators more time in the field to verify what
the departments are telling them.
Representative Grussendorf suggested that states with a
biennial system have static conditions without gigantic
shifts in the market. He added that a first term governor
would inherit the budget of his predecessor.
Co-Chair Therriault questioned if each odd year would be the
120-day session. Representative Phillips clarified that each
new legislature would have a 120-day session on their first
year.
Representative Phillips stressed the need to stabilize
Alaska's economy with a long-range plan.
Representative J. Davies expressed concern that the
legislature would not have enough time to really understand
budgets. He suggested that budgets be divided: half of the
budget would be addressed each year. He observed that there
has not been sufficient time to review data in the current
subcommittee process. He observed that his father, who was
an official in the state of Washington, found that he spent
all most as much time preparing supplemental budgets in the
off year as the regular budget. He questioned if the savings
were overstated.
Representative Phillips pointed out that some states have
allowed their finance committees to meet during the interim.
She observed that teleconferencing could be utilized.
KAREN COWART, GENERAL MANAGER, ALASKA SUPPORT INDUSTRY
ALLIANCE (THE ALLIANCE), ANCHORAGE testified via
teleconference in support of HJR 2. She read from a prepared
statement:
The Alaska Support Industry Alliance is a non-profit
trade association representing over 350 members engaged
in business within the oil, gas, and mining industries.
Collectively, we represent over 29,000 employees. Our
mission is to foster and promote the safe and
environmentally sound development of Alaska's natural
resources.
We believe state government should do business like a
business and investigate new ideas that would allow
government to do more with less - be more efficient and
effective in planning and executing our state budget
and budget process. Budgetary efficiency would send a
message to potential investors that we have a solid and
sound fiscal plan, and our "House is in order - a good
place to do business".
(TAPE CHANGE, HFC 00 - 79, SIDE 1)
We believe a two-year budget cycle could result in the
following:
á An opportunity for agency planning - proactive
spending habits instead of reactive spending
dialogue;
á The opportunity to analyze state programs based on
performance and results prior to yearly budget
appropriations:
á The potential for a shortened legislative session,
thereby saving state dollars and resources; and
á A greater utilization of all 60 legislators and
their expertise. Traditionally, the Senate/House
Finance Committees are made up of the more senior
members of each body. The House Finance Committee
members serve on no other committee. In many cases,
we are missing their valuable input, wisdom and vast
experience in legislation creation due to physical
time restraints. A two-year process would give all
legislators a chance to voice their opinions in the
early stages of legislation and budget development.
But, what about emergency needs or supplemental
requirements?
A biennial budget process would not preclude
supplemental budget considerations due to circumstances
of need. These could be addressed on a case-by-case
need.
Nevertheless, the process would free up legislators to
focus attention - one year on budget, one year on
legislation.
Twenty states have already adopted a biennial budget
process. That's a good indication that other states
are "thinking outside the box".
We believe Alaska needs to embrace a new way of
thinking. We must look at new and innovative ways to
conduct business. We encourage the dialogue on a
biennial budget process to continue.
MARK LANGLAND, PRESIDENT, FISCAL POLICY COUNCIL, ANCHORAGE
testified via teleconference in support of the legislation.
He maintained that biennial budgeting would create
efficiencies and fit nicely with a long-range fiscal plan.
He felt that a biennial budget would benefit the fiscal
process. He pointed out that the Constitutional Budget
Reserve would provide a funding source to pick up the slack.
He maintained that biennial budgeting would force the
legislature to protect the Constitutional Budget Reserve in
order to maintain a shock absorber that can provide for the
fluctuation of earnings. Planning gives more credibility and
comfort to the business community and provides better
opportunity for efficiencies.
CHERYL FRESCA, ALASKA POLICY COUNCIL, ANCHORAGE testified
via teleconference in support of the legislation. She
observed that she spent 17 years working with the state's
budget as legislative staff and in the Office of Management
and Budget. She emphasized the amount of time required for
executive branch agencies to prepare their annual budget
requests to the legislature and the work that is necessary
to close out a fiscal year. A two-year budget cycle would
provide significant productivity savings for administrative
and program staff involved in the various stages of budget
work. The challenge would be to free up resources and give
managers flexibility. The objections to a two-year budget
are no longer relevant. Fluctuations in the annual budget
are not a reason not to do biennial budgeting. The use of
the Constitutional Budget Reserve has changed the importance
of the revenue forecast. She maintained that biennial
budgeting would shift the legislature's function to
evaluating results.
Vice Chair Bunde observed that there are only a few years
left to the Constitutional Budget Reserve. He questioned if
a consequence of biennial budgeting would be to force the
state into a long-range plan. Ms. Fresca agreed that
biennial budgeting would encourage long-range planning. She
noted that fluctuations in revenue would still determine the
amount of revenues from the Constitutional Budget Reserve,
but pointed out that withdraws would be taken annually.
KAREN BRAND, VICE PRESIDENT, ALASKA STATE CHAMBER OF
COMMERCE, JUNEAU testified in support of the legislation. In
response to a question by Co-Chair Therriault, Ms. Brand
noted that the state Chamber is on an annual budget cycle.
JACK FARGNOLI, POLICY ANALYST, OFFICE OF MANAGEMENT AND
BUDGET spoke in support of the legislation. He maintained
that a biennial budget approach would encourage longer
planning timeframes for fiscal and program planning, work
well with performance measures, give a emphasizes for long-
term planning within programs, and allow for targeted depth
of treatment by the legislature and program managers for
policy needs within program areas.
The Office of the Governor has looked at the cost and
savings. Mr. Fargnoli stated that the greatest savings would
be in the shortening of legislative sessions in terms of
employees. Savings in employee productivity could be
redirected to other areas. There would also be savings in
travel and per diem.
Mr. Fargnoli stated that the Administration's only concern
is in regards to timing. The legislation provides for the
ballot question to come before voters in November. He
pointed out that departments and agencies begin budget
development as soon as the legislative session adjourns.
Agencies would need to know the outcome in order to create
their budgets. He observed that there are a number of ways
the issue could be addressed. A few departments could be
selected to begin the process. He noted that there could be
discussion during the interim on implementation.
Mr. Fargnoli added that there would always be a need for a
supplemental. He suggested that additional provisions be
considered to deal with other economic or social changes of
magnitude required during the second year of the biennial
process. He observed that the Constitutional Budget Reserve
fund helps to stabilize and regulate the flow. He reiterated
that the Administration would look forward to further
discussions regarding implementation.
Vice Chair Bunde asked the project longevity of the
Constitutional Budget Reserve fund. Mr. Fargnoli did not
know but added that the fund has continued through
projections of its demise.
Vice Chair Bunde emphasized that the supplemental can be a
significant amount of work. Mr. Fargnoli observed that other
states have handled their supplemental in a variety of ways.
There are states that have a session every other year and
that have their finance committees meet on the second year.
There are other states that meet two years in a row. The
only consensus, according to the National Conference of
State Legislators, is that the amount of legislative
activity in a biennial regime was somewhat more than the
ideal theory.
Representative J. Davies summarized that according to the
Administration that the primary savings would stem from the
fact that the legislature would be around less. Co-Chair
Therriault observed that the Department of Health and Social
Services' budget has large general fund portion built on
formulas and caseload. He stated that it would be impossible
to estimate the cost over a two-year period. He maintained
that the subcommittee chairman for the department would have
to go through the same process on the second year. He did
not see any savings in the Department of Health and Social
Services' budget. The legislature would not have the
department under its control on the second year. He observed
that if the department doesn't operate a program the way the
legislature directs than their only option would be to cut
the funding in a supplemental after it has already been
appropriated. He did not see that biennial budgeting would
work well for the Department of Health and Social Services.
Representative Phillips argued that the legislature
establishes the policy. Savings would be derived from
freeing agency personnel from work on the budget.
Representative J. Davies noted that the substantial savings
would come from a shortening of the time the legislature
spends working on the budget. He maintained that the time
the legislature spends on the budget is already
insufficient. He expressed concern that there would be less
legislative oversight.
Representative Phillips maintained that the legislature
could spend more time on the budget if it determined it was
necessary. Representative J. Davies pointed out that the
bill would reduce the amount of time in session.
Representative J. Davies observed that the National
Conference of Legislators found that the expected savings
from the agencies is generally overrated. The real savings
comes from the legislature being out of session. Mr.
Fargnoli agreed that the savings have generally been across
the board less than expected. He pointed out that the
legislature has a lot of latitude for designing and
implementing a program.
GINGER BLAISDELL, FISCAL ANALYST, LEGISLATIVE FINANCE
DIVISION noted that Representative Phillips had requested an
analysis of the legislation. She provided members with a
memorandum on biennial budgeting dated 1/25/00 (copy on
file). The memorandum compared the biennial budget process
of other states. She noted that most of the states contacted
had transitioned from an annual to a biennial budget or had
always had a biennial budget. No states had transitioned
from a biennial to annual budget in the last 20 years. All
the states began with a biennial budget. Biennial budgets
were adopted to allow citizen legislators. Most states that
transitioned to annual budgets did so as state budgets and
issues became more complex. States that transitioned back to
a biennial budget did so to encourage long term planning and
to reduce legislative sessions.
Ms. Blaisdell noted that fiscal analysts of five states were
contacted. She reviewed opinions of the fiscal analysts that
were contacted. Analysts noted that there was less stress on
the legislature. In Arizona, the governor is allowed to
submit adjustments to the appropriation measure. Only
technical corrections, non-general fund increments and
caseload driven changes are accepted. Formula funded
programs could be adjusted any year. The interim year
adjusted bill took only three weeks from the time it was
introduced to the time it was passed due to the restrictions
placed on it.
Ms. Blaisdell observed that the state of Connecticut began
budget reform in 1981. At that time they had a 20 percent
deficit of $961 million dollars. Their reform bill included
an income tax proposal, multi year budgeting, and a spending
cap. The off budget year was intended to focus on
performance measure. The fiscal analyst contacted stated
that the focus on performance measures had not occurred due
to significant changes in the off year and interest in
performance measures had waned.
Ms. Blaisdell observed that in Oregon, the biennial budget
tends to be slightly more conservative if the budget is
limited to the revenue forecast. If revenues drop lower than
the forecast a special session is called. If revenues
increase than a savings is realized, since the budget is
locked in. The biennial budget is fairly constant and
developed over an 18-month period. The governor has more
time to review agency requests. Complete budget information
is provided one month prior to the start of the legislative
session.
Ms. Blaisdell reviewed the biennial process in Texas. She
noted that the resource impact is smaller than Alaska's. The
fiscal analyst in Texas recommended that future needs should
be estimated three and a half years from preparation to full
implementation. She observed that the fall forecast of 1999
would be forecasting revenues through the year 2002. He also
recommended provisions to allow the legislature to meet in
times of crisis: some states call special sessions; some
offer a supplemental bill; and some have emergency boards
(similar to the Legislative Budget and Audit Committee).
Texas found that two-year budgets force agencies to plan and
prioritize for the long-term; outcome based budgeting
process places even greater emphasize on long range planning
and discourages tinkering and micro management of one year
budgets; and gives agencies the flexibility to concentrate
on how best to produce results, whether than how to justify
spending needs.
Ms. Blaisdell reviewed the comments of the state of
Washington's fiscal analyst. Timesaving within an agency
allows that agency to focus on the issues at hand rather
than budget preparation. The downside of biennial budgeting
is that the cost of starting new programs is more tempting.
If a new program is presented to the legislature and they
agree to fund it for the second of the two-year cycle, the
following budget will require an increment to full-fund the
program for a complete two-year cycle.
Vice Chair Bunde questioned if most new programs occurred on
the second year of the cycle. Ms. Blaisdell did not know,
but stated that construction projects that were budgeted to
be built may not be budgeted to be fully staffed. She added
that an agency, such as Office of Management and Budget,
would have to be more diligent about planned spending in a
two-year process.
Representative J. Davies observed that the Texas
legislature, in terms of general funds, only has control
over approximately 17 percent of the budget. Ms. Blaisdell
noted that the state of Texas has a larger amount of
dedicated funds, similar to Alaska's statutory designated
program receipts. There are also municipal revenues that are
paid on a local level, which made it difficult to compare to
Alaska.
TRACI CARPENTER, FISCAL ANALYST, LEGISLATIVE FINANCE
DIVISION she stated that the Division attempted to calculate
the amount of time spent by agency staff on budget
preparation, presentation, and travel. These costs were
divided into first and second years. She concluded that the
real savings would be in terms of the shorter legislative
session.
(TAPE CHANGE, HFC 00 - 79, SIDE 2)
Ms. Carpenter noted that the estimates by the Legislative
Finance Division were within a million dollars of the Office
of Management and Budget's.
Representative J. Davies questioned where the savings would
be realized. Ms. Carpenter responded that real savings would
be in travel and per diem. Productivity savings would be on
the administrative services directors' level. Uncompensated
overtime couldn't be quantified.
TAMARA COOK, DIRECTOR, LEGISLATIVE LEGAL AND RESEARCH
SECTION, LEGISLATIVE AFFAIRS AGENCY provided information on
the legislation. She explained that the House Judiciary
version added section 1, which contains provisions
addressing the length of the sessions. In addition, the
Judiciary Committee looked at two provisions in the
Constitution that are difficult to deal with in the context
of developing a biennial budget constitutional amendment.
The appropriation limit was drafted on the premise that a
single fiscal year would be compared to a single fiscal
year. It would have to be amended to address two fiscal
years. A similar provision is contained in subsection (b) of
the Constitutional Budget Reserve, which contains a formula
under which the legislature can access CBR funds based on
what money was available from the proceeding year to the
current year. This provision would have to be amended. To
prevent the legislature from being prohibited access to the
fund. She explained that the Judiciary Committee decided not
to address the issues due to concerns over the Bess opinion,
which addresses the number of subjects that a proposed
constitutional amendment can include. The original bill
doubled the appropriation limit and repealed subsection (b)
of the Constitutional Budget Reserve based on Bess concerns.
KARLA SCHOFIELD, DEPUTY DIRECTOR, ADMINISTRATIVE SERVICES,
LEGISLATIVE AFFAIRS AGENCY provided information on the
legislation. She observed that there would be a $20 thousand
dollar savings for each day the legislative session was
shortened. Session per diem totals $9,500 dollars a day;
reduced legislative staff would account for the majority of
the rest of the savings. The Legislative Affairs Agency did
not prepare a fiscal note. A 60-day session would result in
a $1.6 million dollars savings every other year.
HJR 2 was heard and HELD in Committee for further
consideration.
ADJOURNMENT
The meeting was adjourned at 4:25 p.m.
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