Legislature(2009 - 2010)HOUSE FINANCE 519
02/03/2010 01:30 PM House FINANCE
| Audio | Topic |
|---|---|
| Start | |
| HB300 || HB302 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 300 | TELECONFERENCED | |
| += | HB 302 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
HOUSE FINANCE COMMITTEE
February 3, 2010
1:37 p.m.
1:37:26 PM
CALL TO ORDER
Co-Chair Hawker called the House Finance Committee meeting
to order at 1:37 p.m.
MEMBERS PRESENT
Representative Mike Hawker, Co-Chair
Representative Bill Stoltze, Co-Chair
Representative Allan Austerman
Representative Mike Doogan
Representative Anna Fairclough
Representative Neal Foster
Representative Les Gara
Representative Reggie Joule
Representative Mike Kelly
Representative Bill Thomas Jr., Vice-Chair
Representative Woodie Salmon
MEMBERS ABSENT
None
ALSO PRESENT
Annette Kreitzer, Commissioner, Department of
Administration; Kevin Brooks, Deputy Commissioner,
Department of Administration; Eric Swanson, Director,
Division of Administrative Services, Department of
Administration; Emil Notti, Commissioner, Department of
Commerce, Community and Economic Development; Curtis
Thayer, Deputy Commissioner, Department of Commerce,
Community and Economic Development; Jo Ellen Hanrahan,
Director, Division of Administrative Services, Department
of Commerce, Community and Economic Development.
SUMMARY
HB 300 APPROP: OPERATING BUDGET/LOANS/FUNDS
HB 300 was HEARD and HELD in Committee for
further consideration. The following departments
presented overviews:
Department of Administration
Department of Commerce, Community and Economic
Development
HB 302 APPROP: MENTAL HEALTH BUDGET
HB 302 was HEARD and HELD in Committee for
further consideration.
HOUSE BILL NO. 300
"An Act making appropriations for the operating and
loan program expenses of state government, for certain
programs, and to capitalize funds; making supplemental
appropriations; making appropriations under art. IX,
sec. 17(c), Constitution of the State of Alaska; and
providing for an effective date."
HOUSE BILL NO. 302
"An Act making appropriations for the operating and
capital expenses of the state's integrated
comprehensive mental health program; and providing for
an effective date."
1:37:43 PM
Co-Chair Hawker discussed housekeeping.
DEPARTMENT OF ADMINISTRATION
ANNETTE KREITZER, COMMISSIONER, DEPARTMENT OF
ADMINISTRATION, introduced her support staff. She defined
the mission of the Department of Administration (DOA): to
provide consistent and efficient support services to state
agencies so that they may better serve Alaskans. She noted
that DOA has ten divisions and five independent boards and
commissions. She stated her intent to cover two major
areas: personnel labor relations and retirement and
benefits.
1:41:37 PM
Ms. Kreitzer maintained that DOA had been steady regarding
recruitment and retention since she had been appointed
commissioner in 2007. She reminded the committee that the
situation in 2007 was dire; there were multiple long-time
employees who were eligible to retire. She referenced
current concern about the number of state employees who are
eligible to retire. Regarding wages, she reported that in
many areas the department is not keeping up with the
private sector or other government agencies; the state
continued old hiring practices of screening out applicants
through desired qualification questions, which was relevant
when there were many applicants. She believed the strategy
was outdated as there were fewer and fewer applicants.
Ms. Kreitzer spoke of improvements the department had made,
including the executive working group formed in 2007; a
group of commissioners have identified areas of concern and
set direction for improved recruitment and retention.
Through labor negotiations, HB 417, and other initiatives,
most state employees have had wages increase between 16 and
19 percent since 2008.
Ms. Kreitzer directed attention to a handout,
"Administrative Order No. 237, Executive Working Group
Status Report of Recommendations" (copy on file). She
commented that the information was also available on the
DOA main webpage. She highlighted action items completed
and in progress: a geographic differential study, review of
human resources integration, and a salary survey.
1:43:56 PM
Representative Gara expressed concern about salary survey
results that social workers at the Office of Children's
Services (OCS) [Department of Health and Social Services
(DHSS)] were paid more than social workers in the private
sector. He pointed out that the average length of stay at
OCS was two years, which is damaging for the children
servied. He did not believe the survey took into
consideration the unusual stress of the job and wondered
whether a salary increase might improve morale.
1:45:38 PM
Ms. Kreitzer reminded him of salary increases to all state
employees. She reported that the salary survey would first
focus on job classes that have been identified as being
underpaid. The focus would then turn to other issues; she
suggested that the burnout might be addressed. She
disagreed with Representative Gara's characterization of
the survey comparisons and offered to address the issue
more in subcommittee. She directed attention to the website
as a means for gathering information.
Representative Gara restated concerns about OCS social
workers. He did not feel that the issue had been addressed.
He asked whether every state worker had received an
increase in pay. Ms. Kreitzer replied that the impact to
state employees had been 16 to 19 percent average increase
since 2008.
Representative Gara asked whether it was realistic to
expect [an increase for OCS workers]. Ms. Kreitzer did not
believe the OCS social workers were in the underpaid
category.
Representative Gara asked who he would go to if he had a
solution to propose. Ms. Kreitzer replied that any
suggestion made would have to conform to personnel rules.
Representative Gara questioned personnel rules. Ms.
Kreitzer remarked that there were tools that hiring
managers could use, such as alternative work weeks and
flexible hours. The tools have to work for the division in
question. She had made an effort to inform the
commissioners' working group about people who are taking
advantage of the tools.
1:50:27 PM
Ms.Kreitzer directed attention to a PowerPoint
presentation, "News and Views: Economic Conditions and
Pensions, House Finance Committee, February 3, 2010" (copy
on file). She quickly reviewed the headlines on the slides
to give the committee a sense of what she sees on a daily
basis:
· Oil production fell more than 3 percent last fiscal
year, and another 5 percent decline is expected in the
current fiscal year
· Union workers at Alyeska made concessions
· Another state prodded the retirement of 46,000 public
employees and increased the cost of health care
coverage to employees
· Alaska is catching up with the rest of the country on
the recession
· Anchorage municipality is expecting shortfalls and
layoffs
· Increased stresses related to pensions
1:51:56 PM
Ms. Kreitzer turned to the subject of labor contracts. She
reported that labor negotiations were taking place with
several labor unions. She tells the unions that the state
is looking for sustainable contracts. She noted that all
states attending a recent gathering of human resource
professionals reported that they were reducing non-union
salaries and offering no increases for union workers;
Alaska was the only state that was potentially increasing
wages.
Ms. Kreitzer pointed out that the state is a self-insured
provider of health coverage and pensions and one of the few
states to pre-fund post-retirement benefits. She referenced
the SB 125 contributions, the cost above the 22 percent for
the Public Employees' Retirement System (PERS) and 12.56
percent for the Teachers' Retirement System (TRS) that the
state contributes; the current year's amounts are $165.8
million for PERS and $190.9 million for TRS.
Ms. Kreitzer remarked that there had been some rebound in
the market; the fiscal year earnings for PERS and TRS are
just over 11 percent as of November 2009. Health care costs
for active employees are up for FY 11 by 19.6 percent for
active employees and 14 percent for retirees (retirees are
on a calendar year).
Co-Chair Hawker wondered whether a schedule of the
increases had been provided and wondered how the numbers
compared with the previous six years. Ms. Kreitzer
responded that based on an estimated 15,000 state
employees:
· FY 02: 21.1 percent increase, which equates to an
annual increment of about $18 million
· FY 03: 9.6 percent increase
· FY 04: 11.9 percent increase
· FY 05: no increase
· FY 06: 16.3 percent increase
· Since FY 06: using reserves, 1.8, 1.9, and 4.8 percent
increases
· FY 11: 19.6 increase, also using reserves
Co-Chair Hawker underlined that reserves were used to
reduce a larger number to the 19.6 increase included in the
FY 11 budget request.
1:55:25 PM
Co-Chair Hawker delineated the progressive increase in the
cost for the health care trust for active public employees:
$3 million increase two years ago, $7.5 million one year
ago, and $32 million for the current year. He queried the
reasons. Ms. Kreitzer responded that actuaries had
projected that $32 million would be required for FY 11; the
estimated increase for FY 12 is 20 percent.
Co-Chair Hawker summarized that there had been roughly a 40
percent increase in two years, following a period of around
five years with a 15 percent increase. He wanted to know
what was driving the increases. Ms. Kreitzer responded that
the department would get more detail to the committee.
1:57:55 PM
Representative Kelly asked whether the annual increases are
reflected in the adjusted base.
KEVIN BROOKS, DEPUTY COMMISSIONER, DEPARTMENT OF
ADMINISTRATION, replied that the increases are reflected in
the per-employee, per-month contribution, personal services
benefits line in all the budgets.
Representative Kelly observed that a certain amount of the
growth is only briefly considered during the average
legislature. He asked whether only the increase was being
considered, and if part of the growth was a given. Mr.
Brooks replied that the department was presenting a macro
view of all the budgets; the total spent on health care is
$200 million, which is in the base. The additional
increments seen every year have shown single digit
increases for several years.
Representative Kelly pointed out that there was a larger
problem looming.
Co-Chair Hawker agreed and observed that the numbers are
not as visible when allocated throughout the entire state
budget and across all the agencies. He believed a macro-
focus is necessary to examine the overall issue of state
benefits. He wanted to know what happened in the last few
years. Ms. Kreitzer responded that the department would get
the information to the committee.
Representative Kelly relayed that he had made an uneasy
truce with PERS and TRS but felt that the systematic growth
in the budget was not good.
Co-Chair Hawker maintained that employees are very
expensive; the FY 11 monthly cost per employee for
healthcare is $1,088. Ms. Kreitzer clarified that $1,088 is
the number that is being bargained.
Representative Doogan assumed that there were other factors
contributing to the higher numbers than employees consuming
healthcare without discretion, including increased health
costs. He wanted a complete picture.
2:03:59 PM
Representative Doogan turned to social work salaries and
the salary study. He believed that one third of social
workers were quitting every year, which would result in
considerable cost to the state in terms of recruitment and
training. He wondered whether the department needed help to
reduce social worker turnover. Ms. Kreitzer replied that
DOA's personnel division works closely with the DHSS; there
have been a number of meetings to address the issue. She
did not want to speak for DHSS, but she had not been
contacted about the problem. She stressed that she was
obligated to use the survey to look at people who are under
the line.
2:06:19 PM
Representative Doogan acknowledged that the issue was not
only DOA's responsibility. He wanted to make a general
point that excessive turnover in any category costs the
state money and is inefficient. He requested information
regarding the longevity and seriousness of the problem.
2:08:12 PM
Representative Doogan expressed concern about the cost of
continually retraining employees instead of figuring out
how to retain them.
Co-Chair Hawker queried whether the social worker turnover
rate in the state was comparable to similar jobs in the
private and public sectors. He thought some jobs would
always have a high turnover rate.
Representative Gara stressed that 50 percent of the social
workers who left were people who had been in the position
for less than two years. He pointed out that the 16 to 18
percent salary increases resulting from previous
legislation did not go to the social workers who left,
because the legislation was for workers with longevity. He
asked whether the salary increases went to entry level
employees. Ms. Kreitzer responded that the employees would
have benefited from the salary increase if they had stayed
on the job longer than two years. She emphasized that the
longevity increments replaced by service steps have more of
an impact on employees who stay longer, but they go to non-
covered employees, and they have been bargained into
contracts. Therefore, the social workers would have been
covered to the extent that the social workers stayed with
their contracts.
Mr. Brooks added that the salary schedule for General
Government Unit (GGU) employees has moved 10 percent and
11.5 percent for Supervisory Unit (SU) employees; all new
employees benefit from the schedule increase. Each employee
will get an annual review for the first five years that
could result in a 3.5 percent increase; after five years
the review takes place every other year and could result in
a 3.7 percent increase.
2:12:36 PM
Representative Gara queried the increase to entry-level
workers. Mr. Brooks replied that entry-level pay is
currently 10 percent higher and within a year would be 3.5
percent higher.
Ms. Kreitzer continued with health care costs. She believed
the question should be how to contain big increases. She
referred to a 2009 confidential health risk assessment of
44.3 percent of state employees; a second survey was
planned for the end of 2010 or early 2011. Survey responses
were compiled by an independent party and results show that
the largest issues for Alaska are obesity, cardiac disease,
and diabetes.
Ms. Kreitzer also explained that there had been a survey
done in 2009 by Wells Fargo Insurances Services, which had
become the state's claims administrator following a Request
for Proposals (RFP). The RFP also specified that Wells
Fargo was to build and provide its own networks; the
company had recently announced that Alaska Regional
Hospital is the preferred hospital for the AlaskaCare
Health Plan. Other networks include Costco Wholesale's
vision and pharmaceuticals services, Wellness Initiatives
Network, Inc., Alaska Vision Services, Magellan Health
Services, and Beech Street Corporation.
2:15:37 PM
Ms. Kreitzer reported that DOA was moving away from the use
of social security numbers to increase identity protection
and that the state is examining ways to further protect
information it collects. All information is now
electronically encrypted and physical security has been
increased.
Representative Fairclough asked about Wells Fargo's
capacity to handle the high volume of the state's health
care. Ms. Kreitzer responded that she would get back to the
committee regarding the issue.
2:17:41 PM
Representative Fairclough stated concerns about managing
customer service.
Co-Chair Hawker expressed concerns about state procurement
issues. Ms. Kreitzer questioned the accuracy of the
information he had received.
Representative Joule emphasized that the state is a major
employer in Alaska. He wondered whether the department was
noticing more out-of-state job applicants in the current
economy. Ms. Kreitzer responded that DOA's emphasis has
been to hire Alaskans. She noted that some positions, such
as information technology (IT) positions are difficult to
fill in Juneau. Other job categories experience difficulty
as well. She questioned why. She acknowledged that some
applicants come from the Lower 48 and some positions are
being filled, but she did not think it was at the expense
of Alaskan applicants. She encouraged anyone who heard
complaints about the issue to let her know.
Co-Chair Hawker referred to a $3 million decrease in third-
party administrator costs for group health. Ms. Kreitzer
explained that when there is a transition between third-
party administrators, the state always holds out the amount
of money it anticipates paying to unfilled claims. She
believed the amount was closer to $5 million, but less was
needed in the transition; this explained the $3 million
reduction for retirement and benefits.
2:22:36 PM
Ms. Kreitzer scanned core services within the department.
She reported on a 2006 legislative requirement for the
Division of Finance to increase the number of electronic
payments; there was a substantial increase in FY 10,
approximately 2,100 more vendors (foster parents) were
getting electronic payments, double the FY 09 amount.
Ms. Kreitzer noted that other progress in the Division of
Finance included the elimination of the need for Social
Security numbers on timesheets and leave slips. On-line
pay-stubs and the discontinuation of paper paystubs in
August have saved the state over $130,000 in paper stock
and postage.
Ms. Kreitzer anticipated questions regarding the new e-
travel budget component. She reported that the state travel
office has been significantly overhauled; the $600,000
increment for interagency receipts now covers actual
expenditures.
Ms. Kreitzer informed the committee that the construction
for the Palmer State Office Building is on schedule and
well underway; the bulk of the tenants will be in the
facility by the end of August 2010. Mat-Su agencies,
including the court system, law enforcement, the Department
of Law (DOL), the Department of Public Safety (DPS), the
Public Defender's Office and the Office of Public Advocacy
(OPA), will be co-located in the new building.
Ms. Kreitzer commented that most energy-saving measures had
already been taken and indicated a report detailing cost
savings because of that work.
2:25:25 PM
Co-Chair Hawker queried increased costs for state-owned
facilities: the FY 09 actual cost was $10 million; FY 10
was $13.25; another $2 million is being requested for FY
11. Mr. Brooks believed that part of the expense was for
the Palmer State Office Building, which is a very large
facility.
Vice-Chair Thomas thought the project had not been fully
funded the previous year.
Ms. Kreitzer directed attention to Enterprise Technology
Services (ETS). She relayed that bandwidth has been a
challenge and that the cost of bandwidth should be
considered when web-based initiatives are proposed. The
cost to the state under the current core-services contract
for bandwidth is measured in megabits per second; currently
the cost is $500 per megabit. Technical upgrades have
doubled and tripled wide-area network bandwidths in areas
including Juneau, Anchorage, Fairbanks, Ketchikan, Sitka,
Kenai Peninsula, Bethel, and the Mat-Su. Technical
deployment of land-based microwave connection has been
completed from Bethel to Emmonak, Aniak, and St. Mary's.
Ms. Kreitzer observed that security is an ETS challenge
because of constant and evolving threats to the state's
network. Efforts begun in 2005 to undertake appropriate
security initiatives have been continued.
2:28:57 PM
Ms. Kreitzer pointed to a supplemental request for $865,000
for OPA, which has the court-appointed special advocate
program. She observed that the program did good work;
community volunteers serve as guardians ad litem (GAL) for
abused and neglected children in the state's protective
custody. The volunteers support and supplement OPA's
professional GALs. A part-time coordinator of volunteer
court-appointed special advocates (CASA) was hired the
previous year in the Mat-Su Valley, which has increased
trained volunteer GALs by 114 percent and increased the
number of children being served by volunteer GALs by 104
percent. In FY 09, OPA experienced a 13.6 percent increase
in the number of public guardian clients and have developed
a new guardian program to help family members learn how to
be public guardians. In 2009, OPA's Office of Elder Fraud
and Assistance recovered $462,000 through settlement and
court order for Alaska elders who were victims of fraud or
financial exploitation; during 2010 so far, the office has
recovered about $1.5 million for elders.
Co-Chair Hawker queried the Public Defender Agency request
in the supplemental budget which cited a number of case
filings, including a 37 percent increase in felony cases in
the Northern district. He wondered what was causing the
increase in felony and misdemeanor prosecutions.
2:31:29 PM
Ms. Kreitzer had no concrete evidence as to why crime had
risen. She speculated that in a declining economy, more
people might qualify for a public defender.
Co-Chair Hawker noted that other agencies reported similar
speculative conclusions. He thought the issue was serious
and merited consideration. He asked about the $300,000
increased request to the Violent Crimes Compensation Board,
especially in the light of the declining Permanent Fund
Dividend (PFD) funding. Ms. Kreitzer responded that she was
there to defend the governor's budget. Mr. Brooks added
that the calculation was by the Office of Management and
Budget (OMB).
2:34:02 PM
Ms. Kreitzer listed measures the Public Defender Agency had
taken to contain costs: the use of paralegals in order to
free attorneys to do what they need to do; the case
management system that has been implemented gives a better
overall picture; and regional restructuring, with smaller
offices being grouped into regional units.
Co-Chair Stoltze commended Mr. Steiner [Director of the
Public Defender Agency].
Ms. Kreitzer moved to a $1.15 million requested by the
Alaska Oil and Gas Conservation Commission (AOGGC) for
gasline evaluation work.
Co-Chair Hawker thought that AOGGC typically bills industry
for services and asked why it was asking for state general
funds. Ms. Kreitzer replied that general funds had been
continually appropriated for the item year to year.
2:37:14 PM
ERIC SWANSON, DIRECTOR, DIVISION OF ADMINISTRATIVE
SERVICES, DEPARTMENT OF ADMINISTRATION, explained that
there have been general fund appropriations over the years
for AOGGC oil and gas related work. He acknowledged that
AOGGC bills industry for day-to-day operations, but the
decision had been made to use general funds for gasline
related work.
Co-Chair Hawker noted that oil and gas requests would be
aggregated into a single request involving all relevant
agencies.
Ms. Kreitzer turned to the Office of Administrative
Hearings, another independent commission/board in DOA. She
highlighted a supplemental request for $85,000 general fund
due to an increase in tax cases.
Ms. Kreitzer commented that the Alaska Public Offices
Commission (APOC) did not have substantive budget items and
has completed a computer filing project.
Ms. Kreitzer reported that the Division of Motor Vehicles
(DMV) was requesting $500,000 federal authorization for the
commercial driver license (CDL) program and $668,000
reduction for the [Dowling Road/Benson Avenue] lease.
Co-Chair Hawker referenced a $600,000 capital request by
APOC. He questioned increases to the Elected Public
Officials Retirement System (EPORS). Mr. Brooks pointed out
that the EPORS retirement system was fully funded.
Co-Chair Hawker asked how many bargaining unit settlements
were open currently.
2:41:15 PM
Ms. Kreitzer replied that the department is negotiating
with the SU, the GGU, Confidential Employees Association
(CEA), and Labor, Trades, and Crafts (LTC).
Co-Chair Hawker wondered whether any of the negotiations
would be concluded by the close of the budget process. Ms.
Kreitzer stated that she was hopeful.
Representative Fairclough queried whether the CDL program
in the DMV was contracted or internal. Ms. Kreitzer replied
that it was both and offered to get more information.
Representative Fairclough noted other private sector CDL
training and wondered how the state managed funding for the
program.
2:42:36 PM
Representative Kelly commented that the current binding
arbitration system means a single person makes the
decision. He asked how many negotiations went to binding
arbitration. Ms. Kreitzer replied that Class 1 Employees
have the opportunity and ability to go to binding
arbitration. The two biggest applicable unions are public
safety employees, mostly troopers and airport safety
officers working for Department of Transportation and
Public Facilities and DPS; the other union is the Alaska
Correctional Officers Association (ACOA), representing
correctional officers in facilities throughout the state.
Representative Kelly queried the percentage going to
binding arbitration. Ms. Kreitzer replied that there was an
ACOA binding arbitration settlement before the legislature
currently in the supplemental; the last contract went to
binding arbitration as well.
2:44:51 PM
Representative Kelly wanted to know what percentage of
bargaining engagements in the state could go to binding
arbitration because that option is allowed, and how many
have. Ms. Kreitzer replied that she could get the
information. She recalled that the SU Class 1 Employees
ended up going to binding arbitration in 2008, and that was
extended across the entire bargaining unit.
DEPARTEMENT OF COMMERCE, COMMUNITY AND ECONOMIC DEVELOPMENT
2:46:48 PM
EMIL NOTTI, COMMISSIONER, DEPARTMENT OF COMMERCE, COMMUNITY
AND ECONOMIC DEVELOPMENT, provided an overview, "Department
of Commerce, Community and Economic Development, Department
Overview, February 2010" (copy on file). He stated the
mission of the department:
· The mission of the Department of Commerce, Community,
and Economic Development is to promote a healthy
economy, strong communities, and protect consumers in
Alaska.
Commissioner Notti described the three legs of the
Department of Commerce, Community and Economic Development
(DCCED): one keeps the community strong, a second deals
with business aspects, and the third consists of
independent agencies. He saw the department's priority, in
keeping with the governor's instruction, as economic
development as well as keeping the budget stable. A deputy
commissioner was recently hired to pursue economic
development for the state.
Commissioner Notti noted that the DCCED FY 10 budget
included $35 million general funds with an overall budget
of $195 million; the FY 11 budget is for $33 million
general funds with an overall budget of just over $200
million.
Commissioner Notti reported that DCCED currently has 529
employees with a net zero increase in positions.
Commissioner Notti informed the committee that a core
challenge is the high cost of energy, which hinders growth
because of high transportation costs. He stressed that
transportation costs factor large in economic development.
He did not anticipate energy costs going down in the near
future.
2:51:42 PM
Commissioner Notti listed DCCED accomplishments (page 3):
· Re-established the Alaska Film Office
· Helped nine new tourism businesses get started through
the Tourism Mentorship program
· Administered over 1,400 grants with a value in excess
of $766 million
· Community & Regional Affairs presented 39 trainings
throughout the state on bookkeeping, land planning,
utility management, and tax assessment.
Commissioner Notti detailed that the Division of Community
and Regional Affairs trains city administrators and village
people to be eligible for federal grants and assists them
when there are problems related to taxes, workmen's
compensation, and bookkeeping. In order to keep utilities
functioning, the division also trains people to operate
utilities and to price services. These activities are part
of the community leg of the department and use 14 percent
of the general funds.
Commissioner Notti explained that the largest part of the
department's budget is used for the business leg. He did
not want to call this the "economic development" side as
the bulk of the money is used to administer business
licenses and to watch over the banking industry and
insurance business. These activities in the two divisions
[the Division of Banking and the Division of Insurance]
employ approximately 20 investigators.
2:54:15 PM
Co-Chair Hawker asked what the state was doing to promote
economic development, especially in the light of expenses
attributable to a declining economy, such as Medicaid costs
and rising criminal prosecutions. He also queried the
department's management of professional licensing, pointing
to years of audits stating the need for improvement.
Commissioner Notti replied that although there is an Office
of Economic Development, the department is not pushing
development. He relayed a brief history of the office. He
agreed that DCCED is not doing much to push economic
development; only 2 percent of money is spent in the state
for economic development. He spoke in support of the
current staff in the office.
2:58:34 PM
Co-Chair Hawker referred to Legislative Budget and Audit
Committee reports and asked whether progress was being
made.
CURTIS THAYER, DEPUTY COMMISSIONER, DEPARTMENT OF COMMERCE,
COMMUNITY AND ECONOMIC DEVELOPMENT, described work that the
department has done to address the issue. He acknowledged
that the department was behind in the area of renewing
corporation filings. He reported that he had replaced
personnel and had developed a team that was making progress
on the backlog and reporting directly to him. He noted that
the old computer system had impeded progress and was in the
process of being replaced.
Mr. Thayer addressed queries related to the Office of
Economic Development. He has been conducting an audit of
personnel and their activities; new personnel are being
sought who will be more responsive to community needs. The
office is small, but many parts of state government are
connected with it. He stated that more would be revealed
after the audit was completed.
3:01:36 PM
Representative Kelly wondered whether the office should be
cut since the director had been cut and it was such a small
part of the budget. Mr. Thayer replied that there were many
elements involved, including the Alaska Film project with
$100 million worth of credits. In addition, the agency
administers the $9 million from the state for the Alaska
Travel Industry Association (ATIA). He wanted to evaluate
what could be done to improve the division, as its reach is
extensive.
Representative Kelly referred to the $30 per barrel price
of oil a year previous. He wondered whether the department
would redirect the work the Office of Community Development
if oil were the same price today. Mr. Thayer responded that
the question was valid but he could not answer it since he
was only six weeks into the evaluation process.
Representative Kelly thought the response was fair; his
intent was not to criticize the department. He noted that
the governor had given a lean agency budget. He was trying
to determine where government spending could be cut.
3:05:15 PM
Mr. Thayer pointed out that the legislature had combined
two departments, the Department of Community and Regional
Affairs and the Department of Commerce and Economic
Development, into one. He believed that over time, the
community and regional affairs has been more prominent. His
analysis was questioning how the economic development side
could be aided.
Representative Kelly wanted to see concrete results.
Co-Chair Stoltze commented that Commissioner Notti was not
working theoretically as he had been through times with
much lower oil prices. He queried Mr. Thayer's perspective
on the railroad. Mr. Thayer responded that he was working
with the railroad regarding the Flint Hills [Resources
Alaska], the Port of Anchorage, and the fuel issue.
Co-Chair Stoltze asked for more information about Flint
Hills. Mr. Thayer answered that the department was trying
to understand the issue. He pointed out that there were 70
potential projects, and he was attempting to analyze which
are practical, which should be taken to the legislature,
and which need administrative action. Some of the projects
have been in play for five to ten years; he opined that
Alaska was hampering its own economic development. He said
the department was working with the Alaska Industrial
Development and Export Authority (AIDEA) regarding the
Flint Hills and the fuel storage at the Port of Anchorage
projects.
Co-Chair Stoltze hoped there would be better communication
between the department and the legislature. He was
concerned about missing something that could result in
serious repercussions for the state. Mr. Thayer agreed.
3:09:49 PM
Co-Chair Stoltze reiterated his desire for improved
communication. He did not want to micromanage the
department. He wanted a successful partnership between the
state and the railroad.
Representative Austerman wanted more information about the
film office. He had looked at the numbers in the annual
report and wondered how much business had been generated in
the state by the tax credits. He thought the office should
be closed down if it spends money and does not make money.
Co-Chair Hawker reported that he had been a critic of the
film office tax credits. He gave Mr. Thayer a brief history
of the legislation. He expressed concern regarding expense
to the state.
Representative Gara queried trade and marketing efforts
within the agency intended to expand economic development.
He wondered whether there had been an evaluation of the
results of money spent. Commissioner Notti replied that
there was no statistical analysis of returns to the state
for the money spent.
Mr. Thayer listed several trades, including the Alaska
Seafood Marketing Institute (ASMI), Alaska Aerospace
Development Corporation (AADC), and the Governor's Office
of International Trade, and noted that none of them report
directly to the department. He added that analysis was
trying to determine how the money was being spent and
whether efforts could be combined.
Representative Gara explained that he was referring to
trade with businesses outside of Alaska. He understood
statistics were hard to gather, but he wanted reassurance
that the money the state spent on trade work was getting
results.
Commissioner Notti replied that the question was whether
the agencies were returning money to the state, such as
AIDEA and the Alaska Housing Finance Corporation [connected
with Alaska Energy Authority]. He thought it could be many
years before the rocket launches returned money, and
returns related to ASMI were hard to measure, although ASMI
has had significant successes, including making Alaska fish
products one of the top three menu items of the top 500
U.S. restaurant chains. He believed ASMI had the best
numbers regarding its impact on Alaska's economy, for
example related to how much gets back to the fishermen.
3:15:32 PM
Representative Fairclough asked about internal
improvements. She wanted to know how the technical changes
would be integrated in communities, specifically bandwidth
in rural communities. Commissioner Notti replied that the
communications aspect is left up to commercial companies,
which will build in response to demand. He acknowledged
that some places had good bandwidth and others had slower.
He recalled work in Ketchikan; AT&T had stepped up to fill
the need.
Representative Fairclough wondered whether strong
communications capability might contribute to a healthy
economy in both rural and urban Alaska and strengthen
communities to alleviate poverty. Commissioner Notti
responded that communications is a key factor for economic
development, especially taking into consideration the need
to compete in a world market; small villages will need to
get online before they can compete. He did not see that
happening right away. He pointed to current efforts; for
example, there were 29 applications for stimulus dollars
for fiber optics. He cautioned however that fiber optics
projects are billion-dollar projects, and there is not
enough money. He did not see the state solving the problem.
Representative Fairclough wondered whether there are
federal dollars to bring smaller communities online. She
referred to a department evaluation regarding the cost of
fiber optic communications.
3:19:26 PM
Commissioner Notti replied that Deputy Commissioner Michael
Black could provide more details as he has been working on
broadband issues with the federal government and with other
departments.
Representative Fairclough asked for an update from Mr.
Black to her office. She asked how the department was
interfacing with the university concerning energy,
particularly related to weatherization. She referred to
cold-climate research and the need in both rural and urban
communities to reduce energy costs. Commissioner Notti
responded that Mr. Black had been working on the cold-
weather issue, specifically related to Newtok/Mertarvik,
where an energy-efficient community hall is being built
through both the university and a private company.
Representative Doogan noted that the department budget is
over $2 million, 50 percent of which is corporation
budgets; he asked what the remaining $89 million was for.
JO ELLEN HANRAHAN, DIRECTOR, DIVISION OF ADMINISTRATIVE
SERVICES, DEPARTMENT OF COMMERCE, COMMUNITY AND ECONOMIC
DEVELOPMENT, responded that the remaining part of the $89
million was spread across banking corporations, a community
and regional affairs program, insurance investments, and
revenue-sharing programs, such as national forest receipts,
the Payment in Lieu of Taxes (PILT) program, the Office of
Economic Development, and the Serve Alaska program.
Representative Doogan asked whether part of the $89 million
was pass-through funds. Ms. Hanrahan replied that
approximately $30 million represented pass-through funds
for revenue-type sharing programs such as PILT and national
forest receipts. Part of the amount (about 36 percent of
the DCCED budget) is for grants to communities.
3:23:29 PM
Representative Doogan wanted further clarification. Ms.
Hanrahan explained that $30 million is pass-through funds;
the 36 percent is of the total budget and the $30 million
is part of the 36 percent.
Representative Doogan asked whether the approximately $60
million remaining was for agency operations. Ms. Hanrahan
directed attention to a pie chart on page 7 depicting the
budget breakdown:
· Grants - 36 percent ($72.5 million)
· Personal Services - 26 percent ($51 million)
· Services (contractual) - 35 percent ($70 million)
Representative Doogan wanted to determine how much of the
budget was a typical agency budget and how much represented
money passing through the agency on its way to somewhere
else. He questioned how much was for grants administration
and how much was for agency operations.
3:26:10 PM
Ms. Hanrahan replied that the department has begun to view
itself in two pieces: corporations and core [agency
operations]. Approximately $111 million is for the
corporations; $89 million is for agency operations. Of the
$89 million for agency operations, a portion is for pass-
through appropriations; she did not have the exact numbers
for the breakout, but offered to provide them at a later
date.
Co-Chair Hawker provided a description of the DCCED budget,
using the short form and dividing the various
appropriations into "things we do" and "things somebody
else does." Agency operations include the commissioner's
office, the offices of economic development and community
and regional affairs, investments (managing state loan
programs), regulation of banking and insurance, and
corporate business licensing. Operations that are conducted
by others include revenue sharing, trade association
contracts, Alaska Aerospace Corporation, AIDEA, Alaska
Energy Authority (AEA), and ASMI programs.
Representative Salmon wanted clarification regarding the
powers of the AIDEA board as related to AEA. He asked
whether a previous problem had been resolved. Commissioner
Notti replied that the year before, the department had
tried to separate the programs. The department felt that
AEA should not be under a board of directors that was
primarily banking people and that AEA needed more freedom
to do work related to producing energy. An attempt was made
to create two different boards with separate executive
directors for each entity. The action required legislative
approval. The job was only half done; there was an
executive director placed over AEA, but the executive
director remained under the same board with AIDEA. He
expected that a future attempt would be made to separate
the boards.
3:32:33 PM
Representative Joule asked whether the AIDEA board spent
time on energy issues. Commissioner Notti responded that
the meetings for AIDEA and AEA, held by the same board, are
held on the same day. He reported that the bulk of the time
was spent on loans, projects, and AIDEA reports. He thought
it was fair to say that AEA gave briefer reports and did
not get as much attention as AIDEA.
Representative Gara asked whether there was a plan to
upgrade diesel plants to save people fuel costs. He had
realized that the best way to save money in many places was
not to build a wind mill but to make the existing diesel
plant more efficient. He referred to efficiency upgrades
being done by the Denali Commission. For the past year, he
had been trying to work with AEA to get a list of diesel
plants that AEA believed could be made more efficient, but
he had not been able to get the information. He stated that
his goal was to reduce energy costs by updating diesel
plants that would not get Denali Commission funds in the
next few years.
Commissioner Notti thought that wind power could save money
in some places; he believed it had saved close to $1
million in Kodiak, displacing diesel. However, the
investment is high. He stated that upgrading diesel is only
part of the problem. A community might be moving towards
using low-sulfur diesel fuel, which requires a much more
sophisticated and expensive engine; a village might need
three different sizes of generators for different energy
loads.
3:36:20 PM
Commissioner Notti emphasized that any energy upgrade is
very expensive, whether wind, hydro, bio-fuel, or diesel
upgrades.
Representative Gara queried instigating a statewide diesel
upgrade plan. He believed that aggressive planning may be
in order. Commissioner Notti deferred to AEA.
Co-Chair Hawker believed that a future Legislative Budget
and Audit Committee meeting would address AEA projects.
Representative Kelly spoke of his experience on the
subcommittee. The film office tax credits troubled him as
well. He expressed frustration regarding the department's
500 employees.
3:40:08 PM
Representative Kelly commented that Mr. Thayer might have
been brought on board to address the tough issues; he
believed that the biggest issue was the high number of
employees.
Representative Joule commended Margaret Gold Hanson, one of
DCCED's employees in the Kotzebue office. He reported that
she had been there for over twenty years, has a deep
understanding of the community, and is an invaluable
lifeline for many. She touches many lives in struggling
villages. He wondered if the same quality of people were
being hired to maintain vital lifelines. Commissioner Notti
acknowledged that the person in question was getting ready
to retire and that there was no plan of succession. He
noted one person who had been brought in on the land
custodian deal for unincorporated villages, so that when
the current person retires there will be institutional
memory. He pointed out that people in the villages usually
stay on for many years and that the jobs are economically
very important in small communities.
Co-Chair Hawker remembered that his first four years on the
committee were spent looking at the agencies and their
executive structures. He felt that the growth of executives
and employees in all agencies has been "horrendous" over
the past six years. He referred to DCCED's organizational
chart (copy on file), which indicates a commissioner and
two deputy commissioners. He wondered what could be done.
Commissioner Notti responded that the organizational chart
was a rough draft and that the division responsibilities of
the two deputy directors had not yet been determined. He
added that the chart does not reflect what the people on it
are doing. He stated that he deals at any given time with a
wide range of issues and cannot possibly keep up. The
deputy commissioners are also extremely busy. He added that
about 40 percent of the 529 employees in the report are
from outside agencies. He felt the same issue should be
examined throughout the departments.
Co-Chair Hawker felt that growth was a valid concern. He
pointed to a $200 thousand increment for postage because
37,000 insurance licensees needed to be notified of every
change in rules. He questioned why the task was not done
electronically. He also questioned the need for the inch-
thick insurance report produced each session.
3:50:01 PM
Ms. Hanrahan agreed that the point was important. She noted
that the issue was addressed in the ten-year plan, but that
a statute change was needed.
Co-Chair Hawker maintained that he would introduce as a
finance bill any statute that would save $200,000.
Co-Chair Stoltze thought the measure could be attached to
another bill.
3:52:28 PM
ADJOURNMENT
The meeting was adjourned at 3:52 PM.
| Document Name | Date/Time | Subjects |
|---|---|---|
| Administration Budget Overview Priorities.doc |
HFIN 2/3/2010 1:30:00 PM |
|
| DOA Budget Overview.doc |
HFIN 2/3/2010 1:30:00 PM |
|
| DOA Budget Overview.pdf |
HFIN 2/3/2010 1:30:00 PM |
|
| DOA Overview PowerPoint020310 (2).pptx |
HFIN 2/3/2010 1:30:00 PM |
|
| 2-2-10 DOA Overview Organization.pdf |
HFIN 2/3/2010 1:30:00 PM |
|
| Economic DevelopmentCCED Oveview. Remarks.pdf |
HFIN 2/3/2010 1:30:00 PM |
|
| DOA Overview PowerPoint020310 (2).pptx |
HFIN 2/3/2010 1:30:00 PM |
|
| CCEDORG CHART CO Presentation Last Page.pdf |
HFIN 2/3/2010 1:30:00 PM |
|
| cced OverviewORG CHART OED.Thayer.pdf |
HFIN 2/3/2010 1:30:00 PM |
|
| CCED Overview ORG CHART NEW FOCUS..pdf |
HFIN 2/3/2010 1:30:00 PM |
|
| Budget Overview CCED February 2010.pdf |
HFIN 2/3/2010 1:30:00 PM |