Legislature(2015 - 2016)BARNES 124

01/28/2015 03:15 PM LABOR & COMMERCE


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03:11:38 PM Start
03:15:00 PM Overview: Department of Administration - Commissioner Fisher
04:11:02 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Overview: TELECONFERENCED
Dept. of Administration, Commissioner Fisher
                    ALASKA STATE LEGISLATURE                                                                                  
          HOUSE LABOR AND COMMERCE STANDING COMMITTEE                                                                         
                        January 28, 2015                                                                                        
                           3:15 p.m.                                                                                            
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Kurt Olson, Chair                                                                                                
Representative Shelley Hughes, Vice Chair                                                                                       
Representative Jim Colver                                                                                                       
Representative Gabrielle LeDoux                                                                                                 
Representative Cathy Tilton                                                                                                     
Representative Andy Josephson                                                                                                   
Representative Sam Kito                                                                                                         
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Representative Mike Chenault (alternate)                                                                                        
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
OVERVIEW: DEPARTMENT OF ADMINISTRATION - COMMISSIONER FISHER                                                                    
                                                                                                                                
     - HEARD                                                                                                                    
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
No previous action to record                                                                                                    
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
SHELDON FISHER, Commissioner Designee                                                                                           
Department of Administration (DOA)                                                                                              
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Presented a PowerPoint overview of the                                                                   
Department of Administration.                                                                                                   
                                                                                                                                
KATE SHEEHAN, Director                                                                                                          
Division of Personnel & Labor Relations                                                                                         
Department of Administration (DOA)                                                                                              
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Answered questions during the overview of                                                                
the Department of Administration.                                                                                               
                                                                                                                                
KONRAD JACKSON, Staff                                                                                                           
House Labor & Commerce Standing Committee                                                                                       
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:   Answered questions  on behalf of  the House                                                             
Labor &  Commerce Standing Committee, Representative  Kurt Olson,                                                               
Chair, during the overview of the Department of Administration.                                                                 
                                                                                                                                
ANDY MILLS, Special Assistant                                                                                                   
Office of the Commissioner                                                                                                      
Department of Administration                                                                                                    
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:   Answered questions  during the  overview of                                                             
the Department of Administration.                                                                                               
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
3:15:00 PM                                                                                                                    
                                                                                                                                
CHAIR KURT  OLSON called  the House  Labor and  Commerce Standing                                                             
Committee meeting  to order at  3:15 p.m.   Representatives Kito,                                                               
Tilton, Josephson  and Olson were  present at the call  to order.                                                               
Representatives  Colver,  Hughes,  and   LeDoux  arrived  as  the                                                               
meeting was in progress.                                                                                                        
                                                                                                                                
^OVERVIEW: DEPARTMENT OF ADMINISTRATION - COMMISSIONER FISHER                                                                   
  OVERVIEW: DEPARTMENT OF ADMINISTRATION - COMMISSIONER FISHER                                                              
                                                                                                                              
3:15:27 PM                                                                                                                    
                                                                                                                                
CHAIR OLSON  announced that the  only order of business  would be                                                               
an  Overview:   Department  Of  Administration   by  Commissioner                                                               
[Designee] Fisher.                                                                                                              
                                                                                                                                
3:15:53 PM                                                                                                                    
                                                                                                                                
SHELDON    FISHER,   Commissioner    Designee,   Department    of                                                               
Administration (DOA), directed attention  to the organization and                                                               
mission  of  the Department  of  Administration  [slide 2].    He                                                               
emphasized  that  a  substantial   portion  of  the  department's                                                               
efforts  and services  are rendered  to the  public and  to other                                                               
state agencies.                                                                                                                 
                                                                                                                                
3:17:36 PM                                                                                                                    
                                                                                                                                
COMMISSIONER  FISHER  highlighted  that  the  Division  of  Motor                                                               
Vehicles (DMV)  and the Public  Defender Agency (PDA)  cover most                                                               
of the  state, with offices  in many communities in  every region                                                               
of the  state [slide  3].  The  department employs  slightly more                                                               
than 1,000 employees.                                                                                                           
                                                                                                                                
COMMISSIONER FISHER  acknowledged the visibility of  the Division                                                               
of  Motor Vehicles  (DMV) since  most  Alaskans conduct  business                                                               
with this  division.   The DMV  has worked hard  in the  past few                                                               
years to  improve its service  and shorten  lines.  The  DMV does                                                               
provide  some  on-line  services  and  in  2014,  48  percent  of                                                               
registration  renewals occurred  on-line, he  reported.   The DMV                                                               
hopes to be able to  provide on-line renewal of drivers' licenses                                                               
soon.  Although  the tests can't be  administered on-line, people                                                               
can  take practice  exams to  shorten  the amount  of time  spent                                                               
inside the  facilities.  Thus,  the DMV is constantly  looking at                                                               
ways to shorten lines and improve its service.                                                                                  
                                                                                                                                
COMMISSIONER FISHER reported that  the Division of Retirement and                                                               
Benefits (DRB)  represents an important part  of the department's                                                               
responsibilities.  In addition, the  Public Defender Agency (PDA)                                                               
and    the   Office    of   Public    Advocacy   (OPA)    provide                                                               
constitutionally-mandated  services,  but  while  these  agencies                                                               
have experienced  fairly dramatic  increases in  their respective                                                               
caseloads, these  increases create challenges as  the state faces                                                               
budget constraints.  The department  also houses five independent                                                               
commissions,  including  the  Alaska  Public  Offices  Commission                                                               
(APOC),  the Alaska  Oil &  Gas Conservation  Commission (AOGCC),                                                               
the Alaska  Public Broadcasting Commission (APBC),  the Office of                                                               
Administrative  Hearings (OAH),  and Violent  Crimes Compensation                                                               
Board (VCCB).   The  department provides  administrative services                                                               
to the  aforementioned commissions, but also  recognizes they are                                                               
independent commissions.                                                                                                        
                                                                                                                                
3:19:55 PM                                                                                                                    
                                                                                                                                
COMMISSIONER  FISHER  directed  attention  to  slide  5,  to  the                                                               
services the  department provides to  other state agencies.   For                                                               
example,  the  Division  of   Finance  (DOF)  provides  statewide                                                               
financial and  payroll services as  well as an  e-travel program.                                                               
The  Division of  General Services  (DGS) provides  management of                                                               
space  and  buildings.    The Division  of  Personnel  and  Labor                                                               
Relations (DPLR)  has a centralized  and managed  human resources                                                               
function  as  well as  overseeing  labor  relations and  contract                                                               
bargaining.   The Enterprise  Technology Services  (ETS) consists                                                               
of the centralized portion of  the states' information technology                                                               
and the Division  of Risk Management (DRM)  manages insurance and                                                               
risk  for the  state.   Finally, the  Division of  Administration                                                               
(DOA)  services  provides   budget,  financial,  and  procurement                                                               
services to the department.                                                                                                     
                                                                                                                                
3:20:56 PM                                                                                                                    
                                                                                                                                
COMMISSIONER FISHER  outlined core initiative and  challenges for                                                               
the  Department of  Administration (DOA)  [slide 6].   Each  area                                                               
consists  of   a  function  within  the   department  and  across                                                               
departments.  The Department  of Administration provides services                                                               
and a leadership role to others,  he said.  In terms of personnel                                                               
cost savings,  the state spends  about $2.6 billion  on personnel                                                               
and as  the state  faces budget challenges,  it must  also reduce                                                               
those  costs,  in  part, through  increased  productivity.    The                                                               
department must also  continue to focus on  health care spending.                                                               
The  second  area the  department  has  focused  on has  been  to                                                               
continue to reduce the unfunded  liability, in particular, in the                                                               
area of health  care costs.  The state also  hopes to lower costs                                                               
for  state purchases  and procurement.   For  example, the  state                                                               
spends nearly  $2 billion  on goods and  services so  even modest                                                               
savings can result  in fairly substantial savings.   Further, the                                                               
department also  sees an opportunity  to improve  its centralized                                                               
and decentralized functions in  information technology.  Finally,                                                               
in terms of facility management,  the department believes that an                                                               
opportunity exists for the state  to become more efficient in the                                                               
utilization of space.                                                                                                           
                                                                                                                                
3:23:01 PM                                                                                                                    
                                                                                                                                
COMMISSIONER FISHER reported labor  and the collective bargaining                                                               
contracts [slide  7].  This  slide highlights the  contracts that                                                               
expire between  June 30, 2014 and  June 30, 2016, he  said.  Last                                                               
year,  the  department  did  not reach  final  agreement  on  two                                                               
contracts:   the Marine Engineers' Beneficial  Association (MEBA)                                                               
and  the Masters,  Mates,  and Pilots  (MMP),  so those  contract                                                               
negotiations will  continue this  year.   In addition,  this year                                                               
the  department  will  negotiate   three  contracts:  the  Alaska                                                               
Correctional  Officers Association  (ACOA), the  Public Employees                                                               
Local 71  (LTC), and the  Teachers' Education Association  of Mt.                                                               
Edgecumbe  (TEAME).     The  department  has   reached  tentative                                                               
agreement with the  ACOA; however, it will  continue to negotiate                                                               
with  the LTC  and  TEAME this  year.   A  substantial number  of                                                               
employees are  members of three  contracts that will  expire next                                                               
year:  the Alaska State  Employees Association (ASEA), the Alaska                                                               
Public  Employees   Association  (APEA),  and   the  Confidential                                                               
Employees Association (CEA).                                                                                                    
                                                                                                                                
3:24:08 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE COLVER  mentioned that he  came in contact  with a                                                               
number  of DOT&PF  and the  Alaska  Department of  Fish and  Game                                                               
(ADF&G)  employees  in his  travels  this  summer, who  expressed                                                               
concern that  the cost of  living adjustment (COLA) was  the same                                                               
in  rural  areas  as  in   Anchorage,  even  though  rural  areas                                                               
experience  much  higher  fuel  and electric  costs.    He  asked                                                               
whether these  costs will  also be  negotiated in  the bargaining                                                               
process.  He expressed concern  about retention of some employees                                                               
in rural Alaska due to the high cost of living.                                                                                 
                                                                                                                                
3:25:31 PM                                                                                                                    
                                                                                                                                
KATE SHEEHAN,  Director, Division of Personnel  & Labor Relations                                                               
(DPLR),  Department of  Administration (DOA),  answered that  the                                                               
increase Representative  Colver mentioned  is the  geographic pay                                                               
differential cost, which was the  result of a 2009 McDowell Group                                                               
study that  was bargained with  most of  the unions.   She stated                                                               
that the  geographic pay differential, in  statute, resulted from                                                               
passage of Senate Bill 95.   In fact, the department is currently                                                               
negotiating with LTC, the Laborer's  Trades and Crafts [Local 71]                                                               
who do not currently have  the geographic pay differential rates.                                                               
However, under statute a geographical  pay study can be performed                                                               
every five  years with an  appropriation by the legislature.   In                                                               
2008,  the  legislature appropriated  funds  for  the study  that                                                               
resulted  in  the   aforementioned  geographic  pay  differential                                                               
rates, she said.                                                                                                                
                                                                                                                                
3:26:21 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE COLVER  asked whether the General  Government Unit                                                               
(GGU) is affected by the geographic pay differential.                                                                           
                                                                                                                                
MS.  SHEENAN  answered  yes;   additionally  the  [Alaska  Public                                                               
Employees    Association   (APEA)]    Supervisory   Unit    (SU),                                                               
Confidential    Employees   Association    (CEA),   and    Alaska                                                               
Correctional  Officers  Association  (ACOA) were  also  included.                                                               
However, the Alaska Vocational  Technical Center (AVTEC) teachers                                                               
and three marine units are not affected.                                                                                        
                                                                                                                                
REPRESENTATIVE COLVER  related his  understanding that  this will                                                               
arise as a topic  for the unions to consider as  to whether it is                                                               
an issue.                                                                                                                       
                                                                                                                                
CHAIR OLSON recalled the court system  may also have had [a study                                                               
performed].                                                                                                                     
                                                                                                                                
MS. SHEEHAN  replied that  she did  not know  the answer  to that                                                               
question.                                                                                                                       
                                                                                                                                
CHAIR OLSON further recalled it might be unresolved.                                                                            
                                                                                                                                
KONRAD   JACKSON,  Staff,   House  Labor   &  Commerce   Standing                                                               
Committee,  Alaska  State  Legislature,  added that  a  bill  was                                                               
introduced last legislature but it did not pass.                                                                                
                                                                                                                                
3:27:21 PM                                                                                                                    
                                                                                                                                
COMMISSIONER  FISHER directed  attention  to  the average  yearly                                                               
base salary  by work  associations [slide 8].   He  indicated the                                                               
salary range varies,  depending on the unions.   In addition, the                                                               
average employee benefit cost is  approximately 49 percent of the                                                               
yearly  average  pay.    Further, these  numbers  do  include  an                                                               
average geographic pay differential, he said.                                                                                   
                                                                                                                                
3:27:58 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  HUGHES asked  for  further  clarification on  the                                                               
PSEA.   She asked what  "AA" and "AP" stand  for in terms  of the                                                               
Public Safety Employees Association (PSEA) salaries listed.                                                                     
                                                                                                                                
COMMISSIONER  FISHER  answered that  "AA"  refers  to the  Alaska                                                               
State Troopers (AST) and "AP"  covers the airport police and fire                                                               
personnel, who have different rates.                                                                                            
                                                                                                                                
3:28:21 PM                                                                                                                    
                                                                                                                                
COMMISSIONER  FISHER directed  attention  to an  overview of  the                                                               
negotiation process  [slide 9].   He advised that the  process is                                                               
governed  by statute  and  negotiations are  begun  based on  the                                                               
terms of  the collective bargaining.   Typically, the negotiation                                                               
process starts in the fall.   Certain terms such as wages, hours,                                                               
and other terms are mandatory.   The Department of Administration                                                               
must submit  the monetary terms  to the legislature  for approval                                                               
no later  than the 60th day  of the legislative session.   In the                                                               
event the  department doesn't reach an  agreement, some employees                                                               
have the right to strike, he said [slide 10].                                                                                   
                                                                                                                                
3:29:31 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  LEDOUX,  with respect  to  the  right to  strike,                                                               
noted  that all  employees have  the right  to strike  except for                                                               
protective service  personnel.   She asked  whether the  right to                                                               
strike is  based on state or  federal statute, or if  it is based                                                               
on common law.                                                                                                                  
                                                                                                                                
MS. SHEEHAN  answered that the  right to  strike is based  on the                                                               
Public Employment  Relations Act (PERA), which  is state statute.                                                               
She  directed attention  to  AS 23.40,  which  defines the  three                                                               
classes  of employees;  for example,  Class 1  - police  and fire                                                               
protection  includes  all  Department   of  Public  Safety  (DPS)                                                               
employees, including  correctional officers.   The  other classes                                                               
are also defined, she said.                                                                                                     
                                                                                                                                
3:30:33 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  LEDOUX  asked whether  there  is  a local  option                                                               
clause.                                                                                                                         
                                                                                                                                
MS. SHEEHAN  answered that not  all employers are subject  to the                                                               
Public Employment Relations Act  (PERA), but all classified state                                                               
employees are subject to the act.                                                                                               
                                                                                                                                
3:30:56 PM                                                                                                                    
                                                                                                                                
COMMISSIONER FISHER directed attention  to labor striking, to the                                                               
strike  classes Representative  LeDoux  just  referred to  [slide                                                               
11].  He  stated that "Strike Class 1" employees  do not have the                                                               
right to  strike, but have  certain other  rights.  The  right to                                                               
strike  can be  limited  for "Strike  Class  2" employees,  which                                                               
consists  of  public  utility,   snow  removal,  sanitation,  and                                                               
educational institution  employees.   He said that  "Strike Class                                                               
3" may strike if the majority of its members vote to do so.                                                                     
                                                                                                                                
3:31:37 PM                                                                                                                    
                                                                                                                                
COMMISSIONER  FISHER  referred  to  the flowchart  on  slide  12,                                                               
entitled "Bargaining  Road Map."   In the  event of  an agreement                                                               
monetary  terms are  submitted to  the  legislature the  contract                                                               
would be finalized, assuming the  funds are appropriated.  In the                                                               
event  of an  impasse,  "Strike Class  1"  employees without  the                                                               
right to  strike can  seek arbitration  to resolve  the disputes.                                                               
The  other   classes  do  not   have  that  right,   but  certain                                                               
alternatives exist  depending on  what the department  decides to                                                               
do; however,  he assured members  the department works  very hard                                                               
to reach agreement and has generally been successful.                                                                           
                                                                                                                                
3:32:38 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  JOSEPHSON, in  terms of  exempt employees,  asked                                                               
whether legislation modifies the salaries.                                                                                      
                                                                                                                                
MS. SHEEHAN asked for further clarification on the question.                                                                    
                                                                                                                                
REPRESENTATIVE  JOSEPHSON asked  who sets  the salary  for exempt                                                               
employees,  such  as  the  deputy   commissioner  and  how  those                                                               
salaries are modified.                                                                                                          
                                                                                                                                
MS. SHEEHAN answered that it  depends; for example, the partially                                                               
exempt  salary schedule  is set  in statute  by the  legislature.                                                               
The  Public   Employment  Relations   Act  (PERA)   requires  the                                                               
department  to bargain  wages.   Thus, the  classified employees'                                                               
salaries are set through collective  bargaining.  Exempt employee                                                               
salaries are set by whoever makes the determination, she said.                                                                  
                                                                                                                                
3:34:08 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE LEDOUX asked who makes the determination.                                                                        
                                                                                                                                
MS. SHEEHAN  answered that the  governor makes  determinations on                                                               
staff salaries, but exempt employees  in commissions would be set                                                               
by the  commission, in consultation  with the  governor's office.                                                               
For  example,  the  Alaska  Seafood  Marketing  Institute  (ASMI)                                                               
salaries  would  be  made  by  ASMI,  in  consultation  with  the                                                               
governor's office.                                                                                                              
                                                                                                                                
3:34:43 PM                                                                                                                    
                                                                                                                                
COMMISSIONER  FISHER   highlighted  the   past  Cost   of  Living                                                               
Allowances (COLA) that  were negotiated [slide 13].   At the time                                                               
COLA is  negotiated, no one  knows what the consumer  price index                                                               
(CPI)  will  be;  however,  over time  the  COLA  increases  have                                                               
roughly matched  the actual CPI  increases.  He offered  that one                                                               
percent  CPI in  the  five different  contracts being  negotiated                                                               
will have  different impacts on  the individual contracts.   As a                                                               
whole  each  one  percent  COLA  amounts  to  approximately  $2.7                                                               
million annually or $16.3 million for three years, he said.                                                                     
                                                                                                                                
3:35:59 PM                                                                                                                    
                                                                                                                                
COMMISSIONER  FISHER turned  to the  current status  of contracts                                                               
[slide  15].   As  previously mentioned,  the  contracts for  the                                                               
Masters, Mates,  & Pilots (MMP) and  Marine Engineers' Beneficial                                                               
Association  (MEBA) were  scheduled to  be negotiated  last year.                                                               
The  state  reached  a  tentative agreement  with  MMP,  but  its                                                               
members  failed  to ratify  the  agreement  so negotiations  will                                                               
continue.  The state has not  yet reached an agreement with MEBA,                                                               
but  negotiations continue.   However,  the state  has reached  a                                                               
tentative   agreement    with   Alaska    Correctional   Officers                                                               
Association (ACOA).   He pointed out the  negotiated COLA figures                                                               
of  1 percent  in 2016,  1 percent  in 2017,  and 2.5  percent in                                                               
2018.   The  Labor Trades  & Crafts  and the  Teachers' Education                                                               
Association  of  Mt.  Edgecumbe (TEAME)  are  both  currently  in                                                               
negotiations with the state, he reported.                                                                                       
                                                                                                                                
3:36:55 PM                                                                                                                    
                                                                                                                                
COMMISSIONER FISHER  discussed the  next steps once  agreement is                                                               
reached  noting that  the DOA  submits the  monetary terms  of an                                                               
agreement to the legislature for approval [slide 16].                                                                           
                                                                                                                                
3:37:07 PM                                                                                                                    
                                                                                                                                
COMMISSIONER  FISHER  discussed   the  monthly  health  insurance                                                               
benefit credit [slide  17].  This impacts the state  in two ways,                                                               
for  active employees  and  for  retirees.   He  pointed out  the                                                               
dramatic increase in  costs, such that in the past  30 years, the                                                               
Alaska consumer  price index (CPI)  increased by 95  percent with                                                               
medical  expenses  increasing  by   over  300  percent.    Alaska                                                               
continues to  be one of the  most expensive states in  the nation                                                               
for medical  services, he said,  with medical  expenses sometimes                                                               
costing twice  as much in  Alaska as in  some other states.   The                                                               
administration sees the  need and opportunity to  try to continue                                                               
to reduce  costs, he said.   Costs have  begun to decline  in the                                                               
last year,  in part,  by replacement of  the state's  third party                                                               
administrator  with Aetna.   In  fact,  Aetna's more  substantial                                                               
network has reduced  costs, he said, estimating that  in 2014 the                                                               
state saved nearly $44 million.                                                                                                 
                                                                                                                                
3:38:43 PM                                                                                                                    
                                                                                                                                
CHAIR  OLSON  cautioned that  [Aetna's  success]  depends on  the                                                               
region since  some parts  of the state  continue to  experience a                                                               
shortage  of medical  professionals.   He  reported  that he  has                                                               
received  a number  of  complaints from  retirees  and from  some                                                               
active employees  in his district  who allege that  benefits have                                                               
diminished  under  Aetna.    If  so,  it  would  probably  be  in                                                               
violation of their contract, he stated.  He asked for comments.                                                                 
                                                                                                                                
COMMISSIONER FISHER  explained that  the task of  the third-party                                                               
administrator  is to  administer approximately  1.5 million  line                                                               
items in  the insurance  plan.   He acknowledged  that challenges                                                               
exist in  figuring out how  to align and preserve  with precision                                                               
specific benefits  when switching administrators.   Some benefits                                                               
may  impact members,  he agreed,  stating the  administration has                                                               
been  holding  conversations  with   retirees  to  address  their                                                               
concerns and  find solutions  to more  clearly meet  their needs;                                                               
however, he  also doesn't believe  there has been  a diminishment                                                               
in the  overall plan.   He cautioned  that the standard  does not                                                               
require a  one-for-one exactness, but  rather that the  plan must                                                               
provide  a program  roughly  comparable -  with  some pluses  and                                                               
minuses.   He  further said  that the  administration understands                                                               
the frustration members  are having and has been  taking steps to                                                               
try to address their concerns.                                                                                                  
                                                                                                                                
3:41:07 PM                                                                                                                    
                                                                                                                                
CHAIR OLSON  outlined his  plan to  schedule meetings  to discuss                                                               
the aforementioned issues at length.   He encouraged Commissioner                                                               
Fisher   to   participate,   as   well   as   welcoming   Aetna's                                                               
participation.   Although  he has  held some  brief conversations                                                               
with Aetna,  the complaints and  nature of the calls  are serious                                                               
enough to warrant further investigation.   For example, Aetna has                                                               
been using the  Rawlings [Group], a Lower  48 subrogation company                                                               
that isn't licensed in Alaska,  in fact, according to the DCCED's                                                               
website  the company  doesn't  even hold  a  business license  in                                                               
Alaska.   He expressed concern  that the Rawlings Group  has been                                                               
attempting to  shift claims from  the major medical policy  to an                                                               
automobile policy,  workers' compensation,  or other policy.   He                                                               
advised  members that  these issues  will be  considered under  a                                                               
separate series of meetings.                                                                                                    
                                                                                                                                
COMMISSIONER  FISHER  responded  that  he will  be  delighted  to                                                               
engage  in  those  meetings.    He said,  "I  do  think  this  is                                                               
critical,  and critical  from  both dimensions."    First, it  is                                                               
critical for the state to address  its medical costs.  Of the $10                                                               
billion  plus of  unfunded liability  in the  pension plan,  $3.6                                                               
billion  is associated  with medical  care.   At  the same  time;                                                               
however, the state should provide  its retirees the services they                                                               
deserve.   He  welcomed  working with  the  committee on  resolve                                                               
these issues.                                                                                                                   
                                                                                                                                
3:43:05 PM                                                                                                                    
                                                                                                                                
CHAIR  OLSON asked  whether the  department has  been considering                                                               
medical tourism.  He recalled  that previously the administration                                                               
had    been    considering    sending    patients    and    their                                                               
spouses/caregivers, primarily  to Seattle, to  obtain specialized                                                               
treatment.  He recalled that treatment  would be 40 to 50 percent                                                               
less even with travel and lodging expenses.                                                                                     
                                                                                                                                
COMMISSIONER FISHER answered yes;  that the department is looking                                                               
at  everything.   The  aforementioned  scenario illustrating  the                                                               
cost dynamic  demonstrates some of the  challenges the department                                                               
is facing, he said.                                                                                                             
                                                                                                                                
CHAIR OLSON offered to provide  the top 25-50 procedures based on                                                               
six   western   states,    primarily   developed   for   workers'                                                               
compensation.   He said that  some medical procedures are  300 to                                                               
350 percent more expensive in Alaska.                                                                                           
                                                                                                                                
3:44:36 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  LEDOUX asked  whether  the  state has  considered                                                               
working  with  the  federal  government  to  allow  more  foreign                                                               
physicians to immigrate if they are  willing to work in Alaska or                                                               
remote  areas.     She  offered  her  belief,   with  respect  to                                                               
immigration,   that  physicians   don't  currently   receive  any                                                               
advantage in  the queue, whereas  nurses have a much  easier time                                                               
immigrating.   She  acknowledged  the matter  relates to  federal                                                               
immigration,  but she  wondered  whether the  state could  foster                                                               
discussions to obtain exemptions for physicians.                                                                                
                                                                                                                                
COMMISSIONER FISHER  said he  thought her  suggestion is  a great                                                               
one  and although  he is  not aware  of any  initiative, she  has                                                               
raised an interesting opportunity to explore.                                                                                   
                                                                                                                                
3:45:40 PM                                                                                                                    
                                                                                                                                
CHAIR  OLSON, with  respect to  medical tourism,  advised members                                                               
that during  the pipeline days,  one union  had two Lear  jets to                                                               
medevac workers to Seattle for treatment.                                                                                       
                                                                                                                                
REPRESENTATIVE LEDOUX  commented that medical tourism  is used by                                                               
a number of countries.                                                                                                          
                                                                                                                                
3:46:13 PM                                                                                                                    
                                                                                                                                
COMMISSIONER  FISHER   directed  attention  to  the   graph  that                                                               
illustrates the  steep increase in benefits  for PERS/TRS [Public                                                               
Employees  Retirement System/Teachers  Retirement System]  in the                                                               
coming decades [slide 19].  He  cautioned that the state only has                                                               
a few  years to make a  difference, but if the  state succeeds in                                                               
reducing costs, it  will reap substantial benefits  in the coming                                                               
decades.   He said he  feels a  sense of urgency  to aggressively                                                               
pursue  reductions so  the state  doesn't miss  this opportunity.                                                               
The  current unfunded  liability  is just  over  $10 billion,  he                                                               
said.                                                                                                                           
                                                                                                                                
3:47:11 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE KITO  related his understanding that  the graph on                                                               
slide 19  illustrates the impact of  Tier I and Tier  II employee                                                               
medical costs  that will  diminish over time.   He  asked whether                                                               
the current  Tier IV  employees will incur  medical costs  in the                                                               
future.                                                                                                                         
                                                                                                                                
COMMISSIONER FISHER  answered yes; however, the  state has worked                                                               
hard to  ensure that  there isn't  unfunded cost  for Tier  IV so                                                               
over time the burden on the retirement plan will be less.                                                                       
                                                                                                                                
3:48:17 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  JOSEPHSON  recalled  a series  of  articles  last                                                               
April that  noted legislation  shifting $3  billion to  the trust                                                               
was good,  but that  this would  be consumed  by a  new scheduled                                                               
payout  due   to  the  amortization.     He  asked   whether  the                                                               
commissioner could comment on whether  the legislature back ended                                                               
the  trust  but  left  a   somewhat  larger  problem  for  future                                                               
generations to contend with.                                                                                                    
                                                                                                                                
COMMISSIONER  FISHER,  referring to  slide  20,  pointed out  the                                                               
graph illustrates  the $3  billion payment made  last year.   The                                                               
green line shows  what would have been  the amortization schedule                                                               
and the  blue and  red lines  represent the  forecasted schedule.                                                               
He  agreed that  in  the outlying  years there  appears  to be  a                                                               
crossover and that it pushed some costs further out.                                                                            
                                                                                                                                
REPRESENTATIVE JOSEPHSON  commented that it will  be difficult to                                                               
change course this  year or next year; however, he  noted it is a                                                               
concern some have had.                                                                                                          
                                                                                                                                
3:49:53 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE KITO also expressed  his concern that by extending                                                               
the amortization  out too  far, the  state may  be back  into the                                                               
situation of paying more in interest than the state can afford.                                                                 
                                                                                                                                
COMMISSIONER FISHER  offered to review the  schedule and consider                                                               
options.                                                                                                                        
                                                                                                                                
3:50:28 PM                                                                                                                    
                                                                                                                                
CHAIR OLSON  asked whether the  commissioner could break  out the                                                               
retirement and the medical component into two charts.                                                                           
                                                                                                                                
COMMISSIONER FISHER answered yes.                                                                                               
                                                                                                                                
3:50:44 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  HUGHES  recalled  several  years  ago  the  state                                                               
planned to institute  a health care management  plan designed for                                                               
savings.   She asked  whether the  state has done  so and  if the                                                               
state has  realized savings.   She further  recalled that  it may                                                               
have been a nurse call in line.                                                                                                 
                                                                                                                                
CHAIR OLSON  asked whether Representative Hughes  is referring to                                                               
TeleMed [telemedicine].                                                                                                         
                                                                                                                                
COMMISSIONER  FISHER   said  he  was  unsure,   but  related  his                                                               
understanding  that a  certain amount  of  telemedicine is  being                                                               
used in rural Alaska.                                                                                                           
                                                                                                                                
REPRESENTATIVE  HUGHES wondered  if the  state has  some kind  of                                                               
program for state employees and retirees.                                                                                       
                                                                                                                                
3:52:18 PM                                                                                                                    
                                                                                                                                
ANDY  MILLS,  Special  Assistant,  Office  of  the  Commissioner,                                                               
Department    of    Administration    (DOA),    suggested    that                                                               
Representative  Hughes   might  be  referring  to   the  wellness                                                               
program.  He  stated that this voluntary  program brought forward                                                               
ideas, such as Weight Watchers,  employee health concepts, and an                                                               
employee assistance program  similar to a counseling  line.  Some                                                               
telemedicine and other  concepts such as onsite  clinics were not                                                               
implemented, he said.                                                                                                           
                                                                                                                                
3:53:06 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE HUGHES asked whether there were any savings.                                                                     
                                                                                                                                
MR.  MILLS answered  that wellness  is difficult  to track  or to                                                               
find measureable and  quantifiable results.  He  offered to check                                                               
but the  outcome of the  wellness program means  better long-term                                                               
health for its members.                                                                                                         
                                                                                                                                
3:53:36 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE HUGHES recalled that  the proposal was supposed to                                                               
achieve  savings  and  while she  recognized  the  importance  of                                                               
having  healthy  Alaskans,  she also  expressed  an  interest  in                                                               
obtaining   feedback  that   demonstrates  quantifiable   program                                                               
benefits.                                                                                                                       
                                                                                                                                
COMMISSIONER  FISHER   offered  to   check  into  this   for  the                                                               
committee.                                                                                                                      
                                                                                                                                
3:54:07 PM                                                                                                                    
                                                                                                                                
COMMISSIONER FISHER highlighted  that the third area  of focus is                                                               
to obtain  savings in  state purchasing  [slide 21].   Currently,                                                               
some state  procurement is  managed by  the department  and other                                                               
procurement  is managed  by various  other departments,  he said,                                                               
although some  benchmarks indicate  the department has  saved $60                                                               
million.   However, this is an  area that is ripe  for additional                                                               
savings, he said.                                                                                                               
                                                                                                                                
3:54:56 PM                                                                                                                    
                                                                                                                                
COMMISSIONER  FISHER  directed  attention  to  slide  22  to  the                                                               
[Integrated Resource Information System]  IRIS.  This system will                                                               
replace aging financial systems  currently in operation and allow                                                               
a more  complete and comprehensive view  of financial information                                                               
as  well  as  purchasing  information.    He  reported  that  the                                                               
department  is in  the  final  stages of  "go  live" testing  and                                                               
expects  to  make the  transition  to  phase three  of  financial                                                               
management  and "go  live" this  year.   Further, he  anticipated                                                               
that next year  phase 4 will include human  resources and payroll                                                               
components.  He  reported that the department is  on schedule and                                                               
on budget with the IRIS project.                                                                                                
                                                                                                                                
COMMISSIONER  FISHER directed  attention to  the self-serve  site                                                               
that vendors  can use  [slide 23].   This includes  RFPs [Request                                                               
for  Proposals] and  various grants,  allowing vendors  to obtain                                                               
status and  facilitating efficiency and more  competitive bids in                                                               
the state processes.                                                                                                            
                                                                                                                                
3:56:22 PM                                                                                                                    
                                                                                                                                
COMMISSIONER  FISHER   directed  attention  to   the  information                                                               
technology [IT]  services, which are centralized  through the ETS                                                               
[Enterprise  Technology Services]  but decentralized  through the                                                               
department-centric   function   [slide   24].      He   estimated                                                               
approximately  $220  million in  total  IT  spend, of  which  $38                                                               
million is  for ETS.   Many think  that the  department currently                                                               
has  a   somewhat  "silo"  or  "department-centric"   view,  with                                                               
inconsistent  standards  or  a  duplication  of  effort  in  each                                                               
department,  he said.   He  assured members  that the  department                                                               
will work  to find the  right structure  to improve the  level of                                                               
service, in  part, due to  the legislature's request,  but partly                                                               
through its own efforts.                                                                                                        
                                                                                                                                
3:57:28 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  KITO asked  whether  the state  previously had  a                                                               
centralized IT service.                                                                                                         
                                                                                                                                
COMMISSIONER  FISHER related  his understanding  that there  have                                                               
been at  times a  more centralized IT,  perhaps not  100 percent,                                                               
but rather an  ebb and flow over  the years.  He was  not sure on                                                               
the details.                                                                                                                    
                                                                                                                                
3:57:56 PM                                                                                                                    
                                                                                                                                
COMMISSIONER   FISHER   directed   attention  to   the   building                                                               
portfolio,  pointing  out that  the  state  manages 19  buildings                                                               
consisting of  1.6 million square  feet in  state-owned buildings                                                               
with another  3.9 million square  feet of space in  leases [slide                                                               
25].   He reported  the state-owned building  occupancy is  at 97                                                               
percent  occupancy  - which  is  great;  however, the  department                                                               
continues to  strive to reduce costs  and move as many  people to                                                               
state-owned facilities  as possible.   Universal  space standards                                                               
has been  one tool used  to achieve  a higher density  of workers                                                               
[slide 26].   He reported  that although some space  standards to                                                               
upgrade  cubicles were  instituted, and  ones currently  underway                                                               
will  be   completed,  the  administration  has   halted  further                                                               
universal space  standards action  due to budgetary  changes that                                                               
may affect staff numbers.                                                                                                       
                                                                                                                                
3:59:46 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE COLVER  related his  understanding that  the space                                                               
reorganization  has  been  very unpopular  among  employees,  who                                                               
haven't  viewed these  changes as  cost savings  measures because                                                               
implementing space standards also  necessitates buying new office                                                               
equipment.  He hoped the  commissioner will solicit feedback from                                                               
workers.   Workers know  what will work  more efficiently  and he                                                               
questioned  implementing the  universal  space  standards in  all                                                               
buildings  statewide.    He reported  hearing  that  having  four                                                               
people in  one cubicle makes  it impossible to  conduct business,                                                               
particularly in terms  of confidentiality.  He viewed  this as an                                                               
opportunity for the department to review this process.                                                                          
                                                                                                                                
REPRESENTATIVE KITO  agreed with  Representative Colver  in terms                                                               
of making sure  that state employees have the  adequate space and                                                               
the  resources  they   need  to  do  perform  their   jobs.    He                                                               
acknowledged that  may vary so  he hoped  the DOA will  work with                                                               
other  commissioners to  be certain  that individual  job classes                                                               
are adequately served.                                                                                                          
                                                                                                                                
4:01:57 PM                                                                                                                    
                                                                                                                                
COMMISSIONER FISHER answered yes;  noting the department has been                                                               
reviewing some  of the complaints  with union  representatives to                                                               
address  the  issues.   He  said  he  has  reviewed some  of  the                                                               
materials, noting the  nationwide trend to try to  use space more                                                               
efficiently.  He  offered his belief that the  department can use                                                               
space  more efficiently,  but  said he  was  unsure whether  [the                                                               
universal space standards  approach] is the right  answer or not.                                                               
However,  considering space  standards is  not inconsistent  with                                                               
other initiatives in the private and public sectors, he said.                                                                   
                                                                                                                                
4:03:15 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE HUGHES  hoped the  department would  also consider                                                               
co-locating  offices as  it reviews  statewide physical  space in                                                               
order  to save  money whenever  possible.   For  example, as  she                                                               
mentioned recently  in a House Transportation  Standing Committee                                                               
meeting, it  seems like it would  make sense to have  the trooper                                                               
and the highway department share space in rural areas.                                                                          
                                                                                                                                
4:04:13 PM                                                                                                                    
                                                                                                                                
COMMISSIONER FISHER  referring to an earlier  slide, acknowledged                                                               
that the state  often does co-locate offices;  however, he agreed                                                               
that  other opportunities  probably  exist to  be more  efficient                                                               
with space.                                                                                                                     
                                                                                                                                
4:04:32 PM                                                                                                                    
                                                                                                                                
COMMISSIONER  FISHER  directed  attention to  insurance  and  the                                                               
catastrophic  fund managed  by the  department [slide  27].   The                                                               
state  has experienced  several catastrophic  events in  the past                                                               
year.                                                                                                                           
                                                                                                                                
REPRESENTATIVE  JOSEPHSON  asked  whether  the  Aerospace  Launch                                                               
Complex in Kodiak catastrophic event is a covered event.                                                                        
                                                                                                                                
COMMISSIONER FISHER answered that the  department is subject to a                                                               
$1 million  deductible, but the  balance will be  covered through                                                               
multiple  insurance companies.    Thus, the  state's exposure  is                                                               
capped at $1 million, he said.                                                                                                  
                                                                                                                                
CHAIR OLSON asked whether there is recovery from the parties.                                                                   
                                                                                                                                
COMMISSIONER   FISHER  interjected   that  an   investigation  is                                                               
currently  ongoing,   but  this  will  largely   be  between  the                                                               
insurance companies and the launch facility.                                                                                    
                                                                                                                                
4:05:58 PM                                                                                                                    
                                                                                                                                
COMMISSIONER FISHER explained that  the last few slides represent                                                               
three  recently  renovated  office  buildings:   the  Nome  State                                                               
Office Building, the  Douglas Island building in  Juneau, and the                                                               
Geologic Materials Center  in Anchorage [slides 28,  29, and 30].                                                               
He reported efficiencies  were achieved in each  of the buildings                                                               
by  updating  the  insulation  and   thermal  improvements.    In                                                               
particular, the  Geologic Materials Center was  renovated at half                                                               
the  cost of  new  construction and  construction  time cost  was                                                               
reduced by two years, he said.                                                                                                  
                                                                                                                                
4:07:22 PM                                                                                                                    
                                                                                                                                
CHAIR OLSON commented that the  [Anchorage Legislative Office} is                                                               
a nice building.                                                                                                                
                                                                                                                                
COMMISSIONER  FISHER  indicated  the  DOA does  not  manage  that                                                               
project or building.                                                                                                            
                                                                                                                                
4:07:41 PM                                                                                                                    
                                                                                                                                
CHAIR  OLSON  reported  that his  Kenai  office  co-locates  with                                                               
several  offices, including  the DOT&PF,  the OCS  [Department of                                                               
Health and  Social Services, Office  of Children's  Services] and                                                               
the LIO [Legislative Information Office].                                                                                       
                                                                                                                                
COMMISSIONER FISHER acknowledged the comments made.                                                                             
                                                                                                                                
4:08:05 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  HUGHES  reported  on   an  incident  one  of  her                                                               
constituents  experienced at  the  DMV in  an  attempt to  obtain                                                               
his/her  permanent vehicle  registration.   The person  could not                                                               
find the information  on the DMV's website,  which highlights the                                                               
need to have more information online  so the DMV can be more user                                                               
friendly.                                                                                                                       
                                                                                                                                
COMMISSIONER  FISHER  agreed 100  percent.    He said  that  many                                                               
people gauge  government by  their experiences at  the DMV  so it                                                               
needs  to be  a customer  friendly  experience.   He related  his                                                               
understanding that  prior administrations  have tried  to improve                                                               
service,  and have  been successful  in moving  a fair  number of                                                               
functions online, thereby reducing queues  and waiting times.  He                                                               
offered to work to continue that effort.                                                                                        
                                                                                                                                
CHAIR OLSON  remarked that  in many communities,  such as  in the                                                               
Kenai  and Soldotna  area,  the  DMV uses  real  time cameras  so                                                               
people can  view the  lines to estimate  potential wait  time and                                                               
plan their visits accordingly.                                                                                                  
                                                                                                                                
4:11:02 PM                                                                                                                    
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
There being no  further business before the  committee, the House                                                               
Labor and  Commerce Standing Committee  meeting was  adjourned at                                                               
4:11 p.m.                                                                                                                       

Document Name Date/Time Subjects
DOA Overview HLC 01-28-15.pdf HL&C 1/28/2015 3:15:00 PM
DCCED Overview