02/23/1998 03:21 PM House L&C
| Audio | Topic |
|---|
+ teleconferenced
= bill was previously heard/scheduled
HOUSE LABOR AND COMMERCE STANDING COMMITTEE
February 23, 1998
3:21 p.m.
MEMBERS PRESENT
Representative Norman Rokeberg, Chairman
Representative John Cowdery, Vice Chairman
Representative Bill Hudson
Representative Jerry Sanders
Representative Joe Ryan
Representative Tom Brice
Representative Gene Kubina
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
* HOUSE BILL NO. 347
"An Act relating to an exemption from overtime wage requirements
for certain motor vehicle mechanics."
- HEARD AND HELD
* HOUSE BILL NO. 400
"An Act combining parts of the Department of Commerce and Economic
Development and parts of the Department of Community and Regional
Affairs by transferring some of their duties to a new Department of
Commerce and Rural Development; transferring some of the duties of
the Department of Commerce and Economic Development and the
Department of Community and Regional Affairs to other existing
agencies; eliminating the Department of Commerce and Economic
Development and the Department of Community and Regional Affairs;
relating to the Department of Commerce and Rural Development;
adjusting the membership of certain multi-member bodies to reflect
the transfer of duties among departments and the elimination of
departments; and providing for an effective date."
- HEARD AND HELD
(* First public hearing)
PREVIOUS ACTION
BILL: HB 347
SHORT TITLE: OVERTIME WAGE EXEMPTION FOR MECHANICS
SPONSOR(S): REPRESENTATIVES(S) COWDERY
Jrn-Date Jrn-Page Action
01/23/98 2118 (H) READ THE FIRST TIME - REFERRAL(S)
01/23/98 2118 (H) LABOR & COMMERCE
02/23/98 (H) L&C AT 3:15 PM CAPITOL 17
BILL: HB 400
SHORT TITLE: DEPT OF COMMUNITY & ECONOMIC DEVELOPMENT
SPONSOR(S): REPRESENTATIVES(S) KOHRING, Austerman, Barnes,
Cowdery, Hodgins, Kelly, Mulder, Ogan, Ryan, Therriault, Vezey
Jrn-Date Jrn-Page Action
02/12/98 2307 (H) READ THE FIRST TIME - REFERRAL(S)
02/12/98 2308 (H) L&C, FINANCE
02/23/98 (H) L&C AT 3:15 PM CAPITOL 17
WITNESS REGISTER
MARCO PIGNALBERI, Legislative Assistant
to Representative John Cowdery
Alaska State Legislature
Capitol Building, Room 416
Juneau, Alaska 99801
Telephone: (907) 465-3879
POSITION STATEMENT: Presented HB 347.
MONTE JORDAN, Supervising Investigator
Wage and Hour Section
Division of Labor Standards and Safety
Department of Labor
675 7th Avenue, Station J-1
Fairbanks, Alaska 99701
Telephone: (907) 451-2886
POSITION STATEMENT: Answered questions on HB 347.
STEVE ALLWINE, Vice President
Alaska Auto Dealers Association
2180 Fritz Cove Road
Juneau, Alaska 99801
Telephone: (907) 789-1386
POSITION STATEMENT: Testified in support of HB 347.
JAMES D. HINES, auto technician
Mendenhall Auto Center
8725 Mallard Avenue
Juneau, Alaska 99801
Telephone: (907) 789-1386
POSITION STATEMENT: Testified in support of HB 347.
SCOTT HANCOCK, auto technician
Saturn of Anchorage
720 East 9th Avenue
Anchorage, Alaska 99501
Telephone: (907) 272-4022
POSITION STATEMENT: Testified in support of HB 347.
JIM SLOAN, auto technician
Eero Volkswagen of Anchorage, Incorporated
935 Gambell Street
Anchorage, Alaska 99501
Telephone: (907) 272-5522
POSITION STATEMENT: Testified in support of HB 347.
STAN PETITO, Service Manager
Cal Worthington Ford of Alaska, Incorporated
1950 Gambell Street
Anchorage, Alaska 99501
Telephone: (907) 276-5300
POSITION STATEMENT: Testified in support of HB 347.
RICK MORRISON
Alaska Auto Dealers Association;
Eero Volkswagen of Anchorage, Incorporated;
Saturn of Anchorage
935 Gambell Street
Anchorage, Alaska 99501
Telephone: (907) 272-5522
POSITION STATEMENT: Testified in support of HB 347.
DON ETHERIDGE
Alaska State Chapter, AFL-CIO;
District Council of Laborers
710 West 9th Street
Juneau, Alaska 99801
Telephone: (907) 586-3707
POSITION STATEMENT: Testified against HB 347 on behalf of the
AFL-CIO, but noted they are working with the
AADA and the Department of Labor.
DWIGHT PERKINS, Special Assistant
Office of the Commissioner
Department of Labor
P.O. Box 21149
Juneau, Alaska 99802-1149
Telephone: (907) 465-2700
POSITION STATEMENT: Provided department position on HB 347.
REPRESENTATIVE VIC KOHRING
Alaska State Legislature
Capitol Building, Room 421
Juneau, Alaska 99801
Telephone: (907) 465-2186
POSITION STATEMENT: Sponsor of HB 400.
MIKE KRIEBER, Legislative Administrative Assistant
to Representative Vic Kohring
Alaska State Legislature
Capitol Building, Room 421
Juneau, Alaska 99801
Telephone: (907) 465-6863
POSITION STATEMENT: Answered questions on HB 400.
MIKE IRWIN, Commissioner
Department of Community and Regional Affairs
P.O. Box 112100
Juneau, Alaska 99811-2100
Telephone: (907) 465-4700
POSITION STATEMENT: Provided department position on HB 400.
VICKI L. HEALY
P.O. Box 876287
Wasilla, Alaska 99687
Telephone: (907) 373-3736
POSITION STATEMENT: Testified as a Head Start Program parent
with concerns about HB 400.
ACTION NARRATIVE
TAPE 98-16, SIDE A
Number 0001
CHAIRMAN NORMAN ROKEBERG called the House Labor and Commerce
Standing Committee meeting to order at 3:21 p.m. Members present
at the call to order were Representatives Rokeberg, Cowdery, Hudson
and Ryan. Representative Brice arrived at 3:23 p.m.,
Representatives Kubina and Sanders arrived before 3:30 p.m.
HB 347 - OVERTIME WAGE EXEMPTION FOR MECHANICS
Number 0104
CHAIRMAN ROKEBERG announced the committee's first order of business
was HB 347, "An Act relating to an exemption from overtime wage
requirements for certain motor vehicle mechanics."
REPRESENTATIVE JOHN COWDERY, the bill sponsor, stated his staff
would present HB 347.
HB 347 read:
* Section 1. AS 23.10.060(d) is amended by adding a new
paragraph to read:
(17) work performed by a mechanic primarily engaged
in the servicing of motor vehicles if the mechanic is
employed as a flat-rate mechanic by a nonmanufacturing
establishment primarily engaged in the business of
selling or servicing motor vehicles; in this paragraph,
"motor vehicles" does not include boats or aircraft.
* Sec. 2. The amendment to AS 23.10.060(d) made by sec.
1 of this Act applies to work first performed on or after
the effective date of this Act.
Number 0117
MARCO PIGNALBERI, Legislative Assistant to Representative John
Cowdery, came forward to present some background information on HB
347. He stated, speaking from a prepared statement which was
distributed to the committee members:
This bill is necessary to allow flat-rate mechanics,
their employers and consumers, to be certain about the
price of a particular repair job, whether or not that job
extends into overtime.
In current practice, a flat-rate mechanic is compensated
on the basis of a percentage of the hourly shop rate.
The flat-rate mechanic provides the skill and maybe the
specialized tools to do the job. The employer provides
the garage and the overhead expenses.
If the flat-rate mechanic takes 8 hours or less to
complete a job there is no problem. However, if it takes
more than 8 hours then the overtime law is triggered.
Alaska's overtime law requires flat-rate mechanics'
compensation to be based on a complex hourly rate formula
that vitiates the flat-rate concept. This is the
fundamental reason for HB 347. Hourly compensation and
flat-rate compensation are fundamentally different
animals and do not mix. Flat-rate compensation cannot
and should not be converted to hourly compensation.
This legislation will bring our state statute in line
with the federal statute by exempting flat-rate mechanics
from overtime requirements. The federal law recognizes
the uniqueness of flat-rate compensation and therefore
exempts flat-rate mechanics. The language in the federal
law is found at Title 29 of U.S. Code Section 213,
subsection (10)(A) where it says: "Any salesman,
partsman, or mechanic primarily engaged in selling or
servicing automobiles, trucks, or farm implements, if he
is employed by an nonmanufacturing establishment
primarily engaged in the business of selling such
vehicles or implements to ultimate purchasers;".
Number 0269
Now HB 347 does not apply to partsmen. It is mechanic
specific to the mechanics who work in nonmanufacturing
establishments that sell or service motor vehicles, but
not boats or aircraft.
Alaska's overtime pay requirement is stricter than the
federal government's. The federal requirement is that
overtime pay be paid ... after 40 hours of work per week.
Alaska's requirement is that overtime pay be paid after
40 hours per week and after 8 hours per day. Flat-rate
mechanics are exempt from the federal requirement. HB
347 will exempt them from both the weekly and the daily
overtime requirements in Alaska law.
For example, in Day 1 in the work life of Bob, the flat-
rate mechanic, if he does a job for 10 billable hours and does it
in 9 hours, his agreement with his shop owner is that he gets ...
40 percent of the shop rate, if we say the shop rate is $60 per
hour. Current law requires that Bob's compensation be calculated
as follows and you'll see on page 1 of the testimony, the table
[Mr. Pignalberi referred to Table 1 in his written statement], that
you have to go through all the steps in each one of these columns
to determine what Bob's compensation is for that particular job.
Number 0367
A problem exists in that a daily calculation is just
that, it's a daily calculation that is only good for one
day. It changes each day whenever there's a variance in
the number of hours worked, or in the daily flat-rate
total. Any variation in either the length of the work
day, or the flat-rate mechanic's daily earnings, will
change the effective pay rate and thus the overtime rate.
On Day 2, look at what happens if another customer comes
in with exactly the same 9-hour job. Say the mechanic
has already worked a 3-hour job before he starts on the
new 9-hour job. ... The table [Table 2] there will show
that the total compensation due the mechanic was
different than he got for the same job on Day 1, it's $40
more.
Now current Department of Labor rules require the
calculation of an effective hourly rate on a cumulative,
weekly basis. The flat-rate mechanic's compensation for
the very same work will differ if his pay is calculated
on a two-day work week vis- -vis, say, a five-day work
week.
Now this calculation assumes that the flat-rate mechanic
will work no more the rest of the week. If he works
more, then the effective hourly rate and hence the
overtime rate will change. This situation prevents the
employee and employer from knowing what is each day's
compensation because it depends on knowing the exact
amount of work for the whole week in advance. For
example, the compensation for a job completed on
Wednesday will differ depending on whether the employee
is paid on that Wednesday or whether he works additional
days that would cause the calculation of Wednesday's
compensation to change. The law forces absurdity, which
is probably why the federal government provides the
exemption.
Number 0498
Now to progress to the third day in this hypothetical
life of Bob the flat-rate mechanic, no flat-rate jobs
were available that day, they didn't come in, and he
stands by for 10 hours, and he has a standby rate of $12
per hour. Now we simply do that calculation in the table
[Table 3] so that we'll be able to see how it affects his
overall weekly total at the end of Day 6.
Now this Day 3 table shows Bob's compensation as if it
was a stand-alone day. However, if Bob got sick and
didn't work Day 4 and didn't work Day 5, then his pay
would have to be calculated differently [Table 3A]. It
is absurd that the flat-rate mechanic's compensation for
a given day's work should differ depending on what work
was performed on other days of the week. But, that's the
situation inflicted by the current statute.
On the fourth day, the flat-rate mechanic works three
identical flat-rate jobs of three hours each. The first
job's flat rate is $72, as you'll see in Table 4. The
second job's flat rate is also $72. The third job cannot
be charged $72 because there is an ... hour of overtime
included. The overtime hour triggers the Department of
Labor's conversion formula from flat-rate to hourly
calculation, hence the third job must be charged two
hours of straight time and one hour at an overtime rate
for a total job cost of $84, whereas the other jobs were
$72. Under the flat-rate mechanic concept, all three
consumers would have paid the identical price for the
identical job. However, the statute vitiates the flat-
rate concept and requires the flat-rate mechanic's compensation to
be converted to hourly, overtime rates.
Number 0615
Then on the fifth day in our hypothetical example, we
have an 11-hour repair which is done in 8 hours but no
overtime is due because ... he only worked 8 hours and
did not yet trigger the 40-hour weekly overtime [Table
5].
Finally on the sixth day a job comes in that is identical
the job that came in on the first day. Again, the ...
overtime statute is triggered. The job that cost $253 on
the first day cost $356 on the sixth day. [Mr. Pignalberi
noted Table 6 had not copied on the written statement,
but he referred the committee to the bottom of the next
page, where it said "Day 6," noting the bottom table had
the same numbers.]
... The final table is a combination of the six days of
work activity that I've just described. You will note
that the effective hourly rate changes each day because
it is based on the cumulative hours and pay from previous
days of the week. Also, the overtime rate changes
because it is a function of the effective hourly rate.
Consequently, it's impossible for an employer and a flat-
rate mechanic to know, in advance, the exact amount of compensation
due at the end of any day or week. As a result, most of the
employers of flat-rate mechanics simply restrict them from working
overtime to avoid confusion and the attendant liability of
violating the law.
Current state statute requires conversion of flat-rate
agreements between the employers and their flat-rate
mechanics, conversion to an hourly rate. This is akin to
trying to convert a cat into a dog. You can force an
operation and move around the parts but you only end up
with a freak, and the current law is a freak. It scares
employers. It deprives flat-rate mechanics of the
opportunity to work. HB 347 corrects the situation by
separating flat-rate compensation from the statute
governing hourly and overtime pay.
Number 0755
MR. PIGNALBERI stated he would be happy to answer any questions and
noted the presence via teleconference of Ms. Monte Jordan from the
Department of Labor (DOL) in Fairbanks to assist with any technical
questions regarding the formula.
Number 0765
REPRESENTATIVE COWDERY noted Mr. Pignalberi had worked pretty
extensively with this and asked Mr. Pignalberi if he really
understood what he had just said. Representative Cowdery asked if,
in Mr. Pignalberi's opinion, the average person in the DOL
understood it.
Number 0782
MR. PIGNALBERI responded that there were only a couple of people
specialized in the DOL who knew how this formula worked through its
various permutations. He said, of the six tables mentioned, they
had probably done 70 or so iterations and many of them differed.
He said they finally had these verified by the DOL that morning.
Mr. Pignalberi stated, "So it's ... more complex than even I could
portray to you, because every day the situation is somewhat
different. ... It's more than any employer or employee would want
to deal with."
Number 0815
CHAIRMAN ROKEBERG noted the attendance of Representative Sanders,
Representative Brice and Representative Kubina. He commented that
it would be much easier for the committee to decipher the formula
if they would have had it the previous Friday.
Number 0831
REPRESENTATIVE COWDERY responded that they hadn't gotten the
formula down themselves until a matter of minutes ago, noting they
had worked both Saturday and Sunday. Representative Cowdery
displayed a copy of what he called the flat-rate parts guide (Motor
parts and time guide), noting it was a 1995 version. He stated
this was a standard most shops, small and large, used.
Representative Cowdery stated hourly and parts rates were given for
any job - brakes, motor, transmission, for example - so that
estimates could given to customers when they came in. He said,
from his experience in this business using this book, that any
seasoned mechanic could beat this book. For a ten-hour job, he
would say a seasoned mechanic could do it in less time, in the
seven to eight-hour range, commenting he hoped some mechanics were
present who could testify to that fact. Representative Cowdery
said the book was available for the committee's perusal, noting he
had some pages marked. He commented that this was also the "bible"
the automobile factories used for jobs done under factory warranty.
Number 0936
REPRESENTATIVE TOM BRICE asked if a consumer was charged for ten
hours if a job estimated at ten hours by this took only nine hours.
Number 0945
REPRESENTATIVE COWDERY answered in the affirmative.
Number 0955
MR. PIGNALBERI stated this bill was not about what the consumer is
charged, it's only about the way to determine compensation for the
flat-rate mechanic.
Number 0967
REPRESENTATIVE JOE RYAN noted, for the edification of committee, he
knew from a friend who was an orthopedic surgeon that orthopedic
surgeons use a similar book to determine charges for operations.
Number 0990
REPRESENTATIVE BILL HUDSON asked Representative Cowdery who
published the book Representative Cowdery was referring to, and if
it was for Alaska.
Number 0995
REPRESENTATIVE COWDERY responded that there were several,
indicating it was a national publication. He said he had some
dating back to the 1940s, noting they were published and sold more
or less like the statutes. Representative Cowdery commented that
it is very complex, referring to a passage on an engine for a
Camaro or Firebird. He said it has the parts, the retail prices,
and a list of times for the different functions, whether it be a
brake job, steering wheel, engine, transmission, starter; it has
all of these broken out in the number of hours each job would
require. He said, "And it has nothing to do with the hours that
the shop time - you know, the shop charges or the hours that they
pay the mechanic, it's just a kind of a bible."
Number 1075
CHAIRMAN ROKEBERG noted there were approximately nine people
waiting to testify. Chairman Rokeberg asked Ms. Shirley Armstrong,
committee aide to the House Labor and Commerce Standing Committee,
for a copy of the federal statute, stating it was Title 29 of the
United States Code, the Fair Labor Standards Act (FLSA). He
referred to "section" (10)(A) of 29 U.S.C. 213. To Mr. Pignalberi,
Chairman Rokeberg said he was concerned that if they went forward
with this, HB 347 would exempt the automobile dealers, but not the
corner auto mechanics' shop, the few gas stations left in the state
with service bays, things of that nature.
Number 1136
MR. PIGNALBERI responded he thought the problem Chairman Rokeberg
was alluding to was the difference between the federal exemption
and state law. Mr. Pignalberi said HB 347, as written, would apply
to the corner garage repair place but not the gas station, because
they had to be primarily engaged in the business of servicing auto
vehicles.
Number 1157
CHAIRMAN ROKEBERG pointed out that the federal code said "selling,"
not "servicing."
MR. PIGNALBERI replied that was the difference between the federal
statute and the way they have crafted HB 347, stating HB 347 would
apply to the small independent repair facility.
Number 1173
CHAIRMAN ROKEBERG asked how it could apply if it was against the
federal code.
Number 1179
MR. PIGNALBERI stated, "In speaking with legal services on this
subject earlier today, they say if the federal inspector was to do
an investigation, it would be up them as to whether or not they
would try to make an employer pay [an] amount that might be due
under the federal statute vis- -vis the state statute." However,
Mr. Pignalberi said the big difference is that HB 347 applies to
the eight hour per day situation which does not exist in federal
statute. He thinks Alaska is unique among the 50 states in that it
requires employers to pay overtime after an 8-hour day. Mr.
Pignalberi stated the federal law and the rest of the states
require overtime pay after the 40-hour week, noting, "So, we don't
have a rub with the federal statute until after we've passed the
40-hour per week situation, and then it's ... somewhat hazy to me
what happens after that."
Number 1235
REPRESENTATIVE RYAN asked, "If I were the owner of N C Machinery [N
C Machinery Company], could I qualify my people under this bill?"
indicating he was referring to the Caterpillar, Incorporated,
franchise.
Number 1246
MR. PIGNALBERI noted he did not have a copy of the bill in front of
him, but stated, " If N C -- the Caterpillar dealer qualifies with
that language in that one sentence of the bill, then you - you
certainly want this bill. I believe it would, yes."
REPRESENTATIVE RYAN added, "It says selling or servicing motor
vehicles. It's rather broad -- 'motor vehicles' is rather broad."
Number 1268
MR. PIGNALBERI asked if a "caterpillar" qualified as a motor
vehicle.
REPRESENTATIVE RYAN replied, "Propelled by internal combustion
engine ...."
Number 1278
REPRESENTATIVE COWDERY stated he had phoned several small shops in
Anchorage that morning, "In fact the ones that do my business, it's
a two-man shop and owner with one mechanic. I asked 'em about this
and he said, he told me the way he does business, he pays his - his
guy an hourly rate, plus a percentage of the flat-rate book because
everything that comes in ... might or might not be covered, so
that's how he does it. I asked if he was aware that probably what
he's doing is probably not in tune with the state statutes and he
didn't know that, but he said half the shops that are his size that
he knew did a similar -- things that he did or similar."
Number 1320
CHAIRMAN ROKEBERG noted he wished the committee to take all the
testimony at that meeting.
Number 1325
REPRESENTATIVE HUDSON pointed out what he thought was a technical
flaw in the bill; on line 5 of the bill, it designates this as
(17), but he believed there was already a (17), community health
aides.
REPRESENTATIVE GENE KUBINA commented that he thought one of them
had been dropped.
CHAIRMAN ROKEBERG noted it was a drafting issue.
Number 1358
REPRESENTATIVE KUBINA stated he thought Representative Cowdery was
wrong, that a business had to have over four employees for any of
that section to count for overtime.
Number 1370
REPRESENTATIVE COWDERY stated that was the shop owner's comment to
him.
Number 1376
CHAIRMAN ROKEBERG went to Ms. Jordan in Fairbanks. He asked her to
clarify two of the technical issues raised: Representative
Kubina's comment about the four-employee standard and the
Chairman's question about the potential conflict between state and
federal law.
Number 1394
MONTE JORDAN, Supervising Investigator, Wage and Hour Section,
Division of Labor Standards and Safety, Department of Labor,
testified via teleconference from Fairbanks. She said there is an
exemption from all of the overtime statutes for an employer with
less than four employees. She stated, "A small business that has
less than four employees does not have to pay overtime under state
law, you still have to look at federal law."
Number 1412
CHAIRMAN ROKEBERG noted the federal code spoke to automobile
dealers. He gave the situation of a larger mechanics center - for
example, 20 employees working at an auto maintenance shop - saying
that would not be covered because of the federal statute speaking
only to auto dealers and he asked Ms. Jordan if that was correct or
incorrect.
Number 1437
MS. JORDAN noted she was not an expert on FLSA, but it was her
understanding that FLSA does exempt auto dealerships, but not gas
stations and small garages. She stated, "So what if someone called
our office, or the employee came in and wanted to file against that
auto dealership if - if they would be exempt under the feds if we
had a law that exempted them and they were a small garage employee,
then we would refer them to the feds because there is no such
exemption."
Number 1473
CHAIRMAN ROKEBERG asked if the federal law applied to small shops
with less than four employees.
Number 1480
MS. JORDAN replied that the federal government does not have an
exemption based on number of employees, it has an exemption based
on gross received income of the employer. She said, "Again,
federal law occasionally does cover an area that we don't, because
ours is both over 8 and over 40."
Number 1497
CHAIRMAN ROKEBERG asked if there were further questions of Ms.
Jordan. There being none, he requested she stand by.
Number 1524
STEVE ALLWINE, Vice President, Alaska Auto Dealers Association
(AADA), came forward in Juneau to testify. He commented, as the
committee had heard from Mr. Pignalberi, it was a pretty confusing
issue. Mr. Allwine said he would try not "beat the same things,"
and try not to make it quite as complex as it unfortunately seems
to become. He commented that, in a nut-shell, current statutes in
the state of Alaska do not provide an exemption from overtime
restrictions for flat-rate mechanics and that, unfortunately,
requires the DOL to attempt to regulate what has historically been
an unregulated area in most other states. He said the fundamental
difficulty with this issue is that flat-rate mechanics are not paid
by the hour. Mechanics are paid either a flat amount, $10, $20,
$30 per billable hour, or a percentage of the billable hour,
explaining that "billable hour" refers to the charge on a per hour
basis the merchant bills to the consumer. Mr. Allwine noted the
example of 40 percent was given earlier. He said it came out of
the parts and times guide previously referred to, and he would
provide more history shortly. He stated that, as the committee
could see, the DOL had been relegated to what was really an
impossible task of trying to convert flat-rate pay to an hourly
calculation. He stated customers affected by the current
regulation included, but were not limited to, automobile dealers,
retail consumers, wholesale accounts (repairs completed for another
garage), and automotive manufacturers.
Number 1614
MR. ALLWINE explained, regarding the way flat-rate mechanics are
paid, that the times for specific repairs are calculated in a way
to accurately predict how long the work will take to perform and
the resulting time is then divided into tenths of an hour. He said
examples of these calculations range from .2 hours to replace the
windshield wipers on a Lincoln Continental to 8.3 hours for the
complete removal and replacement of an engine in a Saturn 4-door
sedan. The times used are obtained from several published sources:
Motor's, Chilton's, Mitchell's (ph), and each manufacturers' own
time guides provided to automobile dealers. Mr. Allwine said that
it is that data in those books which allows an accurate estimation
of the cost of a particular repair to the consumer. He noted it
also worked, and was especially true, in automobile body shops. He
stated that a flat-rate mechanic is structured into an eight-hour
day under the current system. If the mechanic exceeded the eight
hours, his compensation was subject to the extremely complex
overtime formula as interpreted by the DOL. Mr. Allwine commented
that the DOL has no choice, it has to do this through "regulation."
He referred to the Mr. Pignalberi's explanation, stating the
committee could see the calculation was extremely difficult to
administer in the areas of calculation, accrual for accountants,
and payment - "You never know exactly whether you're doing it
right." He said, for these reasons, most Alaskan employers
restrict their flat-rate mechanics to an eight-hour workday. Mr.
Allwine explained and emphasized this means that if a repair is
close to completion and the work day is at an end, as an employer
he is requiring the mechanic to stop work even it would only take
an additional half hour to complete the repair. Mr. Allwine noted
this was especially annoying for a customer in Southeast Alaska
trying to catch a ferry who had to wait several more days for the
next ferry because the repair couldn't be complete in time. He
said this situation results in frustrated consumers not just
frustrated workers.
Number 1742
MR. ALLWINE stressed that HB 347 differed significantly from the
federal wage and hour exemptions, and that the AADA applauded
Representative Cowdery's foresight in this area. He said HB 347 is
broad inasmuch as it includes independent repair facilities
indicating these facilities are prevalent in Alaska, as well as
automobile retailers. Mr. Allwine said HB 347 identifies and
separates mechanics employed as hourly mechanics from those paid
under the flat-rate mechanism. He stated HB 347 narrowed federal
law because it states, "Primarily engaged in selling or servicing
motor vehicles." He indicated the AADA believes this would
eliminate a possible problem in situations where mechanics are
working in gas stations and required to perform other duties,
because selling and servicing are not the primary functions in
those cases. He said federal wage and hour laws provide numerous
exemptions, and when Alaska took control of its labor laws,
restricting the federal statutes in a blanket manner was the
prudent thing to do. Mr. Allwine stated this was done by simply
not allowing any exemptions at the outset and, as time has
progressed, specific exemptions have been authorized. He noted he
mentioned this for a couple of reasons: 1) to demonstrate that
flat-rate mechanics were not singled out, nor was any class of
employee in the initial legislation; and 2) because HB 347 is
specific and appropriate, as are other exemptions that have been
authorized over time.
Number 1815
MR. ALLWINE said beneficiaries of HB 347 include flat-rate
mechanics, body and paint personnel, employers, consumers, and the
DOL, because the department would no longer have to administer such
a cumbersome "regulation." The revised statute would allow flat-
rate mechanics flexibility in the workplace, increased productivity
and higher income. Mr. Allwine stated it would eliminate a
cumbersome overtime calculation for employers and place Alaska on
a par with other states. He said this would serve to attract and
retain flat-rate mechanics and new personnel to a vocation which is
suffering major shortages nationwide.
Number 1848
REPRESENTATIVE HUDSON noted Mr. Allwine indicated in his testimony
that the DOL was unable to deal with this because of regulations.
Representative Hudson asked if Mr. Allwine thought this was the
department's interpretation of regulations or if could he point
specifically to the statutes which precluded the DOL from trying to
find a regulatory solution.
Number 1865
MR. ALLWINE said he believed this is complicated because an
exemption is required to eliminate something from "wage and hour."
He said he believes if there was another way to do it, if they
could do this through regulation, the AADA would be happy consider
all ideas and work toward that. Mr. Allwine stated he also wanted
to briefly address Representative Ryan's question about whether N
C Machinery Company would fall under HB 347. Mr. Allwine said the
answer was technically no, because to be a motor vehicle, he
believed, the vehicle had to be licensed to be operated on state
and federal highways indicating he thought that would effectively
eliminate the equipment N C Machinery Company dealt with.
Number 1908
CHAIRMAN ROKEBERG asked Mr. Allwine if he had any comments
regarding the Chairman's previous question about the federal law
and its impact in the differential between auto dealers and corner
mechanics.
Number 1915
MR. ALLWINE asked the Chairman to restate the question.
Number 1949
CHAIRMAN ROKEBERG clarified he was talking about the differential
between the federal statute of the United States Code [29 U.S.C.
213, subsection (10)(A)] which specifically cited auto dealers, not
corner mechanics.
Number 1961
MR. ALLWINE stated he thinks HB 347 was a somewhat more favorable
take on that because smaller independent shops, including paint and
body shops, are prevalent in Alaska. He noted there aren't just
franchise automobile dealers throughout the state. Mr. Allwine
said he thinks that if it is proper, it certainly is appropriate
from AADA's perspective that the language of HB 347 include those
independent shops. He indicated he thinks it's appropriate, in
other words, to include a shop that primarily services, as well as
a shop that primarily sells and services automobiles.
Number 1988
CHAIRMAN ROKEBERG stated he would like to move on to other
testimony, commenting that the committee would not be moving HB 347
at this meeting.
Number 1994
REPRESENTATIVE COWDERY stated Mr. Allwine had previously said he
would "get into this book a little bit more," and asked him to
expand his comments.
Number 1999
MR. ALLWINE replied that he had covered it about halfway through.
He said, "If you go to another state, you will find a book like
that. If you were to take your car in and ask for a repair, it
will be based on these books, it is very consistent throughout the
United States." Mr. Allwine confirmed that the book (the Motors
parts and times guide) was a national publication.
Number 2016
CHAIRMAN ROKEBERG said he wouldn't ask some of the other dealers
on-line but could ask Mr. Allwine, as an AADA member, "If they
calculated that a job will take 8 hours based on the book, and it
only takes the mechanic 6 hours and he gets paid his 40 percent of
the six hours or however the formula works, what happens to the
..."
Number 2028
MR. ALLWINE stated the mechanic gets paid for his 8 hours, noting
that was the incentive; if the mechanic produces the job and does
it properly in 6 hours, he is paid the 40 percent of the 8 hours.
Number 2036
CHAIRMAN ROKEBERG asked who gets the 60 percent and the savings per
hour between the customer and the dealer. Chairman Rokeberg asked
if the dealer made the profit.
Number 2043
MR. ALLWINE responded he was in it for the money.
CHAIRMAN ROKEBERG replied that was okay, he believed in profits.
Chairman Rokeberg noted he had just wanted to go on record without
putting any of Mr. Allwine's associates on the spot when they were
testifying.
Number 2054
REPRESENTATIVE RYAN asked if this was predicated upon a journeyman
mechanic.
MR. ALLWINE answered in the affirmative.
REPRESENTATIVE RYAN asked if a customer still received the
originally quoted price if there were a lot of complications and a
job ran over.
MR. ALLWINE responded in the affirmative, adding that the book took
additional options on the vehicle and complications like rusted
bolts into consideration. He noted there were adjustments for
those types of things.
Number 2078
REPRESENTATIVE BRICE asked who audited the book to ensure
reasonable accuracy.
MR. ALLWINE indicated he was not sure, probably the Society of
Automotive Engineers (SAE).
Number 2118
JAMES D. HINES, auto technician, Mendenhall Auto Center, came
forward to testify in support of HB 347. He stated he has been
working for approximately 36 years as a flat-rate mechanic. Mr.
Hines said he feels that if they don't get this bill and it goes
the other way with the overtime, he would lose time if he had to
stop after the eight hours and start again the next day. He said
it would cost him more time on the job and make his job a lot
harder to do. He added, "And I don't know, as far the overtime, I
don't know how you'd ever figure what your pay would be on that."
Mr. Hines said he's asked people in other states and he said they
don't have this overtime problem.
Number 2161
REPRESENTATIVE KUBINA confirmed that Mr. Hines worked for the
dealership but was paid on a per-job basis, receiving health
insurance and a retirement plan, and was almost like an independent
contractor.
Number 2187
CHAIRMAN ROKEBERG asked Mr. Hines if his employer in Juneau allowed
him a little flexibility, or if he was asked to quit working after
eight hours.
MR. HINES replied that he was currently allowed the flexibility to
work over the eight hours.
CHAIRMAN ROKEBERG asked if they had to pay him the overtime.
MR. HINES responded, "Well, that's in the makings -- I don't know
how they figure it out."
CHAIRMAN ROKEBERG continued, "Why, 'cause it's so complex you're
not sure what you're getting paid every week? In other words, you
actually have to rely on your boss's accountant to figure out what
you're gonna get paid every week, and you can't really figure out
if you're getting the right amount of money."
MR. HINES agreed.
Number 2214
REPRESENTATIVE KUBINA asked what happened if Mr. Hines came in one
day and there was no work. Did he just not get paid, or did they
tell him to go home?
Number 2219
MR. HINES replied that he could go home or he could wait and hope
something came through the door.
REPRESENTATIVE KUBINA asked if Mr. Hines received a standby wage
while he was waiting.
MR. HINES answered in the negative. He said he guessed that was
part of the job.
Number 2232
REPRESENTATIVE KUBINA asked if that had been the case for pretty
much of Mr. Hines' whole 36 years as a flat-rate mechanic.
MR. HINES indicated that had been the case for most of his 36
years, that his pay has been based on commission.
Number 2241
CHAIRMAN ROKEBERG asked if Mr. Hines thought that he made a pretty
good living for a hardworking man.
MR. HINES replied he made a good living.
Number 2243
REPRESENTATIVE COWDERY confirmed Mr. Hines was familiar with the
parts and times book.
MR. HINES stated he had been working out of it for many years.
REPRESENTATIVE COWDERY asked Mr. Hines if he felt comfortable
saying he could beat the time in the book.
MR. HINES indicated he could match the time, if not beat it.
REPRESENTATIVE COWDERY asked Mr. Hines if he generally beat the
time.
MR. HINES answered in the affirmative.
Number 2259
REPRESENTATIVE RYAN commented that Mr. Hines testified he received
retirement and health benefits, saying that somewhat explained the
60 percent to the dealer.
Number 2265
CHAIRMAN ROKEBERG stated the committee would go to teleconference
testimony from Anchorage, asking witnesses to limit their testimony
to two or three minutes.
Number 2283
SCOTT HANCOCK, auto technician, Saturn of Anchorage, testified via
teleconference from Anchorage in support of HB 347. He stated he
has worked as a technician with Saturn of Anchorage for 14 years.
Mr. Hancock said the law, as it currently stands, limits their shop
hours, and changing the law would be a win-win situation for both
the consumer and the technician. It would allow them to expand
their shop hours and would allow him to earn more money.
Number 2335
JIM SLOAN, auto technician, Eero Volkswagen of Anchorage,
Incorporated, testified next via teleconference from Anchorage in
support of HB 347. He stated he has been a flat-rate automotive
technician for 25-plus years. He currently works for Eero
Volkswagen of Anchorage, Incorporated, and has been there almost 21
years. Mr. Sloan stated that the flat rate is a good system and
that they don't need overtime. He said it would be nice for him to
be able to finish a job without burdening his employer with
overtime; he would be able to get his cars finished at the end of
the day whether it took him (indisc.) hours or ten hours.
Number 2364
CHAIRMAN ROKEBERG asked if that concluded Mr. Sloan's testimony,
and if anyone had asked him to testify that day.
Number 2370
MR. SLOAN replied that his employer did invite him to come down on
his own volition.
CHAIRMAN ROKEBERG asked Mr. Sloan if he worked beyond eight hours
a day.
Number 2378
MR. SLOAN replied generally he did not.
CHAIRMAN ROKEBERG asked if his employer had to pay him overtime if
he worked beyond eight hours a day.
MR. SLOAN answered in the affirmative.
Number 2392
STAN PETITO, Service Manager, Cal Worthington Ford of Alaska,
Incorporated, testified next via teleconference from Anchorage. He
stated he has been a service manager for 20 years. Mr. Petito said
it is important to point out that all the technicians he has ever
talked to are against any (indisc.) of this sort. He said the
technicians feel like they are independent employees because they
are allowed freedom during the day from constant supervision. He
said if they need to make a run or have a cup of coffee, they're
allowed to because they work by piecework. Mr. Petito mentioned
the discussion of what he referred to as the labor time guide. He
said the more productive a technician is, the better trained he is,
the more money he invests in tools, the more efficient he is going
to be. He indicated they have some technicians who might take 9
hours for an 8-hour pay job; they have others who might take 6
hours for an 8-hour job. He said the labor time guide they keep
referring to is there for the protection of the consumer and the
technician because it gives a fair, established time for a well-
trained, well-equipped technician. Mr. Petito said he thinks the
accounting nightmare that would be involved in calculating overtime
pay was pointed out very well in the beginning. He said (indisc.)
technicians do not have to work over 8 hours a day, about 80
percent of the time there isn't a need for it, but there are those
times 15 minutes or an hour away from completion of a job when the
technicians would like to be able to have the freedom to make that
choice and finish the customer's vehicle.
Number 2459
RICK MORRISON, Alaska Auto Dealers Association; Eero Volkswagen of
Anchorage, Incorporated; Saturn of Anchorage, testified next via
teleconference from Anchorage. Mr. Morrison stated, "In listening
to the testimony today I ..." [TESTIMONY INTERRUPTED BY TAPE
CHANGE]
TAPE 98-16, SIDE B
Number 0001
MR. MORRISON continued, "... but because of this law, we cannot sit
and calculate what our expenses are gonna be (indisc.) try to
create the bill to come in under that estimate. Most of our
technicians today are a much smarter group, very highly educated.
We don't refer to them as mechanics anymore, and even though the
print-out in here says 'mechanic,' these guys are truly and highly
motivated technicians." He said many technicians have their own
tool boxes, which may contain as much as $30,000 to $35,000 worth
of their own tools. He stated they send the technicians out for
continuing education; he personally sends 10 to 15 people out a
year. Mr. Morrison stated he is trying to emphasize that these are
very, very sophisticated technicians compared to the situation in
the industry 25 to 30 years ago when this law was enacted. Mr.
Morrison said he would say the technicians in his stores made, on
average, about 120 to 140 percent every hour they worked because of
their ability to do the job faster than the times the books called
for, noting it was a great incentive. He indicated it was also an
incentive to do the job right the first time because if it wasn't
done right the technicians would have to do the job again on their
own time, and he indicated this made it a self-governing or self-
policing system. Mr. Morrison indicated he thought any journeyman-
level technician in the industry, if asked, would say he or she
would much rather work under flat rate system than an hourly and
overtime system because he or she had the ability to do the job as
fast as he or she wanted.
Number 0068
MR. MORRISON stated one of the disadvantages of the current law was
that it limited flexibility. He related: A couple of gentlemen in
their Saturn store came to him with the idea of opening up on
Saturdays to provide better customer service. They would see if
everybody would be willing to work one extra hour a day and "every
other week we'd take one day off." Mr. Morrison said it sounded
like a great idea but he couldn't do it under the current law, he
said, "Because the customers are not willing to pay the extra
amount of money that it costs them their flat-rate hour, which,
again, they're making 120 to 140 percent more, and pay overtime on
top of that, so I have to look at 'em (indisc.) so I can't allow
you to do that. So there isn't flexibility to do it." Mr.
Morrison said he started in the automotive business 25 years ago as
a technician. He noted he had been an ambitious young man, and
commented that he and his family had benefited because he was given
the privilege of being able to put in as much time as he wanted
working off of a flat-rate system. He stated, "Under current
Alaska law, you can't do that because it's too restrictive. ... In
conclusion, I'd tell you that it's a very minor exception. It
provides a lot of additional incentive for the workforce. If they
don't want to work more than that, I don't believe that they would
be forced to work more than that. In our particular ... stores, we
really let the technicians govern that. These guys are a smart,
intelligent group and they'll work with you, and their goal is to
make the consumer happy because that just brings in more business
for them. And I haven't found anybody within our organization that
would oppose (indisc.) if they had the flexibility on the other
side."
Number 0161
DON ETHERIDGE, Alaska State Chapter, AFL-CIO; District Council of
Laborers, testified next in Juneau. He stated he worked for the
District Council of Laborers and was speaking on behalf of the AFL-
CIO. He said normally they oppose any overtime exemption bill and
HB 347 is no exception, but Mr. Etheridge said they are working
with the dealers and the DOL to find a solution agreeable to all
parties without "messing up" state statute. He said they hope they
can get that done shortly. He mentioned one of his bosses, Mano
Frey, had discussed this with an AADA representative that morning,
and he said Mr. Frey is also waiting to get in touch with Mr.
Flanangan (Deputy Commissioner) from the DOL tomorrow to see if
there is a solution which does not involve changing the statute.
Mr. Etheridge stated, "We get concerned every time we change or add
an exemption to overtime laws, or to the wage and hour of any type,
'cause it's just another chink in the armor the way we look at it,
and we're getting so many chinks that pretty soon the armor's gonna
fall off."
Number 0210
CHAIRMAN ROKEBERG commented he didn't think they had lost any
chinks in the past three years while he's been here.
Number 0216
MR. ETHERIDGE replied that was because they have been fighting
hard.
Number 0225
DWIGHT PERKINS, Special Assistant, Office of the Commissioner,
Department of Labor, came forward to testify. Mr. Perkins stated
there had been a lot of discussion about the flat-rate mechanic,
noting he thinks there are many of misconceptions about the law and
about what is currently being done in the industry. He said the
DOL is philosophically opposed to this type of legislation, noting
the concerns Mr. Etheridge addressed. He stated the DOL's concern
is that it would be a weakening of Alaska's wage and hour laws.
Mr. Perkins said he agreed with Chairman Rokeberg's comments about
few "chinks in the armor" in the last three years. However, Mr.
Perkins stated, the DOL is "on watch" to make sure the working men
and women of Alaska receive their fair pay for their fair days'
work. He referred to Mr. Pignalberi's example and said he was glad
there wasn't a real Bob out there because Bob would probably be
filing a workers' compensation claim for all the stress he
experienced figuring out his pay. Mr. Perkins said he appreciated
Mr. Pignalberi's and Representative Cowdery's efforts, noting they
have had an open dialogue. He said it is the DOL's understanding
that the AFL-CIO and the AADA are working together, and, if it was
the wish of the committee, he stated, "The Department of Labor
would help facilitate to come back to the committee with some
language that would be livable to all parties."
Number 0311
REPRESENTATIVE HUDSON asked Mr. Perkins if he was optimistic the
DOL could find something within the regulatory scheme to resolve
this issue.
Number 0317
MR. PERKINS said he was optimistic the department might be able to.
He noted some ideas have been expressed, and stated the department
would look into all avenues, hopefully coming to a resolution.
Number 0332
REPRESENTATIVE RYAN thanked Mr. Perkins for being open enough to
try to solve this problem, noting it makes a big problem go away.
Number 0341
REPRESENTATIVE COWDERY also thanked Mr. Perkins. Representative
Cowdery mentioned that they had discussed this for a long time, and
he was certain they could come up with a solution he thinks would
be acceptable to everyone. Representative Cowdery asked Mr.
Perkins, "Do you know how many other states that have something
like this that we're trying to get going here ... the eight-hour
..."
Number 0359
MR. PERKINS replied he didn't know offhand. He said, "As been
stated, there is the Federal Labor Standards Act, FLSA, that has
been referred to that does mention it." Mr. Perkins cautioned,
"There is the potential overtime liability for the shops out there
that are not the automobile, and it - it does specifically state
that in FLSA." He noted the department would look at this,
mentioning that Mr. Pignalberi had touched on it and Monte Jordan
["Monte Brice" misstated on tape] with DOL in Fairbanks had
discussed it. Mr. Perkins stated it was something the department
needed to look into, but said they would be happy to report their
findings, and any accomplishments or resolutions they might come
to, if it was the wish of the committee.
Number 0395
CHAIRMAN ROKEBERG stated Representative Cowdery's office has
requested legislative research which indicates at least seven
states have this type of legislation, noting the Chairman thinks
the number is greater. He said it was his wish that they come back
to this committee with a solution. He would commend all parties to
this, including the automobile dealers and organized labor, making
sure DOL fully cooperates with those groups to find a resolution to
this issue in regulation to avoid amendment of the statute. He
stated, "Because if we can't, then we will amend the statute.
Number 0425
MR. PERKINS stated that Commissioner Cashen would be happy to try
to make the wishes of the committee come true.
Number 0430
CHAIRMAN ROKEBERG closed the public hearing for that meeting on HB
347, indicating HB 347 would be held over.
Number 0489
CHAIRMAN ROKEBERG called a brief at-ease at 4:19 p.m. The
committee reconvened at 4:21 p.m.
HB 400 - DEPT OF COMMUNITY & ECONOMIC DEVELOPMENT
Number 0501
CHAIRMAN ROKEBERG announced the committee's next item of business
was HB 400, "An Act combining parts of the Department of Commerce
and Economic Development and parts of the Department of Community
and Regional Affairs by transferring some of their duties to a new
Department of Commerce and Rural Development; transferring some of
the duties of the Department of Commerce and Economic Development
and the Department of Community and Regional Affairs to other
existing agencies; eliminating the Department of Commerce and
Economic Development and the Department of Community and Regional
Affairs; relating to the Department of Commerce and Rural
Development; adjusting the membership of certain multi-member
bodies to reflect the transfer of duties among departments and the
elimination of departments; and providing for an effective date."
Number 0520
REPRESENTATIVE VIC KOHRING came forward to present HB 400 as the
prime sponsor. Representative Kohring stated HB 400, as many of
them had probably heard over the past several weeks, merges two
departments of state government: the Department of Community and
Regional Affairs (DCRA) and the Department of Commerce and Economic
Development (DCED). He referred to the sponsor statement and said
he wanted to give the committee an outline of what they were trying
to accomplish.
The sponsor statement read:
Focusing on economic development is the main purpose for
merging two existing departments into the new Department
of Commerce and Rural Development. The proposed
divisional structure will ensure local government
assistance continues, infrastructure planning is
enhanced, and that economic development strategy and
project funding is centralized and optimized.
The missions of the departments of Commerce and Economic
Development and the Community and Regional Affairs are
similar, to promote economic development of Alaskan
communities. The two departments compliment one anther,
however cross department coordination can be difficult.
Two separate management structures and goals result in a
scattered development strategy. Having a unified
development vision and placing funding resources under
one department will better serve all Alaskan communities,
and Alaska as a whole.
Currently the departments of Commerce and Economic
Development and the Community and Regional Affairs have
economic development programs, along with job training
and child care programs. These non-development, non-
commerce related programs will be moved to the departments of Labor
and Health and Social Services, respectively. Under the new
departments, these important programs can be integrated with
existing programs in those departments while providing better
service to Alaskans. This reorganization frees the new Department
of Commerce and Rural Development to focus on economic development
activities.
Alaska's fiscal crisis necessitates reengineering
government. This merger will eliminate one
commissioner's office, but does not eliminate services.
While creating budget savings, program delivery and
economic development will be enhanced and streamlined in
the new Department of Commerce and Rural Development.
REPRESENTATIVE KOHRING referred to the majority's five-year plan to
reduce spending, noting they were currently entering year three.
Representative Kohring indicated programs many people would like to
see retained will have to be cut in this budget-cutting effort
unless creative ways of reducing government spending are examined.
He noted that is essentially what they are doing with this plan,
restructuring government: merging and consolidating so that they
can run programs more efficiently, reducing the size of
bureaucracy, and hence covering for programs they normally would
have to cut quite deeply if they continue with their five-year
plan. Representative Kohring stated the idea here is to reduce
upper management. He said that by virtue of combining these two
departments into one government entity, only one upper management
structure would be required. He indicated that would mean
eliminating one of the two commissioners, and eliminating the
various assistants, deputy directors and positions of that nature
within one of those two commissioners' offices.
Number 0597
REPRESENTATIVE KOHRING stated they were also focusing on
development of Alaska's economy with HB 400, it was not just
budget-cutting per se. He said their ultimate goal was to enhance
economic development throughout the state, and they feel that by
streamlining the bureaucracy and focusing resources on these
important economic development programs that goal will eventually
be achieved. Representative Kohring indicated there are a couple
of items within DCRA in particular which would be transferred to
other departments through HB 400. The child care assistance
programs, including the Head Start Program, would be transferred to
the Department of Health and Social Services (H&SS), and the Jobs
Training Partnership Act Program (JTPA) would be transferred to the
Department of Labor. Representative Kohring said the theory is
there are certain programs within certain departments in state
government that logically could fit elsewhere. He said, in an
effort to streamline these two "divisions" and focus strictly on
economic development, they thought they would take a look at
transferring out some of the things which would logically fit
elsewhere in the budget. Representative Kohring stated, "Also,
infrastructure development is the primary focus of what we're
trying to ultimately accomplish in the course of developing our
economy, and that's part ... of the effort with this bill as well."
Number 0654
REPRESENTATIVE KOHRING stated HB 400 creates four divisions: 1)
Division of Rural Services, formerly DCRA; 2) Statewide Development
Division, formerly DCED; 3) Financial Resources Division, which
pulls together all the funding entities like Alaska Science and
Technology Foundation (ASTF) and the Power Cost Equalization
Program (PCE); and 4) Division of Administration, which would
combine the duties of the two merged departments, running the
entire new department. Representative Kohring said, "So it's -
it's an effort not only at saving money and focusing on enhancing
the economy, but also taking a department and making one that's
relatively simple, that's not a big, complex, gigantic colossus of
a department out there, it's just four simple, straight-forward
divisions." Also, Representative Kohring stated he wanted to point
out the state currently does not have any kind of rural development
plan. He said, "Where do we want to go as far as developing the
economy of rural Alaska?" noting they feel this provides the
framework so they can start the process of putting together an
overall plan and then implementing it. Representative Kohring
stated he feels HB 400 has a great deal of support, commenting that
it has been cosponsored by ten Representatives, over one-third of
the House majority. He indicated HB 400 was also a culmination of
a two-year effort: taking the initial concept Representative Kelly
had two years ago with his 150-page bill, working with it and
refining it into the current, approximately 68-page version of HB
400 before the committee. He stated, "So it might look like a big
bill, and it is, but it's far less than what we originally started
with, 'cause our effort is trying to make this thing as simple as
we can," indicating most of the legislation was statutory changes
associated with the merger.
Number 0754
REPRESENTATIVE KOHRING stated he wanted to thank the members of the
Administration who had worked well with him and his staff. He said
he and his staff made a concerted effort to reach out to staff at
DCRA, DCED and the Governor's Administration on the third floor of
the Capitol Building. Representative Kohring indicated they wanted
to let these groups know it was an effort to work together, that
they felt it ought to be a nonpartisan attempt to run these
economic development programs much more effectively and
efficiently. He said it is not simply a budget-cutting effort, it
is a recognition of their responsibility to do what they can to
enhance Alaska's economy. Representative Kohring noted they are
not trying to destroy either one of the existing departments, they
are trying to make them work better. He said they are trying to
protect services with HB 400, focusing more on streamlining the
bureaucracy, namely the upper management of the new department.
Representative Kohring referred to an outline he said was not in
the committee members' packets, noting he would like to briefly go
over some additional major points. He noted that, again, they were
focusing on economic development in the delivery of these programs,
mentioning they had already discussed infrastructure.
Representative Kohring stated the committee was probably already
familiar with the ARDOR Program [Alaska Regional Development
Organization Program, DCRA], which he said was contained within the
DCED's budget. He referred to the January 1998 ARDOR Annual Report
and commented that ARDOR recognizes the need to develop Alaska's
economy and also the infrastructure. He quoted Donna Tollman,
president of the ARDOR Association, "Economic development is not
simply creating a business or a job and the term means something
different in each region of Alaska." He said Ms. Tollman goes on
to say, "When infrastructure is in place, new business starts and
job creation is the translation. Where little infrastructure
exists, economic development means developing the water, energy and
transportation systems and workforce, translated creating an
environment in which economic development can occur."
Representative Kohring noted ARDOR recognized the importance of
developing Alaska's infrastructure, which he said is the foundation
for a strong economy. He stated that is what HB 400 achieves as
well.
Number 0853
REPRESENTATIVE KOHRING stated HB 400 contains the concept of "one-
stop funding." He indicated all the financial-related entities
like ASTF, PCE, the Alaska Industrial Development and Export
Authority (AIDEA), and also revenue sharing and municipal
assistance, would be grouped under one "management auspices" in the
new Financial Services Division. He said they feel that would make
it easier for grant and loan applications for local communities to
occur and it would also enable the new department to identify
optimum funding for each project. Representative Kohring said that
currently the different financial entities are scattered among
different agencies; by consolidating these entities they think they
will be able to achieve greater efficiencies. Representative
Kohring commented that then there is, of course, the cost
associated with this whole effort. He stated, "Is it really worth
[it] to do this? Are we really saving money? And we feel the
answer is - is yes. We feel that HB 400 will create immediate cost
savings, both in the short and long term. He indicated the primary
short-term cost savings would come from the elimination of one of
the two upper management structures. Representative Kohring said
they feel that number would be approximately $1 million right from
the start, noting he had specific information he could circulate to
the committee. Representative Kohring said he'd like to point out
another report, one prepared by DCED in 1994. He stated this
report was done by a local consultant; it identified the existence
of duplicating functions of these two departments and multiple
statutes which basically result in two economic development
entities. Representative Kohring said that report recommended
examining those and considering merging the two departments
together. He said he would spare the committee the precise legal
verbiage but noted he had a quote there with him to that effect.
Representative Kohring stated, "So the department itself actually,
by virtue of commissioning this study, recognized that there is, in
fact, benefit to be gained by doing this merger here."
Number 0956
REPRESENTATIVE KOHRING also noted the presence of his finance staff
aide, Mike Krieber, who would provide detail and technical
information as needed. In closing, Representative Kohring said he
would like to identify three things: 1) the problem they are
dealing with, with this budget cutting process and with these
departments; 2) the solution; 3) what the desired result would be
if they implement that solution. Representative Kohring stated the
problem is that, he said in their minds, government needs to be
restructured. He said that as they continue to reduce government
spending, recognizing across-the-board cuts are not necessarily the
answer, they think restructuring, as they are presenting here with
HB 400, is certainly a good way to go. Representative Kohring
added he thinks greater efficiency in program delivery is needed,
indicating he feels that is not currently being accomplished. He
stated the solution with HB 400 would be to cut the bureaucracy
instead of important programs, by unifying these two departments.
He stated the desired result would be enhanced economic development
throughout Alaska, preserving important economic development
programs, noting that this also fits in with their majority's plan
to achieve greater efficiency in government. He referred to the
majority's "commitment to Alaska plan," noting the plan indicated
that they were trying to achieve greater efficiency.
Representative Kohring stated that concluded his presentation and
he was prepared for questions, unless the Chairman wished to
proceed with further testimony.
Number 1034
CHAIRMAN ROKEBERG stated the committee would take questions at this
time, then take testimony. He noted the committee could call
Representative Kohring back up after the testimony.
Number 1043
REPRESENTATIVE COWDERY asked for examples of duplication in the two
departments.
Number 1050
REPRESENTATIVE KOHRING responded that they are working on specifics
regarding overlapping functions and are examining the different
missions of the two departments. He noted, however, they have a
list of quite a few things operated under both DCED and DCRA. For
example: rural economic development, rural small business
development, fishery-related programs, rural tourism, energy
development, electrical utility assistance. Representative Kohring
stated that both entities are currently performing similar
functions in the examples just cited. He said they're taking a
harder look at precisely where that overlap is and what kind of
savings could be achieved if some of the overlapping functions were
eliminated.
REPRESENTATIVE COWDERY indicated Representative Kohring had
discussed the administration of the new department. He asked, "If
you created a new department, what would that title be, and that
type of thing, and who would be in charge?"
Number 1110
REPRESENTATIVE KOHRING responded that it would be called the
Department of Commerce and Rural Development. He noted that they
were trying to retain the names of the previous departments as much
as possible. Representative Kohring said "commerce" was retained
because they want people to know it is an economic development-
related entity; "rural" was retained because they also want people
to know that they're trying to develop the economy of rural Alaska.
Representative Kohring noted Representative Cowdery's question
about upper management structure. He stated HB 400 does call for
the elimination of the DCRA upper management structure and that
commissioner's office. However, he said, the make-up of the new
management entity would be left at the discretion of the (indisc.)
administration once the bill became law.
Number 1157
REPRESENTATIVE HUDSON commended Representative Kohring on combining
many elements from two departments, indicating he thought, from
Representative Kohring's testimony, that it probably would
ultimately involve several other departments as well.
Representative Ryan stated, because it was a very comprehensive
look at governmental services and how those services are performed,
he was interested in knowing if existing statutory services were
being eliminated. He clarified he meant services the legislature
has imposed upon these various departments in the past, and he
asked Representative Kohring if he had identified services that
should be eliminated "within this rewrite here."
Number 1204
REPRESENTATIVE KOHRING noted Mr. Krieber's presence for technical
assistance and stated it was his understanding HB 400 did not
eliminate any services. He said the bill, as it currently stood,
focused just on the bureaucracy of one of the two management
entities; services would stay the same under the new management
auspices per the divisions he had earlier outlined, and one of the
two commissioners' offices would be eliminated.
Number 1232
CHAIRMAN ROKEBERG referred to page 40, line 13, "(27) REPEALED",
the safety of air carriers in the state, and line 21, "(32)
REPEALED", the neighborhood revitalization program. He stated,
"That looks like as if there's a programmatic repeal of authority
of the department ...."
Number 1299
MIKE KRIEBER, Legislative Administrative Assistant to
Representative Vic Kohring, came forward to testify. He responded,
"A lot of what is listed there as repeal had been previous repealed
in prior legislation. There're not any programs eliminated by that
... section."
CHAIRMAN ROKEBERG commented it should be checked out.
Number 1322
REPRESENTATIVE HUDSON, from his experience over quite a number of
years, commented on the complexity of redesigning how an
administration performs the work the legislature has imposed upon
it through the statutes over the years. He noted Representative
Kohring indicated he and his staff were conversing with various
elements of the Administration, Representative Hudson said he was
assuming that would be the Governor's office as well. He asked if
HB 400 embodied some of the views, concerns and hopefully some
(indisc.) with the Administration. Representative Hudson asked
Representative Kohring if that was his view, and how he would
characterize the Administration's reaction to HB 400.
Number 1392
REPRESENTATIVE KOHRING stated the Administration recognizes what
they were trying to accomplish and appreciated their efforts to
reach out to the Administration and work with it. Representative
Kohring referred to a possible newspaper quote which supposedly
said, "If something isn't broken, why are we trying to fix it?" He
indicated that generally summed up the Administration's
perspective, at least from the perspective of the Governor's
office. Representative Kohring indicated he and his staff have
tried very hard to work with the Administration, to be open, and to
hear the Administration's feedback. He noted he hasn't received
any specifics from the Administration, but the concern has been
expressed, " What are you trying to accomplish here, Vic, if both
organizations are working well?" Representative Kohring noted he
would answer that by saying they are trying to accomplish greater
efficiencies by merging the two departments together, running the
whole department under one management entity. He said, from his
perspective, "It's broken if we can, in fact, save ourselves some
dollars and run the same programs with less dollars. And from -
from what we've deduced, from our research and what we put together
right off the bat we'll be able to save a million dollars as a
result of the implementation of this legislation."
Number 1468
REPRESENTATIVE COWDERY asked Representative Hudson, as a member of
the administration 15 or 20 years ago, how many departments were
there then and how have the departments have grown, and if
Representative Hudson had a perspective on that. Representative
Cowdery indicated Representative Hudson might possible answer the
second question in combination with Representative Kohring.
Number 1494
REPRESENTATIVE HUDSON stated he certainly did have a perspective on
it, noting he came in 1974 with Governor Jay Hammond and obviously
government has grown appreciably since then. Representative Hudson
attributed much of this growth to new programs imposed on the
administration by the legislature. They have created new programs
as they have had more money, and he thinks the administration has
had to grow in order to accommodate a lot of that work.
Representative Hudson indicated, however, that every administration
has a different way of attempting to administer and perform the
services and the levels of works the legislature has imposed.
Representative Hudson indicated he hopes the legislature is working
with the current administration in their approach, noting
representatives of the Administration would be speaking about the
ideas embodied in HB 400.
Number 1552
REPRESENTATIVE BRICE asked why the Head Start Program was being
kept in the new department, noting the decision to move the day
care and child care programs out of this new department into H&SS.
Number 1580
REPRESENTATIVE KOHRING indicated it was his understanding that the
Head Start Program was under the auspices of the child care
assistance programs and was transferred out of the new department
in this legislation. He asked Representative Brice what page of
the legislation he was referring to.
Number 1592
REPRESENTATIVE BRICE indicated page 40, lines 27 and 28, which
read: "(24) operate the headstart funding program governed by 42
U.S.C. 9835." Representative Brice noted that was under the duties
of the Department of Commerce and Rural Development.
Number 1603
CHAIRMAN ROKEBERG added that he had many question of that nature.
Number 1611
REPRESENTATIVE BRICE asked one other question, "I keep hearing how
this is going to create an efficiency of -- in terms of provision
of service to the people of the state of Alaska. I've heard it,
I've heard it - I don't see it in the bill. Could you maybe direct
us a little bit towards - towards that?"
Number 1641
REPRESENTATIVE KOHRING stated he would point most toward what would
be called the Financial Services Division. He noted Mr. Krieber
had pointed that out as well, and perhaps could elaborate on some
of the details when they had a chance. Representative Kohring
stated they feel putting all these services like ASTF, PCE, AIDEA,
the revenue sharing and municipal assistance programs, which are
scattered throughout government right now, under the management,
control and operation of one division would enable them to "more
optimize" the funding of these programs to run them better.
Representative Kohring noted it was somewhat like a "one-stop
shopping program." If municipal entities, organizations out there,
needed assistance they could go to just one division, as opposed to
working with separate divisions within state government.
Representative Kohring indicated they think this Financial Services
Division would minimize delays in grant monies, noting it would be
easier for municipal entities to go through the processing of grant
and loan applications. Representative Kohring said he thinks that
would be the primary thing he would point to (indisc.) enable them
to achieve greater efficiencies, and asked Mr. Krieber if he had
anything to add.
Number 1715
REPRESENTATIVE BRICE used the analogy of comparing apples and
oranges with regards to AIDEA and ASTF in that scenario, noting he
felt the programs were not meant to do the same thing, and were
meant specifically to be different, otherwise there would not be
the need for two separate programs. Representative Brice indicated
there had not been complaints about AIDEA or ASTF. He stated, "And
it gets back to the question, I guess, if - if efficiency's what
we're looking for, the greatest - the most efficient type of
government is also that form of government which leads or -- that
does not allow public input or any other type of involvement that
we - that we think is important. Not that that's what we're doing
here, but I just don't see how we're getting to the efficient
provision of large bonding and capitalization of industrial
development in this state by ... moving AIDEA from point A to point
B."
Number 1821
REPRESENTATIVE KOHRING indicated he simply thinks having it all
together makes it easier to provide services to (indisc.) entities,
municipalities. He indicated that these municipalities can then go
to just one division and the one individual operating that
division; he used the analogy of "singing from one sheet of music."
Representative Kohring stated it would also help them focus more on
infrastructure and energy development. He noted energy development
is one of the big things they are trying to accomplish,
particularly for the benefit of rural Alaska. He said they are
trying to look at these different programs from that perspective.
Representative Kohring stated, "How can we work all these together
in tandem to help further develop, not just the infrastructure, but
energy-related resources in the state of Alaska to help our ..."
Number 1870
REPRESENTATIVE BRICE commented, "So the purpose then is to develop
a viable energy program for the state."
REPRESENTATIVE KOHRING replied that was much of what they were
trying to accomplish.
REPRESENTATIVE BRICE continued, "As opposed to using AIDEA or ASTF
to develop small businesses or medium-size industrial businesses to
create economy. That's why I think it's important to keep maybe
those types of programs separate .... In my mind, they serve very
distinct roles, and if what we're talking about is to create a
super energy program, you know, then maybe what we -- then probably
that's what we're ... looking to do here."
Number 1924
CHAIRMAN ROKEBERG noted he agreed with a good deal of what
Representative Brice was saying. Chairman Rokeberg stated he
wished to take some further testimony and then they could start
looking into some of the details.
Number 1939
REPRESENTATIVE KOHRING stated HB 400 does not change the missions
of any of the specific programs, but they would like to recognize
that rural energy development is extremely important for Alaska,
particularly with the PCE program, one of the new department's
funding sources. He said they are cognizant of that serious
approaching problem, and moving to recognize the importance of
infrastructure development, the importance of energy development.
He noted they thought if they could put all these funding entities
under one management roof, it could help to enhance those two
aspects, and he stated Mr. Krieber wished to offer a comment or
two.
Number 1992
MR. KRIEBER stated the problem is both DCRA and DCED are funding
infrastructure projects; both departments are funding rural small
development initiatives, grants, and loans. Mr. Krieber indicated
both departments use a "shotgun approach," and combining the
departments would result in efficiencies. He noted he had recently
attended a Southeast Alaska Community Economic Revitalization Team
(SE-CERT) meeting here over a few days which brought together the
various federal and state funding entities. Mr. Krieber noted the
subject of the meeting was "scoping," in order to get the entities
all to focus on the same type of result and try to decide who would
take the lead; he said it was very apparent in that meeting that
there was quite an overlap, so, he said, there is some coordination
out there which is not achieving the desired results. He indicated
the formation of the Financial Services Division in the one new
department would give them the results currently being desired by
these various departments.
Number 2073
REPRESENTATIVE KOHRING noted Chairman Rokeberg had asked about
lines 13 and 21 on page 40, dealing with repealing of statutes.
Representative Kohring indicated their intent was not to repeal any
current services, other than transferring some services into
different departments, and he indicated they would check the
statutes.
CHAIRMAN ROKEBERG said that was some of the minutiae they could get
into later.
REPRESENTATIVE KOHRING continued, indicating the inclusion of the
Head Start Program in the new department was an error by
Legislative Legal and Research Services. He said the intent was to
transfer the program to H&SS, noting that they would have to come
back with a proposed committee substitute in order to incorporate
the appropriate language.
Number 2122
CHAIRMAN ROKEBERG stated that he wanted the committee members and
the sponsor to know starting at 3:30 a.m. that morning he read the
entire bill, all 68 pages. He stated, "There's a number of little
things in there ...." Chairman Rokeberg stated he would like to go
on unless there was some (indisc.).
Number 2140
REPRESENTATIVE HUDSON requested a sectional analysis.
Number 2146
CHAIRMAN ROKEBERG noted the presence of a brief, simple sectional
analysis in the bill packet. Chairman Rokeberg informed the
committee it was his intention to have further hearings on HB 400
on February 25 and February 27. He indicated the scheduled bills
would be heard first and HB 400 would be taken up at approximately
4:00 p.m. on both days. Chairman Rokeberg stated he wanted to
minimize any inconvenience for the personnel from the various
departments, but noted the committee would like to have people
available for technical questions, and he said the committee looked
forward to the presence of the bill sponsor. Chairman Rokeberg
invited Commissioner Irwin, DCRA, to come forward to testify, and
he invited Representative Kohring to sit at the committee table.
Number 2240
MIKE IRWIN, Commissioner, Department of Community and Regional
Affairs, came forward to testify. He noted the presence of other
DCRA personnel who would be able to answer technical questions, as
the Chairman had indicated, and also the presence of Jeff Bush,
Deputy Commissioner, DCED, and personnel from other affected
agencies. Commissioner Irwin stated, "This is a bill, obviously,
that would have a profound effect on the department that I work for
and to the people across the state who rely on the services that we
provide, and in many ways I think that we provide a very good
product. I'm not going to go into a lot of financial or
programmatic detail as to the pros and cons of this particular
piece of legislation. There are many people much more expert and
knowledgeable than I about the technicalities who will make
themselves available to you as you consider this. I want to
confine my remarks to a couple of specific areas and also, if I
might to -- I was taking notes as Representative Kohring was
speaking, and I might have a few things to ... say on those as
well. First, I would like to speak to the notion that efficiencies
in government is one of the prime considerations of the legislation
before you. In fact, this was one of the chief reasons given two
years ago when the legislature was considering dismantling DCRA
through HB 409. At that time I had only been in this job for a
little over a year, so I have to honestly admit that, that time, I
didn't quite know if what we did and what we were all about was -
was inherently inefficient or efficient. And so I've had to ...
roll up my shirtsleeves to try and find that out since there seem
to be a lot of people in this body who tend to think that we are
quite inefficient."
Number 2386
COMMISSIONER IRWIN continued, "I would like to submit that DCRA is
one of most efficient organizations of its type that I have ever
been around, and I speak from a lot of experience. I've worked in
the private sector for multi-million-dollar corporations. I've
worked in the non-profit world, again for organizations that
administer literally tens and hundreds of millions of dollars in
state and federal dollars annually. I've worked for the federal
government, and this is my second time in an appointed policy
position in state government, and adding to that from the world of
academia, I also bring a master's degree in public administration
to kind of help balance out my hands-on management over the last
two decades. So I haven't come to the conclusions when I talk
about efficiencies of this department in any kind of haphazard way.
Nor have I come to these conclusions out of a subjective analysis
that says I could very well lose my job as a result of HB 400. In
that regard, I know that I am just a temporary hire, I always have
been, and it's just a matter now of how temporary that ... is.
COMMISSIONER IRWIN CONTINUED, "My assessment, rather, that DCRA is
an efficient department is based on factual analyses ..." ["We
don't have a lot of layers of bureaucracy that simple issues need
to work their way through before a decision can be made."]
[TESTIMONY INTERRUPTED DUE TO TAPE CHANGE, INSERTED PHRASE FROM
WRITTEN STATEMENT]
TAPE 98-17, SIDE A
Number 0001
COMMISSIONER IRWIN continued, "... (indisc.) and on the way up. I
mean certainly on - on internal issues such as personnel and other
matters where you should have a - a more rigorous system, we do,
but when it comes to actual policy decisions, folks needing things
to get done, they can a pretty quick decision out of the ... head
offices. When a pulp mill closes in Ketchikan, or a fire destroys
the generation system up in Chalkyitsik, or, as happened this
summer out in Bristol Bay and Kuskokwim, we have some 52
communities and the attendant families put in financial crisis, we
can and do respond with an efficiency and effectiveness that is
difficult to match - and here I would like to go to Mr. Krieber's
statement about the community economic revitalization team process
that we're enacting, and in fact, it's my department that's the
head of that and who invited him to come the that particular
meeting. And as he stated, there were lots of federal and state
agencies there. The problems with trying to find an effective
response has very little to do with DCRA or Commerce and Economic
Development. The people who are actually at that table, and who
really need to - to work more effectively and efficiently together,
in this particular circumstance because we have federal timber
issues in the mix, we - we have all kinds of layers of - of issues
affecting the Tongass community. It's actually a lot of the
resource agencies, both federal and state, who - who really need to
be at the table and working effectively together for the benefit of
those communities, and, in fact, it's our agencies who, through our
models, help those - those folks along in that regard. And when
the restructuring of our workloads is mandated by reductions in our
budgets as has happened the last several years, I think, again,
this is a time when DCRA, through our small organization and
through our ability to react, we have been able to - to do the
reconfigurations of talent and the reorganization of the structure
to accommodate those and still put the product and the service out
there on the street."
Number 0180
COMMISSIONER IRWIN stated, "On the other hand, I realize that when
statements are made regarding the perceived inefficiencies of
government, it's not only about particular agencies, but also about
how efficiently government works in the whole, and I understand and
appreciate that. With respect to HB 400, again I fail to see how
a better service or product will be provided to Alaskans by
rearranging certain functions of government, and then taking what's
left of DCRA and having it subsumed into a much larger
organization. If larger is better, then I guess this makes some
sense. In my opinion, however, larger is not necessarily more
efficient; and I think that there are a lot of people who would
agree with that; in fact, that - that perhaps it's fundamentally
less efficient the larger you get. If efficiency, as it is used
here to rationalize HB 400, is simply to save a relatively minor
amount of wages ... by reducing a few positions at or near the top
of the two departments slated for consolidation, then the rationale
works. One commissioner would go, as would up to two or three top
managers between the two departments. These savings would, we
feel, however, be offset many times over by just the sheer costs of
carrying out the dismantling and consolidation anticipated in this
legislation. Now we don't have the fiscal note yet prepared, we're
working with Representative Kohring's office on that, and I think
that there are some who would say, 'Well, you know you really won't
be changing people around. You won't be changing their sites and
all of that.' I - I don't know that I agree that that would be the
best approach to take in something like this, I think that there
would a lot of arguments for co-location and actually the need for
moving people around, and all of the costs that - that go with
that, and ... every time you move a person the standard rate used
by the Department of Administration is - is something like $5,000
per person. Those are just the financial costs, not to mention the
personal costs that will be born by workers and their programs as
they see and experience the tumult and uncertainty of their work
environments. These uncertainties, and the emotional burdens that
are inherent to them, will saddle and demoralize these workers and
professionals throughout the many long years, and it will take
years to truly effect the changes contemplated in HB 400. And I
can't even begin to put into financial terms the cost of lost
productivity that will certainly follow."
Number 0359
COMMISSIONER IRWIN stated, "The other point that I really wanted to
- to bring up today, and it's a difficult one for me to talk about
in many ways, has to do with the friction that we're currently
seeing as a state, regarding relations between urban and rural
Alaska. I think it's safe to say that those frictions are greater
today than at any time since statehood. Just this morning I
participated in a press conference announcing the Governor's
formation of a commission on rural governance and empowerment. And
the driver behind all of this, and as we've seen, some of your
colleagues ... in the House in Community [and] Regional Affairs
this week will also starting to look at those - those same issues,
that there's something out there, ... there is something happening
in Alaska. These issues, that like bubble gum, the more you chew
on 'em, the harder they get, and they seem to all be coming to a
head and - and there seems to be kind of a critical mass. Again,
when you look at subsistence, when you look at tribal sovereignty,
native sovereignty that's manifesting itself at this particular
time in the Venetie court case that could be decided by the Supreme
Court at any time. We hear discussions about the fairness between
funding, funding for rural schools versus urban schools. These are
just some real -- they're the hot issues of the day, they all
affect and have ... their roots in the rural-urban relationship.
I bring this up in the discussion of HB 400 because I see a true
connection here. Rightly or wrongly, there are those throughout
the state, citizens and policy-makers alike, who see a clear
connection between DCRA and rural Alaska. For some, this
connection has a positive connotation. For others, this connection
is anything but positive. In reality, DCRA has a relationship
with, and responsibilities to, every Alaskan community from the
largest to the smallest. When it comes to financial relationships
- from safe communities funding which used to be municipal
assistance and revenue sharing, to day care assistance and jobs
training ... -- those three programs comprise a majority of - of
the funds that run through our department. Our relationship with
Alaska's large urban governments constitutes by far and away the
greatest amount of our workloads and fiduciary responsibilities,
and we're proud of this fact. But, yes, when it comes to on-the-
ground, hands-on service delivery, our specialty is assisting
communities of small to medium size."
Number 0541
COMMISSIONER IRWIN stated, "Many, and if not an outright majority,
of these communities are made up largely of Alaska Natives. To
that extent, I can understand those who characterize these unending
attempts to do away with DCRA as nothing more than veiled ...
attacks on rural Alaska in general and the Alaska Native community
in particular. Such a notion, I am sure, makes each and every one
of us in this room uncomfortable and I'm equally sure that such is
not the motivation of anyone in this legislature, least of all the
prime sponsor of HB 400. But public policy is not a science as we
all know, it is an art. And it is thus subject to individual
interpretations of the how's and the why's of the fact that HB 400
is before us today. To the extent that many in rural and Native
Alaska see this as yet another attempt to pull the rug out from
under them, care and caution in how we proceed is of paramount
importance. Together we will have to answer the question as to
whether or not this is simply an attempt to take away what may see
as, quote, a rural seat at the governor's cabinet. Together, we
will have to convince many tens of thousands of Alaskans that this
isn't an attempt to take the talent and the energy that has been
built up over the past 25 years, ... talent and energy that
addresses the governance and community development needs of rural
Alaska, and let it dissipate into organizations that have missions
quite unsimilar to that of the current Department of Community and
Regional Affairs. And with that, I'd like to thank you once again
for allowing me to speak and I'd be happy to go into other areas of
inquiry ... to answer questions you might have."
Number 0644
CHAIRMAN ROKEBERG stated he wanted to comment about Commissioner
Irwin's reference to the friction between rural and urban Alaska.
Chairman Rokeberg noted he has been saying much the same thing for
about the last five or six years because he thought this was very
foreseeable, indicating it was particularly foreseable from the
narrower view of declining state revenues, decreasing oil
production and "price squeezes." He indicated, with less money
available to fund interests that may historically been funded
statewide, it was quite foreseeable and predictable that this
schism between the urban and rural areas would grow, noting he
thinks that is only a portion of it. Chairman Rokeberg stated, as
he said the Commissioner rightly pointed out, there are other
issues, not necessarily economic in origin, but just as important,
particularly with some of the people in rural areas of the state.
Chairman Rokeberg indicated he felt this type of friction, or
schism, was really unfortunate. He stated he knew for certain that
the bill sponsor and those interested in HB 400 did not harbor "any
of those particular types of biases or prejudices that ... we
certainly don't accept in this state and haven't for decades and
decades, and - and rightfully so." Chairman Rokeberg added that he
did think the Commissioner pointed out a few things that might not
actually be correct, referring to the idea of a rural seat on the
governor's cabinet, and noting that attitude, if it existed, should
be examined by those holding it.
COMMISSIONER IRWIN noted he meant it the other way around.
Number 0778
CHAIRMAN ROKEBERG responded that it meant the same thing however it
was characterized, noting he did not want to create any more
friction but that was part of the exercise they were going through.
Chairman Rokeberg stated, "I think you've identified -- and I think
this committee, the whole legislature, and the people in the state,
more importantly, ought ... to be aware of what you bring forward
on that issue because it's extremely important and a very
sensitive-type thing we need to be able to work with and work
around."
Number 0808
REPRESENTATIVE COWDERY commented on the discussion of the division
between urban and rural Alaska. He noted five generations of his
family have lived in Alaska, and said, "My perspective, that as
long as politicians, and the press and everything, keep driving
that wedge of Native Alaskans rather than Alaskans, and urban, you
know, and - and Black Americans instead of Americans and this and
that. I think ... it's sad that we keep doing that or that that
happens, and I think it makes the time when we'll all become one
further down the road." Representative Cowdery noted Commissioner
Irwin had spoken about the emotional stress of the uncertainty,
indicating all the committee members appreciated that stress at
every November general election. He asked Commissioner Irwin if he
would be willing to work in the new department if asked, bringing
his expertise in to help develop this, if HB 400 became law.
Number 0911
COMMISSIONER IRWIN replied he had honestly not given it much
thought. He noted there would obviously be only one
commissionership, and said he has jokingly spoken with
Commissioner-designee Sedwick of the DCED about "arm-wrestling" for
the position. Commissioner Irwin stated he chose to accept his
current appointment from Governor Knowles because DCRA is a
department he feels in tune with and akin to. He noted his roots
are in rural Alaska, his and his wife's families both live there;
he said he is a product of rural Alaska. Commenting that he was
not bringing up the issue of "rural versus urban," Commissioner
Irwin noted he thinks there are very unique issues specific to
rural Alaska including economic development. He indicated he feels
a structure like DCRA, with its particular talents and expertise
developed over the last 25 years in rural governance, is necessary
to help find the answers to some very difficult issues which have
plagued this state for a long time. Commissioner Irwin indicated
he thought governance played a major role, even in the inability to
get good economic opportunities in rural Alaska, even where those
economic opportunities presented themselves. He noted he has a
particular passion for that, and that was one of the reasons why he
accepted his present position. Commissioner Irwin indicated he did
not accept his appointment because of financial need, and was not
overly concerned about that aspect if his job was eliminated. In
response to Representative Cowdery's question, Commissioner Irwin
said he did not know, stating, "It doesn't look to me to be the
kind of structure that ... would be the type that I would
necessarily find any real personal things to help me get up in the
morning and want to go to work."
Number 1018
REPRESENTATIVE COWDERY said, "Even if it was commissioner, you
wouldn't?"
Number 1025
COMMISSIONER IRWIN stated he didn't know.
Number 1025
REPRESENTATIVE COWDERY asked him if he would be willing, if this
became law, to take a position below the level of commissioner in
the new department, if he was asked.
Number 0132
COMMISSIONER IRWIN answered, "Not at all."
Number 1034
REPRESENTATIVE COWDERY noted revenues were down and money was going
to be cut this year. He asked Commissioner Irwin where he would
cut $5 million in his department.
Number 1047
COMMISSIONER IRWIN replied he could not do it, mainly because he
did not have any pieces large enough, indicating he would have to
totally dismantle myriad programs. He indicated the biggest chunk
of DCRA's general fund dollars went into the Safe Communities
Program; he noted the Administration's position on that is very
clear so $5 million would not come from there. He noted he has
other "big chunks," giving the example of child care, which is also
one of the Administration's priorities. Commissioner Irwin stated,
"I can't trim and cut $5 million dollar worth out of the ..."
Number 1091
REPRESENTATIVE COWDERY asked Commissioner Irwin if he could cut
less.
Number 1095
COMMISSIONER IRWIN answered he did not think so at this point
without coming to the hard decisions; coming back and asking them,
"What is it you would like us not to do anymore?" He noted they
have trimmed down, found efficiencies, had layoffs, restructured,
and he said he thinks they are "still putting the product out there
on the street that we've always been able to." He attributed this
to the many incredible people who work for DCRA, noting he can't
speak for other departments who might have personnel just as good.
He stated, however, that he knew that whatever he asked of DCRA
staff, they had delivered, whether it meant taking on a couple of
different jobs, making up the rest of it on the weekends and in the
evenings.
Number 1140
REPRESENTATIVE BRICE asked Commissioner Irwin, on a time line, how
long he thought it would take to implement the changes within HB
400.
Number 1153
COMMISSIONER IRWIN noted up-front things like new stationery for
everyone, and he said it would take a little while to get the
administrative aspects in place, stating he did not intend to sound
"flip." He commented that, as far as the restructuring and moving
of people, it could take years to get everybody where they need to
be logistically, noting DCRA, DCED and the other affected
departments have state leases all over the place. Commissioner
Irwin mentioned that through some of the work DCRA's been doing on
the coordinated response in southern Southeast Alaska, he has
gotten to know some people in Washington State who work in a hybrid
department not unlike what this one would be. He noted Washington
State had done a similar move three years ago, indicating that he
did not think they should be looking to Washington as an example
because of the lack of correlations between the states. He said he
did know, however, that Washington still hasn't effected the entire
changes anticipated by the legislature, noting a lot of it had to
do with "corporate culture." He said the people in-house, not the
leaders, don't like the change and are intent to make sure it
doesn't succeed in a lot of ways.
Number 1234
REPRESENTATIVE BRICE asked how much discussion Commissioner Irwin
had had with "these folks who did this." Representative Brice
asked if there was discussion about the impact on programs during
this time.
COMMISSIONER IRWIN replied, "We didn't get into the - the technical
details; Vic and I have had conversations, but it was basically
finding out what it was that he was proposing."
Number 1257
CHAIRMAN ROKEBERG noted that it was almost 5:20 p.m. He conferred
briefly with Jim Nordlund, Director, Division of Public Assistance,
H&SS; and Jeff Bush, Deputy Commissioner, DCED. It was determined
that Mr. Nordlund would delay his testimony until February 27; Mr.
Bush was not available February 27, and would testify on February
25. Chairman Rokeberg stated the committee would probably like to
hear from Commissioner Irwin again if he was able to attend another
hearing, and the Chairman requested the presence of DCRA staff if
the Commissioner would not be available. Chairman Rokeberg stated
the committee would next take the testimony of Ms. Healy, who was
visiting from Wasilla, and then conclude the public hearing on HB
400 for that day.
Number 1324
VICKI L. HEALY came forward to testify. Ms. Healy stated she was
a parent associated with the Head Start Program ["association"
stated on tape]. Ms. Healy stated she was concerned about the Head
Start Program being shuffled around under various entities, noting
her lack of experience in the political arena and her unfamiliarity
with the terms. She indicated she was glad they had figured out
keeping the Head Start Program in the new department was a mistake,
but moving it to H&SS didn't make her feel any better. Ms. Healy
stated that, as a parent, her concern is currently the Head Start
Program is an "awesome tool within the communities." She said it
is one of the things that, as parents, they can get proper, quick
response and reactions for their families and friends. She stated,
"It's not a degrading thing, you don't feel bad walking into a Head
Start office. ... That is one thing that does work well through
the DCRA, and just to say, 'Well, because they're overlapping
something with another office, then Head Start should be shoved
someplace else, and we think that they'll do better there.' Right
now we're working wonderfully where we are." Ms. Healy indicated
she is concerned, as a parent, about what would happen if the Head
Start Program is moved away from DCRA and put under another entity.
She indicated she is not saying H&SS is a bad entity, but she said
it is slower running, or "bogged down" as far as response time from
a community member up the chain and back to get a response. Ms.
Healy indicated, in her opinion, it would slow down their growth as
a community.
Number 1421
MS. HEALY stated, "How many families -- right now where somebody
can go and talk to somebody at DCRA and address a problem and get
almost an immediate response, where we have to go down the chain
later and work our way through a thicker bureaucracy -- how many
families are gonna fall through the cracks during that long delay
that we're now gonna have to set by going someplace else, just
because they deal with other children issues or self-help issues?
Head Start works in all communities, and it's community-oriented,
whether it's federally funded or not. It works with the community,
it's community people involved, it's not just going into an office
where somebody else that you have to deal with who acts like the
money is coming out of their pocket, is making all the decisions.
This is community-involved, and if you do move it around with
careless thought, I don't see a projected future. 'Well, if we
move it there, this is why it's going to run more efficient.' I
don't see any of that in writing. 'This is ... our five year
projection on how Head Start is going to work better there than it
does right where it's at now.' And as a parent, that concerns me."
Number 1489
CHAIRMAN ROKEBERG asked what type of contact parents had with the
actual administration.
Number 1495
MS. HEALY responded, "We have meetings all the time. I -- there's
committees, all types of involvement. We get to work with the
people within Head Start as to what kind of training is gonna
happen with the parents on a weekly basis. 'Are we gonna do anger
management this month? Are we gonna do, 'How to deal with a new
baby in the family?' The people come to the meetings, they get to
vote on things with the staff, with the administration, with that
community -- and being in a Head Start Program that deals with
multiple communities - Wasilla, Big Lake, Chugiak, Eagle River,
Palmer - we even get to deal, as parents, separately within our own
communities and work with the other ones. Where one thing works
well in Wasilla, 'We're gonna do this for a fund-raiser to help
this portion of Head Start out,' they may have something else, and,
'Wow, that's a good idea, so maybe we'll do 'em separate and maybe
we'll combine 'em.' The community does get involved and they get
to make those decision[s] and these are all things that run well
through the program. 'Okay, can we do this? Can we do this garage
sale in order to fund something to do this?' It has to go up the
chain, it has to come back. We need a response for something like
that. If it takes us five months to find out whether or not we can
do that for a fund-raiser as parents, to try and help our community
and our children, that opportunity has been missed because we
couldn't even perform the fund-raiser 'cause we couldn't get a
response on whether or not that was something legally that could be
done. And we get that kind of response as Head Start people
through this office." Ms. Healy noted the intended switch of the
Head Start Program to H&SS. She stated, "There's a lot of other
things that are involved under that hat, and to just shove Head
Start in there because you want to merge two other entities, and
take something away from them that they're already performing well,
I don't see where Head Start is going to benefit, I don't see where
the communities, and me, as a parent, is gonna benefit."
Number 1609
CHAIRMAN ROKEBERG asked if there were any questions for Ms. Healy.
There being none, Chairman Rokeberg announced that the committee,
as previously arranged, would first take up the scheduled bills on
Wednesday, February 25, and Friday, February 27, and then reopen
the public hearing of HB 400 at approximately 4:00 p.m. on both
days. He confirmed that Representative Kohring would be able to be
in attendance.
ADJOURNMENT
Number 1648
CHAIRMAN ROKEBERG adjourned the House Labor and Commerce Standing
Committee meeting at 5:25 p.m.
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