Legislature(2005 - 2006)CAPITOL 106
02/02/2006 08:00 AM House STATE AFFAIRS
| Audio | Topic |
|---|---|
| Start | |
| Overview(s): Department of Environmental Conservation, Division of Water, Village Safewater Program | |
| HB238 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| += | HB 238 | TELECONFERENCED | |
| + | TELECONFERENCED |
ALASKA STATE LEGISLATURE
HOUSE STATE AFFAIRS STANDING COMMITTEE
February 2, 2006
8:06 a.m.
MEMBERS PRESENT
Representative Paul Seaton, Chair
Representative Carl Gatto, Vice Chair
Representative Bob Lynn
Representative Jay Ramras
Representative Berta Gardner
Representative Max Gruenberg
MEMBERS ABSENT
Representative Jim Elkins
COMMITTEE CALENDAR
OVERVIEW OF DEPARTMENT OF ENVIRONMENTAL CONSERVATION, DIVISION
OF WATER, VILLAGE SAFEWATER PROGRAM
- HEARD AND HELD
HOUSE BILL NO. 238
"An Act relating to contribution rates for employers and members
in the defined benefit plans of the teachers' retirement system
and the public employees' retirement system and to the ad-hoc
post-retirement pension adjustment in the teachers' retirement
system; requiring insurance plans provided to members of the
teachers' retirement system, the judicial retirement system, the
public employees' retirement system, and the former elected
public officials retirement system to provide a list of
preferred drugs; relating to defined contribution plans for
members of the teachers' retirement system and the public
employees' retirement system; and providing for an effective
date."
- HEARD AND HELD
PREVIOUS COMMITTEE ACTION
BILL: HB 238
SHORT TITLE: PUBLIC EMPLOYEE/TEACHER RETIREMENT
SPONSOR(s): STATE AFFAIRS
03/30/05 (H) READ THE FIRST TIME - REFERRALS
03/30/05 (H) STA, FIN
03/31/05 (H) STA AT 8:00 AM CAPITOL 106
03/31/05 (H) Heard & Held
03/31/05 (H) MINUTE(STA)
04/02/05 (H) STA AT 10:00 AM CAPITOL 106
04/02/05 (H) Heard & Held
04/02/05 (H) MINUTE(STA)
04/05/05 (H) STA AT 8:00 AM CAPITOL 106
04/05/05 (H) Heard & Held
04/05/05 (H) MINUTE(STA)
04/07/05 (H) STA AT 8:00 AM CAPITOL 106
04/07/05 (H) Scheduled But Not Heard
04/09/05 (H) STA AT 9:30 AM CAPITOL 106
04/09/05 (H) Heard & Held
04/09/05 (H) MINUTE(STA)
04/12/05 (H) STA AT 8:00 AM CAPITOL 106
04/12/05 (H) Heard & Held
04/12/05 (H) MINUTE(STA)
04/14/05 (H) STA AT 8:00 AM CAPITOL 106
04/14/05 (H) Heard & Held
04/14/05 (H) MINUTE(STA)
04/16/05 (H) STA AT 9:30 AM CAPITOL 106
04/16/05 (H) Heard & Held
04/16/05 (H) MINUTE(STA)
04/19/05 (H) STA AT 8:00 AM CAPITOL 106
04/19/05 (H) Scheduled But Not Heard
04/20/05 (H) STA AT 8:00 AM CAPITOL 106
04/20/05 (H) Scheduled But Not Heard
04/21/05 (H) STA AT 8:00 AM CAPITOL 106
04/21/05 (H) <Bill Hearing Canceled>
02/02/06 (H) STA AT 8:00 AM CAPITOL 106
WITNESS REGISTER
LYNN TOMICH KENT, Director
Division of Water
Department of Environmental Conservation
Anchorage, Alaska
POSITION STATEMENT: Introduced fellow presenters during the
Department of Environmental Conservation, Division of Water,
Village Safe Water program overview.
BILL GRIFFITH, Program Manager
Facility Programs
Division of Water
Department of Environmental Conservation
Anchorage, Alaska
POSITION STATEMENT: Presented the overview of the Village Safe
Water program.
SCOTT RUBY, Community Development Section Chief
Division of Community Advocacy
Department of Commerce
Community, & Economic Development (DCCED)
Anchorage, Alaska
POSITION STATEMENT: Explained how the Rural Utility Business
Advisor (RUBA) program works in relation to the Village Safe
Water program.
JIM McCRACKEN, President
Lowell Point Community Council
Lowell Point, Alaska
POSITION STATEMENT: Provided comment during the overview of the
Village Safe Water program.
ACTION NARRATIVE
CHAIR PAUL SEATON called the House State Affairs Standing
Committee meeting to order at 8:06:34 AM. Representatives
Gatto, Lynn, Ramras, Gardner, and Seaton were present at the
call to order. Representative Gruenberg arrived as the meeting
was in progress.
^OVERVIEW(S): DEPARTMENT OF ENVIRONMENTAL CONSERVATION,
DIVISION OF WATER, VILLAGE SAFEWATER PROGRAM
8:07:39 AM
CHAIR SEATON announced that the first order of business was the
overview of the Department of Environmental Conservation,
Division of Water, Village Safe Water program.
8:07:41 AM
LYNN TOMICH KENT, Director, Division of Water, Department of
Environmental Conservation, introduced fellow presenters.
8:09:36 AM
BILL GRIFFITH, Program Manager, Facility Programs, Division of
Water, Department of Environmental Conservation, presented the
overview of the Village Safe Water program. He said the program
was created by the legislature in 1970, at which time less than
10 percent of rural Alaskan homes had running water and flush
toilets. Today 77 percent of rural homes have those facilities,
thanks in part to the program. He stated that the division runs
its program, working closely with rural communities, federal
agencies, and the Alaska Native Health Consortium to help
communities in planning, designing, and constructing water and
sewer systems. In the past decade alone, he reported, the
percentage of rural households with basic sanitation services
has increased by over 30 percent. During that time, over 200
Alaska communities have received funding for water, sewer, and
solid waste facility improvements.
8:11:45 AM
MR. GRIFFITH said the Village Safe Water program carries out
three primary functions: funding allocation, grant
administration, and project oversight. Regarding funding
allocation, he noted that for the past several years, funding
for the program has comprised of 75 percent federal funding from
the United States Environmental Protection Agency (U.S. EPA) and
the United States Department of Agriculture (USDA) rural
development program, and 25 percent from state capital funding.
Communities apply annually to the program for grants for
sanitation projects. Those applications are scored based on the
project's ability to address critical health needs, as well as
the community's demonstrated capacity to operate and maintain
facilities. The highest-ranking projects are recommended for
funding under the state capital budget.
MR. GRIFFITH, regarding grant administration, said once projects
are included in the state capital budget, federal funding is
secured through federal grant applications. The next step is to
work with communities to develop grant agreements, including
project scope of work, cost estimates, and grant funding
conditions. Construction is only approved once communities have
met agreed upon performance criteria, he said, and have
demonstrated the capacity to operate and manage sanitation
facilities. Mr. Griffith said although local capacity
requirements may occasionally delay construction, they are an
important element of a comprehensive, statewide sanitation plan.
8:13:23 AM
MR. GRIFFITH, regarding project oversight, said the program
provides technical and financial support to Alaska's smallest
communities to design and construct water and sewer systems.
Community officials are worked with to ensure that planning and
results are appropriate, facilities are properly constructed,
and grant funds are used effectively. He said, "In some cases,
funding is awarded by [the Village Safe Water program] through
the Indian health service to the Alaska Native Tribal Health
Consortium, who in turn assist communities in designing and
constructing sanitation projects."
8:14:07 AM
MR. GRIFFITH provided a look at some of the direction received
from the legislature, governor, and federal funding agencies
regarding how to improve the program. He said last year the
legislature, through legislative intent language, directed DEC
to do the following: establish a process for sustainable
projects at reasonable costs; exercise final decision authority
regarding project costs and types of systems to be constructed;
develop a project accounting system to provide up to date
information to engineers and managers; encourage development of
local ordinances for collecting sufficient user fees to pay for
sustained operation of facilities; and work with the regulatory
commission of Alaska to encourage local management of facilities
in compliance with commission standards.
MR. GRIFFITH said also in 2005, the governor's administrative
order on sustainability requires that state funded facilities
include the following components: supporting necessary costs;
keeping capital costs low through system simplification and
infrastructure standardization; and having a business plan for
every operation. Additionally, all state programs must include
the following considerations in their funding processes,
according to administrative order: local responsibility for
infrastructure sustainability; access to existing services and
facilities; renovation prioritized over new construction;
infrastructure sized to meet needs; affordability of lifecycle
costs; and appropriate technology to control unit costs. He
noted that the committee was provided with both a copy of the
legislative letter of intent and the administrative order.
8:20:17 AM
MR. GRIFFITH said during the funding allocation process, a
variety of local capacity indicators are used to prioritize
funding requests, including: primary and backup water plant
operator certification; trained utility managers; adequate
collection rates; and operation at full regulatory compliance.
Later in the process, he said, local capacity requirements are
used as construction funding grant conditions, including:
completion of an approved business plan; assessment by the
Remote Utility Business Advisor program in the Department of
Commerce, Community, & Economic Development (DCCED); meeting all
essential capacity indicators; full compliance with all
operation-related water treatment regulations; and trained and
certified sewer system operators. Mr. Griffith stated that
although none of the local capacity indicators and conditions
are new, historically their use was inconsistent until 2005.
MR. GRIFFITH said in addition to capital cost control, the
process of developing, reviewing, and approving community master
plans is also used for incorporating other sustainability
considerations, including: access to existing facilities,
renovation prioritized over new construction, and infrastructure
sized to meet the needs of the community. He said existing
plans may be revisited in order to address significant
deficiencies associated with these considerations.
8:22:52 AM
MR. GRIFFITH said another priority for the Village Safe Water
program over the past two years has been project accounting
system improvements. New accounting staff provides increased
internal controls for the program. State and federal funds -
previously advanced to project bank accounts - are now left in
the state and federal treasury until expenses are incurred.
Accurate real-time expenditure and obligation information is now
available to engineers and management. New project accounting
structure allows expenses to be tracked. Additionally, he
noted, the program no longer maintains a separate administrative
account for engineering, management, and travel expenses related
to project oversight; these expenses must now be charged against
the federal grant and the project they benefit. All project-
related costs are charged directly against the project, with a
consistent scope-level accounting system that provides real-time
expenditure and obligation information to engineers and
managers.
8:24:26 AM
MR. GRIFFITH reported that a third area of focus and change is
in the area of funding allocation and grant administration
improvements, including clarity and consistency of
prioritization criteria on sanitation facility improvement
applications, as well as of funding conditions that are applied
to all construction related grants. He said current completed
and approved sanitation master plans include the scope of all
funding applications and new grant offers. He noted another
improvement is that detailed project cost estimates are now
provided and reviewed at the time of funding application and
grant agreements. These project costs are then tracked
throughout the project and used as a basis from financial
reporting to federal funding agencies, he said.
8:25:35 AM
MR. GRIFFITH stated that federal appropriations since fiscal
year 2005 (FY 05) have included two new requirements associated
with the allocation of rural sanitation funding: a set aside
for rural regional hub communities and the establishment of a
three-year priority list. He offered to provide an overview of
these requirements and the changes that have been made to meet
them.
8:25:56 AM
CHAIR SEATON asked Mr. Griffith if he is saying that the
division is not proceeding with projects that have already been
approved and funded because of a new prioritization.
8:26:21 AM
MR. GRIFFITH answered no. He clarified that the division has
changed some of the prioritization criteria and waiting factors
over the last couple of years, but it has continued to
prioritize projects as it always has.
8:27:48 AM
MR. GRIFFITH, in response to a question from Representative
Gatto, confirmed that the division is not looking to reach a 100
percent goal "when the definition is every single rural
household" [having indoor facilities]. He said the division's
goal is to cover all "serviceable homes," which he explained
means those within established communities, not isolated by
distance or barriers.
8:28:06 AM
REPRESENTATIVE GATTO asked if the households have to pay for any
of the sustainability.
8:29:04 AM
MR. GRIFFITH answered yes. He said all operation and
maintenance costs for these facilities have to be locally
provided by individual users. Sufficient user fees must be
collected to pay for continued operation and maintenance. In
response to a follow-up remark by Representative Gatto, he said
it is similar to electric and telephone utilities; however,
unlike those other power supplies, there is no local subsidy
available for the operation and maintenance of water and sewer
systems.
8:30:14 AM
MR. GRIFFITH, in response to a question from Representative
Gatto, said the water source and its containment is extremely
variable depending upon the community. He said some factors
that are considered are the location of permafrost and types of
soils.
8:30:46 AM
CHAIR SEATON, regarding the sustainability guidelines,
particularly in regard to consistent review, said his
jurisdiction has dealt with the issue of "Lowell Point." He
said it appears that the department does not have a standardized
form or survey. He asked, "How are you meeting this consistent
criteria if you don't have some kind of a standardized survey
form?"
8:31:39 AM
MR. GRIFFITH said he thinks the form to which Chair Seaton is
referring is one to establish both household occupancy and water
and sewer needs. He said Lowell Point is somewhat unique in
that the pattern of occupancy is variable in the community from
house to house. He explained that the vast majority of rural
communities that the division works with don't contain vacant or
seasonal houses. He said the division develops different kinds
of surveys and questionnaires to help establish the type of
occupancy patterns in a community.
8:33:17 AM
MR. GRIFFITH, in response to a question from Chair Seaton, said
the program covers populations of 25 minimum to 600 maximum for
an unincorporated community. He added that there is no upper
population limit for a second-class city.
CHAIR SEATON asked if Mr. Griffith could explain why - after
adopting and funding a project for a community that meets the
minimum population requirement - the division would decide to
hold the money and not proceed with the project that was funded
until it establishes another group of surveys and spends a lot
more money on additional study.
MR. GRIFFITH answered as follows:
Yes, particularly when you're talking about a
community with [a] small number of homes, like Lowell
Point - somewhere around 30 ... year-round occupied
homes. ... Five or ten homes one way or the other can
make a big difference in what kind of facility is
going to best meet the water and sewer needs of that
community in the most economical fashion. So, that's
why it's important to establish whether that number is
20, or 25, or 35, or 40, because it not only makes a
difference in what kind of system will work best from
a technical perspective, but as I mentioned we also
look at capital costs - which means the cost per home.
So, a few homes make a big difference in the cost per
home when the community is small.
8:36:06 AM
MR. GRIFFITH, in response to a question from Chair Seaton, said
the division reviews the sanitation master plan if it hasn't had
recent review, and will continue to do that to ensure that
conditions haven't changed, the information is clear and
consistent, and - most importantly - that capital costs control
is exercised through the review of the plans. He noted that in
general, the division finds most of the plans that have been
developed and the plans that are being developed now have that
kind of consideration already and there is no need to go back
and amend them.
8:37:07 AM
CHAIR SEATON indicated that it is uncommon to ask for funding
for a project that will then be redesigned.
8:38:02 AM
MR. GRIFFITH said the division has established capital cost
control and other previously mentioned sustainability factors as
a primary part of reviewing every sanitation facility master
plan. With that focus, he opined, the quality of the plans is
much better. Some of the old plans did not have that focus and
the division thinks it has an obligation to return to review
those plans to ensure that those facilities will be sustainable.
8:38:31 AM
CHAIR SEATON asked Mr. Griffith if the division thinks it has
the authority to make changes to projects that have already had
money allocated, without legislative approval.
8:39:04 AM
MR. GRIFFITH answered, "Not in some cases; it depends on what
the funding was appropriated for and what the potential changes
are."
8:39:52 AM
MR. GRIFFITH, in response to a remark by Representative Gardner
regarding a handout that shows that one family in three still
does not have access to a sanitary means of sewage disposal or
an adequate supply of safe drinking water, said his initial
reaction is that it should be updated to say one family in four.
8:40:03 AM
REPRESENTATIVE GARDNER asked Mr. Griffith to speak about failure
rates.
8:40:35 AM
MR. GRIFFITH said the program goes back 30 years and in the
early days there were more catastrophic failures, mostly due to
materials available at the time. Because of the improved local
capacity of communities, there have been no catastrophic
failures in at least 10 years. Occasionally there are projects
that may not be operated as efficiently as they could be.
Through the application process, grant conditions, and working
with other programs, he said he believes those concerns are
being addressed as well.
8:41:56 AM
REPRESENTATIVE GARDNER asked what the mechanism is by which the
division is able to identify when things are falling apart.
8:42:12 AM
MR. GRIFFITH said one mechanism is the Rural Utility Business
Advisory program, which uses a comprehensive list of indicators
to assess how well a utility is functioning. The division also
relies on other indicators, such as certified, trained operators
and utility managers and compliance of water regulations. He
also mentioned the Remote Maintenance Worker program, where
someone travels out to the communities several times a year and
reports back to the division. In response to a question from
Chair Seaton, he said most of the remote maintenance workers
work through regional grantees, but there are also three who
work directly for the state. Each remote maintenance worker, he
said, works with about 8-10 communities.
[CHAIR SEATON handed the gavel to Vice Chair Gatto.]
8:43:43 AM
REPRESENTATIVE GRUENBERG directed attention to a copy of a
legislative audit conducted November 19, 2003, [included in the
committee packet], and he asked if that is the most current
audit.
8:44:24 AM
MR. GRIFFITH said that's the latest special legislative audit.
He explained that there is an annual audit done, as well. In
response to a question from Representative Gruenberg, he said
there are a number of letters available that are updates to
changes that have taken place as a result of that audit
[included in the committee packet]. He indicated that the
updates were made in April, June, and September of 2004, and
April of 2005.
8:45:31 AM
REPRESENTATIVE GRUENBERG asked if it is still the recommendation
of the legislative auditor that the program be transferred to
the Department of Transportation & Public Facilities (DOT&PF).
8:45:54 AM
MR. GRIFFITH said one of the division's letters was in response
to that recommendation, but there has been no follow-up on that
issue.
8:46:02 AM
REPRESENTATIVE GRUENBERG responded that "that seems to be at the
heart of their recommendation," and he expressed concern
regarding both the content of the correspondence and the
differences of opinion that the division has compared to that of
the legislative auditors, "both sides apparently somewhat
calling the other side's competency into question." He asked,
"Are you still resisting their recommendation to transfer your
program?"
8:47:14 AM
MR. GRIFFITH responded as follows:
For the large part we've implemented the
recommendations of the audit, but that significant
suggestion in the audit is one that the department
responded to and has not in any way followed through
with as a recommendation.
8:47:38 AM
REPRESENTATIVE GRUENBERG said he doesn't recall ever hearing of
an agency calling the competency of [the legislative auditors]
into question. He asked Mr. Griffith if the department still
thinks they were not competent.
8:48:00 AM
MS. KENT said what she is attempting to explain is that the
concerns of the auditors, which might have driven their
recommendation to shift the program from one department to
another, have been addressed by the department; therefore, the
department thinks that the recommendation is not necessary
anymore.
8:48:34 AM
REPRESENTATIVE GRUENBERG restated his question. He said the
tone of the program's responses called into question the
competency of the [auditors], and he said he wants to know if
the department still thinks its comments were valid and, if so,
why. He said he is concerned when there is question as to the
competency of the people the legislature employs.
8:49:23 AM
VICE CHAIR GATTO suggested Ms. Kent may want some time in which
to formulate an answer.
8:49:51 AM
MS. KENT concurred.
8:50:07 AM
VICE CHAIR GATTO asked how Ms. Kent's position, life, or
organization would be changed if those audits were implemented.
8:50:16 AM
MS. KENT said the program would very likely look like the
program that is currently being implementing.
8:50:43 AM
VICE CHAIR GATTO surmised that DOT&PF would most likely expect
"your group to remain together, continue your work, and probably
have a different person overseeing." He asked if there would be
more significant changes.
MS. KENT said she doesn't think so, because of all the changes
that have been made thus far in response to the governor's
administrative order, the legislative intent language, and the
audit suggestions.
8:51:16 AM
REPRESENTATIVE GRUENBERG mentioned language on pages 19 and 44
of the aforementioned audit handout which is in regard to a
possible lack of statutory authority for communities to
participate in programs. He asked, "Do you feel that there
should be some statutory changes?"
[VICE CHAIR GATTO returned the gavel to Chair Seaton.]
8:52:35 AM
MR. GRIFFITH said the division looked at the statute related to
the Village Safe Water program and determined that statutory
changes are not necessary.
8:53:31 AM
REPRESENTATIVE GRUENBERG read from [the first paragraph of] page
19 of the handout as follows:
Village Safe Water procedures do not encourage a
community to monitor a manager's ongoing compensation.
REPRESENTATIVE GRUENBERG referred to part of footnote 37 on the
bottom of page 19, which read:
The community usually contributes none of its own
money to the project.
REPRESENTATIVE GRUENBERG noted that the division's response to
footnote 37 [is in the second paragraph on page 44 of the
handout] and read:
Communities are prohibited by statute from
contributing to the cost of construction.
REPRESENTATIVE GRUENBERG asked, "Is that good public policy, or
do you believe that should be changed?"
8:53:46 AM
MR. GRIFFITH asked Representative Gruenberg to clarify if his
question is about whether or not the division believes there
should be a match requirement for the small communities as there
is for larger cities.
8:54:22 AM
REPRESENTATIVE GRUENBERG answered yes.
8:54:27 AM
MS. KENT suggested that that's within the purview of legislature
to decide such a policy question as to whether or not the
smaller communities should provide matching grant funds to
projects that the division conducts. She said she assumes the
legislature would consider how small a cash flow is available
in the smaller communities if it were to make such a decision.
8:55:02 AM
REPRESENTATIVE GRUENBERG expressed difficulty in getting a
handle on this issue. He concluded, "But I am, I must say, to
some extent troubled by the content and the tone, and I don't
say that very often."
8:55:36 AM
REPRESENTATIVE GATTO directed attention to page 19 of [the audit
handout to which Representative Gruenberg referred], which shows
a recommendation to address excessive wages for on-site
managers. That recommendation is that the managers be paid a
salary, rather than an hourly wage. He noted that the
justification for that recommendation is on page 20, which shows
["Exhibit 5"], an example for [the highest-paid] on-site
manager. Representative Gatto noted that, with all the
additional job perks, this manager received $355,000. He said
that is an unbelievable amount of money, "unless this person is
so extraordinary."
8:57:40 AM
MR. GRIFFITH said that got the division's attention, too, and
resulted in several policy changes in the form of field
directives, limiting the number of hours that a construction
superintendent can work on the job. It also addressed issues of
nepotism and working on multiple jobs. He indicated that those
changes are detailed in the aforementioned letters. In response
to a question from Chair Seaton, he said those on-site managers
are still paid hourly "and we are following those field
directives ...."
8:58:46 AM
REPRESENTATIVE GRUENBERG said he is concerned by the example
that Representative Gatto highlighted, but he is more concerned
about how this was allowed to happen. He said he wants to know
what basic managerial changes are being made to prevent this
from occurring.
MS. KENT said she would be happy to follow up on that in
writing.
8:59:51 AM
CHAIR SEATON said a consistent theme is that DEC engineers were
having to act outside of their area of expertise in drawing up
contracts. He referred to a letter to Jim Clark from Ernesta
Ballard, dated April 26, 2004, which read, "We are in the
process of reclassifying a position to add contracting support."
He asked, "Is there contracting officer support now, and are
contracts done by contracting officers or by the DEC engineers?"
9:00:31 AM
MR. GRIFFITH said a procurement specialist has been added to the
staff, and contracts and procurement do go through that
individual. He added, "We've also addressed that issue through
standardizing a number of our contracts for professional
services." In response to a follow-up question from Chair
Seaton, he confirmed that that means DEC engineers are no longer
drawing up the contracts.
9:01:04 AM
REPRESENTATIVE GATTO noted that the employee from the example
actually earned the money in 2002 and Mr. Griffith said that
that got the division's attention. Based on that information,
he said he wonders why the pay is still at hourly and no change
has been made to date.
9:01:31 AM
MR. GRIFFITH explained that there were a number of causes of the
high compensation rate, the most significant of which was
excessive hours. He stated his belief that there are issues
about what types of employees can be paid for hourly and what
kinds of workers can be paid by salary, and he stated his
understanding that hourly pay is called for by labor law for
this type of construction job. He added, "But that's something
that I may want to confirm."
9:02:23 AM
MR. GRIFFITH, in response to a question from Chair Seaton, said
the term "on-site manager" is used for construction
superintendents. In response to a follow-up question from Chair
Seaton, he said the division does not have any employees who are
construction superintendents. Construction oversight on-site is
provided either by local hire or through a contract for
construction management services, depending on the size of the
project.
9:03:26 AM
CHAIR SEATON asked if there are currently any requirements
related to technical competence or degrees.
9:03:41 AM
MR. GRIFFITH answered that in the case of the local hire of a
construction superintendent, the division has minimum
requirements that must be met. In response to a follow-up
question from Chair Seaton, he said "minimum" refers to
experience.
9:04:14 AM
REPRESENTATIVE GARDNER directed attention to page 21 of the
audit handout, which shows that the employee in question billed
the state for 110 hours per week for 10 weeks, which she
calculated is more than 15 hours a day, 7 days a week, for 10
weeks. She asked if anyone actually believes that that employee
worked that amount of time and if he/she is still employed.
9:04:38 AM
MR. GRIFFITH said there are now limits that were not in place at
the time, which limit a superintendent's hours during
construction periods to 72 hours a week and 40 hours a week
during nonconstruction periods. He stated that the limit is
cumulative and applies whether the superintendent is managing
one or more projects. That requirement was not in place at the
time the superintendent from the example worked; however, he
said the division found no reason to consider that information
to be fraudulent. That particular superintendent works well
with one of the communities on the Kenai Peninsula and has
continued to work on the project, but is now subject to the new
requirements. As long as an individual meets the requirements
and doesn't violate any laws or labor requirements, the decision
to hire him/her is up to the community.
9:06:33 AM
CHAIR SEATON asked if the time sheets with notes of what is
being worked on are currently a requirement of all the Village
Safe Water program's projects.
9:07:02 AM
MR. GRIFFITH answered yes.
9:07:27 AM
MR. GRIFFITH, in response to a question from Representative
Gatto, confirmed that the locally hired superintendents are paid
by DEC. He offered further details.
9:07:53 AM
REPRESENTATIVE GATTO stated:
I'm surprised at that, but I'm more surprised at this:
When the manager did not commute, DEC rented him a
two-story, three-bedroom, sauna-equipped, home office
at one end of the road. The rental was renovated,
painted, and furnished for him at DEC's expense,
including two televisions, VCRs, and a $2,700 computer
system.
Somebody's making out pretty well here, and I'm
terribly concerned that if indeed we just pay the
money because that's the way the time sheets come in,
and don't have control over who gets hired and -- well
you know where I'm going with this. This seems like
an out-of-control operation.
9:08:49 AM
CHAIR SEATON said he thinks the committee would be better served
by getting some additional information from DEC. He said, "We
were all troubled by the audit and ... I'm glad that DEC was
troubled by the audit, as well."
9:09:36 AM
SCOTT RUBY, Community Development Section Chief, Division of
Community Advocacy, Department of Commerce, Community, &
Economic Development (DCCED), told the committee that he
oversees not only the Rural Utility Business Advisor (RUBA)
program within the department, but also the Local Government
Assistance program, which provides "much the same sort of
assistance to communities on issues other than sanitation." He
directed attention to a handout in the committee packet,
entitled, "Rural Utility Business Advisor (RUBA) program," which
he said provides a brief overview of the program. He noted that
the program was started in 1990. He stated the reason for the
program's involvement and work with DEC was because there were
some problems with facilities failing or struggling to survive,
because rates were not set, money was not being collected, and
ordinances were not passed.
MR. RUBY indicated that RUBA was provided funds through DEC in
order to work with communities that were slated to receive
[sanitation systems]. Over the years, he said, RUBA varied how
it measured capacity and "identified what those critical
indicators were." The latest version of capacity indicators was
developed in 2004. He related that those categories are shown
on the last two pages of a three-page handout in the committee
packet entitled, "History of Rural Utility Business Advisor
(RUBA) program History of Use and Development of Capacity
Indicators," and those indicators are: utility, accounting
systems, payroll tax, personnel system, organizational
management, and operational. Each of those indicators is broken
down into "sustainable" and "essential." The essential
indicators are the ones that DEC has decided to focus on through
special grant conditions that a community must meet in order for
construction to happen, he said. He said RUBA staff completes a
management audit, gives it to the community, and offers to work
with the community to assist them in correcting any
deficiencies. Mr. Ruby said there are other agencies that also
have staff that can help the communities correct the
deficiencies. Once the community has implemented the necessary
changes, it requests that RUBA conduct another assessment, or
"re-audit."
9:13:51 AM
CHAIR SEATON asked if the audits are done only on communities
that have a Village Safe Water program project, "or is this on
the community before the grant is granted?"
9:14:10 AM
MR. RUBY replied that any community can request an audit be
done, but RUBA does not have the authority to conduct an audit
without a community's request for one. He said RUBA's priority
would be to those communities who have current grants.
9:15:33 AM
MR. RUBY, in response to an observation made by Chair Seaton,
said some of the indicators do not apply to a community. For
example, a community may be in the process of getting grant and
has not yet hired any employees, and therefore they would not
have worker's compensation insurance for that purpose. Rather
than marking "yes," which would mean the community meets the
indicator of having workman's compensation insurance, RUBA uses
"N/A," which Mr. Ruby explained is the same as yes, in that it
would not hold up a project.
9:17:10 AM
REPRESENTATIVE GATTO referred to the previously mentioned
handout entitled, "Rural Utility Business Advisor (RUBA)
program." He read one of the items regarding RUBA's approach to
assisting communities: "Assess progress and adjust work plan if
necessary." He questioned whether that was really happening.
9:18:09 AM
MR. RUBY said RUBA's work plan is based upon the deficiencies in
the capacity assessment, and it prioritizes the essential
indicators. He said:
Once you get past the essential indicators, a lot of
times you're trying to decide ... whether or not it's
better to ... adopt ... personnel procedures or to
revise the ordinance. We negotiate with the community
a work plan ... which they want to implement.
... Frequently, ... what we have is high turnover in
the communities. ... It may be that they've had clerk
turnover and we need to retrain their bookkeeper to
make sure that their accounting system is kept up to
date, rather than working on the personnel policies.
... Our work plans try to be ... two to three months
out for what we're going to currently work on [for]
the community, but it's a negotiated work plan for
what the community's able and willing to work on at
that time.
9:19:15 AM
CHAIR SEATON asked if RUBA has the ability to hold up a project
if it does not like it, even if the community is following the
original work plan.
9:19:51 AM
MR. RUBY answered no. He said the work plan is basically set by
the community.
9:21:02 AM
CHAIR SEATON noted that the House Resources Standing Committee
was supposed to hear this overview but is all tied up with oil
and gas issues, which is why the House State Affairs Standing
Committee is hearing it. He said one of the reasons that the
legislature is investigating this issue is because of a project
in Lowell Point in Seward that has been on hold for quite awhile
even though it was approved and funded. He explained that
although this is not a bill hearing, he would like to invite
certain public figures in Seward to offer their point of view.
9:22:01 AM
JIM McCRACKEN, President, Lowell Point Community Council,
stated, "We were hoping for some standardization from one
community to another, but after listening to some of the
discussions this morning, we can see why there's some
complications." He noted that Lowell Point is the beneficiary
of a grant and has been involved for six years on a work project
with the Village Safe Water program.
9:26:21 AM
CHAIR SEATON said he finds it problematic that an at-length
engineering study was completed, the Village Safe Water program
said it wanted certain things amended, the engineers made those
amendments, further study was done, the governor nominated the
program, the legislature approved the program, and now he is
hearing the administration saying it doesn't like the program
anymore, because it doesn't meet necessary criteria. He asked
if that is what is being said.
9:27:10 AM
MR. GRIFFITH responded:
That is what we're saying; we're taking responsibility
for the fact that that project plan didn't get a good
review, didn't get a good look at alternatives the way
that we believe we should have reviewed it, and we
didn't take a close enough look at the capital costs
in the most economical way to provide for the public
health needs in that community. And we're going back
and trying to revisit that issue with the community.
We could have done a better job at the time.
9:27:46 AM
MR. GRIFFITH, in response to a question from Representative
Gatto, said Lowell Point is located approximately 2 miles south
of Seward Alaska on the road system. In response to a follow-up
question from Representative Gatto, he said $90,000 is the
approximate amount per home for sewer collection pipe "mains"
and service lines. He said that would not include any of the
associated piped water system. The total project need is
approximately $6,135,000 - about $200,000 per home for pipes -
which he said is high compared to what is spent in most
communities. He said, "In most communities we're developing
water sources, water treatment, sewage disposal, [and] sewage
treatment. In Lowell Point and the Seward area, a lot of those
facilities are already constructed."
9:28:45 AM
REPRESENTATIVE GATTO asked what Mr. Griffith thinks the public's
perception would be about the cost of $200,000 per home for
water and sewer.
9:29:24 AM
MR. GRIFFITH said he thinks the concern about the cost per home
for water and sewer facilities in rural communities is a
legitimate one. He said he thinks it's the responsibility of
the department to oversee those capital costs and ensure that
each project has a thorough review to prevent spending more
money than necessary. He concluded, "That's part of what we're
trying to do in revisiting the master plan for Lowell Point."
CHAIR SEATON proffered, "And you should know that the master
plan does not include water; it's a sewer plan that we funded."
MR. GRIFFITH clarified that the master plan to which he is
referring was developed in 2000. The application submitted in
2003 was for only the sewer portion of that master plan.
9:30:18 AM
REPRESENTATIVE GARDNER asked if there is any contribution from
the local property owners to the project.
9:30:37 AM
MR. GRIFFITH answered no.
9:30:40 AM
CHAIR SEATON told Representative Gardner, "Village safe waters
are either federal pass-through money or state money. ... It's
not like you're going into a home and putting in an individual
system - this is the sewer main, et cetera."
9:31:04 AM
REPRESENTATIVE LYNN said he has been to Lowell Point. He asked
if the occupancy of the homes is year-round, adding that he
thinks he knows the answer.
9:31:46 AM
MR. GRIFFITH said there are a number of homes in addition to the
30 being talked about, and there is a variety of occupancy
patterns in those homes. He estimated that 30 of the homes are
occupied continuously "in one way or the other." He said there
are slope workers, fishermen, teachers who rent a house during
the school year and live there in summer, people who operate bed
& breakfasts, and vacationers.
CHAIR SEATON added that there is a homesteader living there, and
there is also a volunteer fire station - "more than just homes."
The committee took an at-ease from 9:33:23 AM to 9:38:41 AM.
HB 238-PUBLIC EMPLOYEE/TEACHER RETIREMENT
CHAIR SEATON announced that the last order of business was HOUSE
BILL NO. 238, "An Act relating to contribution rates for
employers and members in the defined benefit plans of the
teachers' retirement system and the public employees' retirement
system and to the ad-hoc post-retirement pension adjustment in
the teachers' retirement system; requiring insurance plans
provided to members of the teachers' retirement system, the
judicial retirement system, the public employees' retirement
system, and the former elected public officials retirement
system to provide a list of preferred drugs; relating to defined
contribution plans for members of the teachers' retirement
system and the public employees' retirement system; and
providing for an effective date."
9:38:53 AM
REPRESENTATIVE GATTO moved to adopt the committee substitute
(CS) for HB 238, Version 24-LS0761\R, Wayne, 1/31/06, as a work
draft. There being no objection, Version R was before the
committee.
9:40:15 AM
CHAIR SEATON stated that the purpose of bringing back HB 238 is
to address helping employer costs. He directed attention to a
PowerPoint presentation, the hardcopy for which is in the
committee packet and is [10 pages front and back]. On page one
of the PowerPoint, it shows definitions of relevant terms as
follows [original punctuation provided]:
Blended employer past service cost rate: refers to
the average past service cost rate of all non-State
non-school district PERS employee
Past service cost: refers to the annual lump sum
payment made towards the PERS system unfunded
liability.
Past Service Cost Rate: means the annual payment as a
percentage of total wage base of employee salary
required to pay the past service cost as an amortized
contribution in percentage over a stipulated number of
years.
Unfunded Liability: refers to amount that would need
to be paid into the PERS system to cover all of its
liabilities.
CHAIR SEATON, regarding the blended rate, said, "If you paid the
full normal costs and all of your assumptions were correct, you
would fully collect and you would pay for all the benefits that
would have accrued to that employee."
9:42:27 AM
CHAIR SEATON directed attention to the first "slide" on page 2
of the PowerPoint presentation, which read as follows [original
punctuation provided]:
What is the Past Service Offset Account? (PSCOA)
The PSCOA is a mechanism to help municipalities pay
their unfunded liability over 25 years. The payments
are based on a municipality's number or Tier IV
employees and contributions are limited to the average
experience of the system
CHAIR SEATON reminded the committee that the rate has always
been calculated based on the entire wage base of the employer;
therefore, if an employer has 25 employees, it doesn't matter if
they are Tier I, II, III, or IV. He directed attention to a
hypothetical situation of how the PSCOA is calculated, beginning
on page 3 of the PowerPoint. Using "City X" as an example, the
page shows that if City X has 25 employees, 20 of whom are Tiers
I, II, and III defined benefit (DB) employees and 5 of whom are
Tier IV defined contribution (DC) employees, the PSCOA will pay
the past service cost (PSC) for those new Tier IV employees who
technically do not have a past service cost associated with
them.
CHAIR SEATON moved on to [page 4 of the PowerPoint] which shows
the following in the top slide [original punctuation provided]:
Assumptions about City X
2005
Past Service Cost Rate of City X: 30%
Average Past Service Cost Rate: 20%
Average Salary for City X: $40,000
City's X's Wage Base: $1 million
The PSCOA will pay on behalf of the 5 DC employees:
(average salary * average employer PSC rate) * number
of DC employees = PSCOA assistance
($40,000 * .2) * 5 = $40,000
9:46:02 AM
REPRESENTATIVE GARDNER stated her understanding of the benefit
of having a DC program is that it is freestanding, meaning each
employee's costs and benefits are independent of anything that
went before.
CHAIR SEATON said Representative Gardner is exactly correct.
REPRESENTATIVE GARDNER asked, "So, why is there a past service
cost for the new tier employees?"
9:46:19 AM
CHAIR SEATON explained that there actually is not; however, the
employer has to make a certain amount of payment into the system
to pay the debt. Even though the new employee did not have a
past service cost, the employer still owes the debt, and the way
it's most easily calculated is by looking at the employer's wage
base.
9:47:22 AM
REPRESENTATIVE GARDNER responded that in some respect this is an
artificial construct; it's a bookkeeping decision.
9:47:35 AM
CHAIR SEATON confirmed that is correct.
9:47:38 AM
REPRESENTATIVE GARDNER asked, "If I am a small public employer
and ... I need to hire somebody, am I better off to hire
somebody under the new tier or to hire somebody who already is
in a tier and comes to me from some other state agency?"
9:48:00 AM
CHAIR SEATON reiterated that the debt is a fixed amount that the
employer would have to pay. In response to Representative
Gardner's restatement of her question, he confirmed that the
employer would be better off hiring someone new, rather than
someone who is in the old DB system. He said he is waiting on a
legal opinion to find out whether an employer can legally make
that determination.
9:49:23 AM
REPRESENTATIVE GARDNER asked, "If we were to assume that this is
a great plan and it would be very effective, why would we limit
it to nonstate and nonschool district employers; why not include
everybody?"
9:49:40 AM
CHAIR SEATON said the school district and state agencies
basically have no funding other than from the legislature. He
said, "This is a mechanism to try to get to those nonstate
funded."
REPRESENTATIVE GARDNER said, "So, we're setting up a mechanism
for indirectly funding those obligations that are not directly
ours, but we're accepting them as ours and setting up a funding
mechanism. But we still could do the same for all the different
pots. We're just saying, 'This gets paid out of this pot and
this gets paid out of this pot.'"
CHAIR SEATON responded, "We could, and we might want to have
different funding mechanisms for the others, because it gives us
more flexibility, because we're paying those bills anyway." In
response to a comment made by Representative Gardner, he said,
"Under this mechanism we would help pay, and we're creating a
mechanism to help the municipalities."
9:51:21 AM
CHAIR SEATON continued with the PowerPoint, bringing focus to
the second slide on page 4, which read as follows [original
punctuation provided]:
The PSCOA payment reduces City X's PSC contribution
from $300,000 to $260,000 , or their PSC rate from 30%
to 26%
CHAIR SEATON reviewed that another bill dealing with pension
obligation bonds (POBs), offered a scenario in which the POB
could lower the [past service cost] by 2.6 percent. The
scenario shown on page 4 of the PowerPoint, he noted, would
lower the past service cost by 4 percent.
CHAIR SEATON directed attention to page 5 of the PowerPoint,
which shows City X at "20 years out," to show how much of the
employers' past service cost the PSCOA would pay in the future.
[The first slide on page 6 shows that City X has 30 employees,
three of which are DB and 27 of which are DC.] The second slide
on page 6 read as follows [original punctuation provided]:
Assumptions about City X
2025
Past Service Cost Rate of City X: 30%
Average Past Service Cost Rate: 20%
Average Salary for City X: $40,000
City's X's Wage Base: $1.2 million
The PSCOA will pay on behalf of the 27 DC employees:
(average salary * blended employer PSC rate) * number
of DC employees = PSCOA assistance
($40,000 * .2) * 27 = $216,000
CHAIR SEATON noted that [the first slide on page 7] shows that
the PSCOA payment reduces City X's past service cost
contribution from [$360,000 to $144,000], or the past service
cost rate from 30 percent to 12 percent. Chair Seaton referred
to [the second slide on page 7], which read as follows [original
punctuation provided]:
Why not a greater reduction in PSC payments for City
X?
City X is only receiving aid for the average PSC rate
(20%) when there [sic] actual rate is 30%
If city X had the same PSC rate as the system (20%)
the PSCOA would pay 18% of the city's PSC for the
twentieth year, the city left to make up the
difference of $24,000
CHAIR SEATON explained that is the example of City X, "we're
only funding to the average past service cost rate for all
employees." He said cities make choices. He said there are
cities that sell off a section of a business and retain that
money within the city's account. Chair Seaton said the most
glaring example is Fairbanks, which sold off a utility and put
$100 million in an account, but kept the past service cost
liability. He said, "So, what we're saying is we're not going
to go in and absorb, from the state level, those voluntary
changes that you make. So, we'll only come up to the average."
9:57:05 AM
CHAIR SEATON noted that the [first slide on page 8] shows a
graph correlating with the employer's 30 percent past service
cost rate, with the average being 20 percent, a scenario in
which the employer would pay about 12 percent with PSCOA
assistance. The same slide shows the employer having the same
past service cost rate as the system average of 20 percent.
With the PSCOA, that scenario would mean that the employer would
pay only 2 percent.
CHAIR SEATON cited [the second slide on page 8], which read as
follows [original punctuation provided]:
PSCOA payments will increase over time until by the
end of the amortization period the PSCOA is paying
almost all of the past service cost payment for that
year
CHAIR SEATON drew attention to [the first slide on page 9],
which he noted contains a graph showing the PSCOA contributions
as percent of total past service cost. The graph, he noted,
begins in 2005 at about 8 percent and goes to almost 100 percent
[by 2027]. The next slide on page 9 read as follows:
System Impact of PSCOA
Unfunded liability of PERS non-State non-school
district: 679 million
What the PSCOA will pay over 25 years: 299 million
CHAIR SEATON suggested a better way to look at this is that "we
would pay 44 percent of the amount due for employers" [which is
shown on the final slide on page 10]. He said, "To make this
function, it would be a little less than $300 million in present
dollars that would have to go into the present dollar offset
account to create this funding mechanism."
9:59:03 AM
CHAIR SEATON directed attention to the sponsor statement, which
he indicated will clarify some of the information. He
referenced a two-page graph entitled, "Payment to Unfunded
Liability per Tier - Actual Dollar Value." He said the graph
offers a look at a five-year breakdown of communities for Tiers
I, II, III, and IV, and totals.
CHAIR SEATON asked the committee to remember that this plan
would set up a long-term mechanism; it's not an instant shot to
reduce the employers' contribution amounts today. He said:
We've heard a lot of complaints, but in reality, the
contribution rates for municipalities haven't gone up
at all, because we made a 5 percent contribution last
year. There's 5 percent, plus the other 5 percent.
... At least in the governor's budget, there's a
proposal to pay the 10 percent for this year. ...
What's going to happen over time though, is if we take
a long-term look, we want to make sure that on the
further end of things that cities aren't constrained
so that they can't offer their services that we want
all communities to offer.
10:01:08 AM
CHAIR SEATON, in response to a question from Representative
Gardner, reminded everyone that the bill that dealt with pension
obligation bonds had passed out of the House State Affairs
Standing Committee and is currently in the House Finance
Committee. He explained he had offered that example to show
another plan with quite a different effect.
CHAIR SEATON announced that HB 238 was heard and held.
ADJOURNMENT
There being no further business before the committee, the House
State Affairs Standing Committee meeting was adjourned at
10:01:59 AM.
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