Legislature(1995 - 1996)

04/13/1996 10:04 AM STA

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
             HOUSE STATE AFFAIRS STANDING COMMITTEE                            
                         April 13, 1996                                        
                           10:04 a.m.                                          
                                                                               
                                                                               
 MEMBERS PRESENT                                                               
                                                                               
 Representative Jeannette James, Chair                                         
 Representative Scott Ogan, Vice Chair                                         
 Representative Joe Green                                                      
 Representative Ivan Ivan                                                      
 Representative Brian Porter                                                   
 Representative Ed Willis                                                      
                                                                               
 MEMBERS ABSENT                                                                
                                                                               
 Representative Caren Robinson                                                 
                                                                               
 COMMITTEE CALENDAR                                                            
                                                                               
 The confirmation hearing of Michelle Brown as the Commissioner of             
 the Department of Environmental Conservation.                                 
                                                                               
      - CONFIRMATION ADVANCED                                                  
                                                                               
 HOUSE BILL NO. 545                                                            
 "An Act relating to the cost-of-living differential for certain               
 public employees residing in the state and the criteria for                   
 determining eligibility for the differential; and providing for an            
 effective date."                                                              
                                                                               
      - HEARD AND HELD                                                         
                                                                               
 HOUSE BILL NO. 482                                                            
 "An Act relating to state procurement practices and procedures; and           
 providing for an effective date."                                             
                                                                               
      - PASSED CSHB 482(STA) OUT OF COMMITTEE                                  
                                                                               
 (* First public notice)                                                       
                                                                               
 PREVIOUS ACTION                                                               
                                                                               
 BILL:  HB 545                                                               
 SHORT TITLE: PUB. EMPLOYEE COST OF LIVING DIFFERENTIAL                        
 SPONSOR(S): RULES BY REQUEST OF THE GOVERNOR                                  
                                                                               
 JRN-DATE      JRN-PG            ACTION                                        
 03/22/96      3269    (H)   READ THE FIRST TIME - REFERRAL(S)                 
 03/22/96      3269    (H)   STATE AFFAIRS, FINANCE                            
 03/22/96      3269    (H)   3 ZERO FISCAL NOTES (ADM, REV, DOT)               
 03/22/96      3269    (H)   GOVERNOR'S TRANSMITTAL LETTER                     
 04/04/96              (H)   STA AT  8:00 AM CAPITOL 102                       
 04/04/96              (H)   MINUTE(STA)                                       
 04/09/96              (H)   STA AT  8:00 AM CAPITOL 102                       
 04/09/96              (H)   MINUTE(STA)                                       
 04/11/96              (H)   STA AT  8:00 AM CAPITOL 102                       
 04/11/96              (H)   MINUTE(STA)                                       
 04/13/96              (H)   STA AT 10:00 AM CAPITOL 102                       
                                                                               
 BILL:  HB 482                                                               
 SHORT TITLE: STATE PROCUREMENT PRACTICES & PROCEDURES                         
 SPONSOR(S): RULES BY REQUEST OF THE GOVERNOR                                  
                                                                               
 JRN-DATE      JRN-PG            ACTION                                        
 02/09/96      2686    (H)   READ THE FIRST TIME - REFERRAL(S)                 
 02/09/96      2686    (H)   L&C, STATE AFFAIRS, FINANCE                       
 02/09/96      2687    (H)   2 FISCAL NOTES (ADM, DOT)                         
 02/09/96      2687    (H)   5 ZERO FNS (2-ADM, DCED, DCRA, CORR)              
 02/09/96      2687    (H)   5 ZERO FNS (DOE, DEC, F&G, GOV, DHSS)             
 02/09/96      2687    (H)   5 ZERO FNS (LABOR, LAW, DMVA, DNR, DPS)           
 02/09/96      2687    (H)   2 ZERO FNS (REV, UA)                              
 02/09/96      2687    (H)   GOVERNOR'S TRANSMITTAL LETTER                     
 03/18/96              (H)   L&C AT  3:00 PM CAPITOL 17                        
 03/20/96              (H)   L&C AT  3:00 PM CAPITOL 17                        
 03/20/96              (H)   MINUTE(L&C)                                       
 03/22/96              (H)   L&C AT  3:00 PM CAPITOL 17                        
 03/28/96      3429    (H)   L&C RPT  CS(L&C) 1DP 5NR 1AM                      
 03/28/96      3429    (H)   DP: KUBINA                                        
 03/28/96      3429    (H)   NR: KOTT, SANDERS, MASEK, PORTER                  
 03/28/96      3429    (H)   NR: ROKEBERG                                      
 03/28/96      3429    (H)   AM: ELTON                                         
 03/28/96      3429    (H)   2 FISCAL NOTES (ADM, DOT) 2/9/96                  
 03/28/96      3430    (H)   4 ZERO FNS (2-ADM, DCED, DCRA) 2/9/96             
 03/28/96      3430    (H)   4 ZERO FNS (COR, DOE, DEC, F&G) 2/9/96            
 03/28/96      3430    (H)   3 ZERO FNS (GOV, DHSS, LABOR) 2/9/96              
 03/28/96      3430    (H)   4 ZERO FNS (LAW, DMVA, DNR, DPS) 2/9/96           
 03/28/96      3430    (H)   2 ZERO FNS (REV, UA) 2/9/96                       
 04/09/96              (H)   STA AT  8:00 AM CAPITOL 102                       
 04/09/96              (H)   MINUTE(STA)                                       
 04/11/96              (H)   STA AT  8:00 AM CAPITOL 102                       
 04/11/96              (H)   MINUTE(STA)                                       
 04/13/96              (H)   STA AT 10:00 AM CAPITOL 102                       
                                                                               
 WITNESS REGISTER                                                              
                                                                               
 MICHELLE BROWN, Commissioner-Designee                                         
 Department of Environmental Conservation                                      
 410 Willoughby Avenue, Suite 105                                              
 Juneau, Alaska 99801-1795                                                     
 Telephone:  (907) 465-5066                                                    
  POSITION STATEMENT:   Provided testimony for her confirmation                
 hearing.                                                                      
 PATRICK GULLUFSEN, Assistant Attorney General                                 
 Governmental Affairs Section                                                  
 Civil Division                                                                
 Department of Law                                                             
 P.O. Box 110300                                                               
 Juneau, Alaska 99811-0300                                                     
 Telephone:  (907) 465-3600                                                    
  POSITION STATEMENT:   Provided testimony on HB 545.                          
                                                                               
 BRUCE CUMMINGS, Labor Relations Specialist                                    
 Alaska Marine Highway System                                                  
 Department of Transportation and Public Facilities                            
 3132 Channel Drive                                                            
 Juneau, Alaska 99801-7898                                                     
 Telephone:  (907) 465-3238                                                    
  POSITION STATEMENT:   Provided testimony on HB 545.                          
                                                                               
 DUGAN PETTY, Director                                                         
 Central Office                                                                
 Division of General Services                                                  
 Department of Administration                                                  
 P.O. Box 110210                                                               
 Juneau, Alaska 99811-0210                                                     
 Telephone:  (907) 465-2250                                                    
  POSITION STATEMENT:   Provided testimony on HB 482.                          
                                                                               
 ACTION NARRATIVE                                                              
                                                                               
 TAPE 96-51, SIDE A                                                            
 Number 0015                                                                   
                                                                               
 The House State Affairs Committee was called to order by Chair                
 Jeannette James at 10:04 a.m.  Members present at the call to order           
 were Representatives Willis, Ivan, Porter, Ogan and James.  Members           
 absent were Representatives Robinson and Green.                               
                                                                               
 The first order of business to come before the House State Affairs            
 Committee was the confirmation hearing of Michelle Brown as                   
 Commissioner of the Department of Environmental Conservation (DEC).           
                                                                               
 The record reflected the arrival of Representative Joe Green at               
 10:09 a.m.                                                                    
                                                                               
 CHAIR JEANNETTE JAMES called on Michelle Brown to present her                 
 credentials before the committee members.                                     
                                                                               
 Number 0078                                                                   
                                                                               
 MICHELLE BROWN, Commissioner-Designee, Department of Environmental            
 Conservation, said she would first explain the direction of DEC.              
 She stated she had been with DEC for a little over one year now.              
 She was the Deputy Commissioner to Gene Burden prior to her                   
 Commissioner-designee status.  She explained to the staff during              
 the transition that although there was a new Commissioner the                 
 direction would remain the same.  She explained it was clear that             
 the DEC needed a new approach.  The era of command and control was            
 gone and the DEC needed to move towards a common stewardship of               
 resources approach.  There were some restrains, however.  The first           
 was the need to change the mind-set that had been in place for quit           
 some time.  The second was the need to have an organization that              
 was conducive to consistency and accountability and that would                
 allow the changes necessary.  There were also many budget problems.           
 The budget did not accurately capture the cost of running a                   
 program.  Furthermore, the budget was also not tied to the public             
 health objective needs.  Therefore, last year the DEC was                     
 reorganized.  She explained as part of the reorganization the DEC             
 went from 22 autonomous management units to 6 autonomous management           
 units to establish clear management lines and accountability.  The            
 22 units were presenting business problems and regional                       
 inconsistencies.  By organizing into six units, the DEC unified               
 program development and implementations.  The employees that were             
 applying the laws were now also developing them.  As a result,                
 regulations were not being issued that had not been ground tested             
 by the field staff and the regulated community.  The DEC also saved           
 $1.3 million, and reduced its work force by 5 percent.  This was a            
 result of eliminating redundancies, straightening the lines of                
 management, and consolidating administrative functions.  It was               
 impossible to tell what it actually cost to run a program when the            
 22 management units existed.  Consequently, the DEC could for the             
 first time indicate what it would cost to run an air program, for             
 example, on a statewide basis.  Therefore, the department could               
 turn to the federal government and receive more realistic and                 
 indirect rates for grants.  The general fund, therefore, was not              
 subsidizing the federally funded programs.  The department also               
 reduced its spending from the oil and hazardous substance relief              
 response fund, and saved hundreds of thousands of dollars because             
 each program was paying its fair share.                                       
                                                                               
 MS. BROWN further said the DEC was moving towards a mission of                
 compliance and technical assistance.  Compliance was necessary, but           
 the department was now starting with the assumption that the                  
 industries in Alaska had both the technical ability and the                   
 corporate consciousness to work with the DEC for a common and                 
 cooperative environmental management program.  She cited the three            
 operating premises.  The first was that the DEC was part of the               
 state's resource management team.  The department believed that               
 sound environmental management meant assisting in the design and              
 citing of operations to avoid environmental problems and opposition           
 to projects.  The department wanted to be constructive at the                 
 front-end rather than a "road block at the eleventh hour."  The               
 second was that the DEC was part of the state's economic                      
 development team.  The DEC believed that jobs and environmental               
 protection were not mutually inconsistent.  The DEC had been                  
 focusing on customer services that would strengthen the overall               
 economic development of the state which would create jobs.  Air,              
 water and natural resource quality was needed to attract new                  
 industry by making resources available.  Therefore, the DEC would             
 have to make sure that the state did not exceed the capacity of the           
 environment and avoid new development.  The studies had shown that            
 economic development was strongest where there was strong                     
 environmental management.  She did not mean the most stringent                
 environmental management.  She meant that resources were managed on           
 an interactive, rational and involved manner.  She called it a                
 hands-on approach to ensure that facilities were cited and operated           
 in a place that would not cause impact.  The studies had also shown           
 that where there was excessive pollution the economy declined                 
 because the environment was very much like an infrastructure.                 
 Therefore, new economic development could not readily occur if a              
 single operator was taking up the entire capacity of the                      
 environment.  She cited new homes, for example, could not be built            
 if the area could not absorb more sewage discharge or provide                 
 drinking water.  The third was that the DEC was the cornerstone of            
 the state's public health system.  She said close to one-half of              
 the mission of DEC was for safe food, pure drinking water, proper             
 waste disposal and better sanitation.  In order to implement these            
 principles the DEC had turned to a management by objective                    
 approach.  The result was a permit that provided for a safe                   
 environment.  It was a focus on results rather than making people             
 "jump through hoops."  She also instructed the staff to get out               
 into the field and establish partnerships.  The department needed             
 to form coalitions, plan and avoid environmental problems and be              
 more creative in problem solving to achieve compliance rather than            
 just demand it.  She cited the Clean Air Act regulations, the                 
 Environmental Protection Agency (EPA) Placer Mining General Permit,           
 the water quality standards, the clean up of Sitka's Silver Bay and           
 the military sites at King Salmon as examples of the DEC's new                
 efforts.  She further cited the seafood program.  Over 50 percent             
 of the seafood produced in the United States was processed in                 
 Alaska, and the DEC inspected the bulk of it or the Food and Drug             
 Administration (FDA) would not allow the products to move from the            
 state.  This was obviously a large part of the state's economy.               
 The DEC was using data to determine the areas that were at risk in            
 a timely manner resulting in the products being delivered to the              
 market faster without a compromise to the health of the public.  In           
 conclusion, the DEC was not completely where it wanted to be right            
 now.  A transition was hard, everyone had to get used to it.  It              
 was a matter of time.  However, the DEC had successfully crossed              
 over to a system of more cooperative environmental management that            
 brought people to the table to work through the issues.  She said             
 she would be happy to answer any questions.                                   
                                                                               
 Number 0948                                                                   
                                                                               
 REPRESENTATIVE JOE GREEN said, he could not think of anybody other            
 than Michelle Brown, who could cooperate and not lose site of her             
 duties as a Commissioner.  The attitude she brought to the DEC was            
 stunning.  She was also fiscally responsive.  He strongly supported           
 her confirmation.                                                             
                                                                               
 MS. BROWN thanked Representative Green for his support of the Clean           
 Air Act regulations.                                                          
                                                                               
 Number 1020                                                                   
                                                                               
 REPRESENTATIVE BRIAN PORTER said the goals she presented sounded              
 good.  He wished her luck.                                                    
                                                                               
 Number 1046                                                                   
                                                                               
 REPRESENTATIVE ED WILLIS asked Ms. Brown how involved the DEC was             
 with working with the military to clean up the bases around the               
 state?                                                                        
                                                                               
 Number 1058                                                                   
                                                                               
 MS. BROWN replied the DEC was very involved.  It received grants              
 from the Department of Defense to higher staff to supervise the               
 sites.  Those grants were declining, however, as the federal                  
 dollars were declining.  She reiterated the DEC was aggressively              
 involved.  She cited in King Salmon the DEC just signed the first,            
 three party agreement in the country, where the military, the EPA             
 and the state agreed on a clean up course of action.  This avoided            
 the base from going on the super fund list.  The Department of                
 Defense did not want to put a base on the super fund list otherwise           
 it stigmatized the property.                                                  
                                                                               
 Number 1106                                                                   
                                                                               
 REPRESENTATIVE WILLIS asked Ms. Brown the status of the ducks that            
 died on Fort Richardson in Eagle River?                                       
                                                                               
 Number 1121                                                                   
                                                                               
 MS. BROWN replied studies had been conducted.  She could not                  
 remember if there was a clean-up plan, however.  She would get back           
 to him with more information.                                                 
                                                                               
 Number 1140                                                                   
                                                                               
 REPRESENTATIVE SCOTT OGAN said he had not heard anything bad about            
 Ms. Brown from the industry or other legislators.  He did have two            
 constituents, however, who feared and loathed the DEC.  The DEC               
 invoked a love-hate relationship for some.  He explained it was               
 hard to get some people to speak against the DEC for fear of                  
 repercussions.                                                                
                                                                               
 REPRESENTATIVE OGAN further said the legislature had the power to             
 regulate and adjudicate problems.  The general problem with                   
 government bureaucracy was that there was not enough separation of            
 powers.  It was more efficient for the DEC to adjudicate a problem,           
 for example, than to use the court system.  Therefore, the people             
 had a tremendous amount of power.  He cited an individual that had            
 a problem with a septic system and would not fix it.  As a result,            
 the DEC held up his food license.  He asked Ms. Brown to comment on           
 the power that the DEC had to enforce the regulations.                        
                                                                               
 Number 1309                                                                   
                                                                               
 MS. BROWN replied she understood the fear surrounding the DEC.  She           
 said people were afraid in general to say to a regulatory agency              
 "this can't be done" for fear of reprisals when there were                    
 problems.  It was important to engage in a discussion of                      
 alternatives without fear.  She called it a balancing act.  It was            
 important that the industry felt comfortable enough to engage in              
 creative solution problem solving dialogue with the DEC.  Moreover,           
 the DEC rarely engaged in enforcement, but rather it tried to solve           
 problems.  It did have the authority to issue a notice of                     
 violation, but there was no enforcement power behind it.  If the              
 problem was not corrected, the DEC would then have to decide if               
 enforcement action was necessary.  It did not have administrative             
 powers to take any administrative action, except for the issuance             
 of a compliance order.                                                        
                                                                               
 Number 1432                                                                   
                                                                               
 REPRESENTATIVE OGAN said the DEC did have the power, however, to              
 shut down a business, for example, and possibly impoverish people.            
                                                                               
 Number 1438                                                                   
                                                                               
 MS. BROWN replied the DEC did not have the power without a court              
 order.  The DEC had the power to not give a permit, however, and              
 the individual had the right to appeal.  She reiterated the DEC               
 could not shut down a business once a permit was issued without a             
 court order.                                                                  
                                                                               
 Number 1470                                                                   
                                                                               
 REPRESENTATIVE OGAN said it was hard to pay lawyer fees when the              
 money was not coming in.  He suggested they discuss this issue                
 further at some other time.                                                   
                                                                               
 MS. BROWN said she would like to discuss with Representative Ogan             
 some of his concerns regarding the Mat-Su area.  She explained she            
 tried earlier but their schedules kept conflicting.                           
                                                                               
 Number 1479                                                                   
                                                                               
 CHAIR JAMES said she was extremely impressed with the presentation            
 of Ms. Brown.  She subscribed to the same focus that she mentioned            
 for the DEC regarding regulatory reform.  She was particularly                
 interested in the goal orientation compared to the process                    
 orientation of the department.  Furthermore, she explained "over              
 reach" was needed to make things happen.  In the past that had been           
 accomplished with environmental issues in all areas.  She cited the           
 protection areas had been over reached to the extend that many                
 businesses had been destroyed.  She agreed business was needed for            
 environmental control because it cost money.  If environmental                
 control was insisted to the point that there was not any business             
 then the control "went out the window."  The healthy communities              
 were the ones that had the best environmental controls.                       
 Furthermore, she agreed that the right people were not writing the            
 regulations.  She agreed with the approach of Ms. Brown and the               
 DEC.  She further agreed with the goal orientation approach for               
 more focus and creativity.  She urged Ms. Brown to not get                    
 discouraged.  The old habits would be around for a long time.                 
                                                                               
 Number 1726                                                                   
                                                                               
 REPRESENTATIVE GREEN said he commiserated with the concerns of                
 Representative Ogan's constituents.  He said three years ago he was           
 the biggest adversary of the DEC.  He thought it was mismanaged.              
 Ms. Brown had proven otherwise.  He said it was often forgotten               
 that the DEC was caught between federal edict and the locals that             
 wanted to do something.  He was grateful that the DEC was there to            
 act as a buffer.  Furthermore, the attitude of a department                   
 permeates downwards and he welcomed the attitude of Ms. Brown.  He            
 said it would be impossible for all of Representative Ogan's                  
 constituents to agree with the appointment because they have either           
 been burned or knew somebody that had been burned by the                      
 DEC.  That attitude would probably not go away for decades.                   
                                                                               
 Number 1817                                                                   
                                                                               
 REPRESENTATIVE IVAN IVAN said he had not heard any complaints so              
 far against the DEC.  He cited small business owners were sometimes           
 frustrated because of all the restraints in his district.  He                 
 stated he represented one of the poorest regions in the state as              
 far as resource development was concerned.  He believed the                   
 environmentalists controlled the developmental efforts through big            
 organizations.  The folks from his area were conservationists                 
 because they recycled what they could from the environment and                
 lived with it.                                                                
                                                                               
 REPRESENTATIVE IVAN further stated his district was looking at                
 mining development in the middle-Kuskokwin area.  He asked Ms.                
 Brown how his area would be affected by the changes in the DEC?  He           
 further asked Ms. Brown how the DEC handled mining?                           
                                                                               
 Number 1936                                                                   
                                                                               
 MS. BROWN replied the DEC created a public service division as a              
 part of the reorganization.  The easiest solution would have been             
 to implement a straight line management approach by program.                  
 However, the communities called for generalists to answer questions           
 and to help the public move through the system.  Therefore, a                 
 statewide public services division was created.  The division was             
 to help the small businesses while others could focus on the                  
 permits.  In two areas the DEC had asked the managers to advocate             
 for certain industries creating a workable schedule for everybody             
 involved.  The compliance assistance officer, the hazardous waste             
 hot line, and the hazardous waste program were also part of the               
 public service division.                                                      
                                                                               
 Number 2077                                                                   
                                                                               
 MS. BROWN further replied regarding mining the DEC had tried to               
 work with people for permit avoidance.  If they could avoid waste             
 water discharges they could avoid the entire National Pollution               
 Discharge Elimination System (NPDES) permit process.  Furthermore,            
 memorandums of agreement had been established with the EPA, the               
 applicant, and the DEC to set a time frame.                                   
                                                                               
 MS. BROWN further addressed the coal bed methane issue that                   
 affected Representative Ogan.  She called it a wonderful energy               
 source and could eliminate a lot of the problems with the bulk fuel           
 tanks.  She explained she had asked each of the divisions to report           
 if there was sufficient regulatory authority to analyze the                   
 program.  It was discovered that they were shallow wells,                     
 therefore, there was not a likelihood that oil would be encountered           
 creating little risk.  As a result of the efforts of each division,           
 the DEC would be ready when the program was ready to advance.                 
                                                                               
 Number 2168                                                                   
                                                                               
 REPRESENTATIVE OGAN said he was straying from the issue of the                
 confirmation of Ms. Brown.  However, it was recently brought to his           
 attention that methane gas was also used for the disposal of human            
 waste.  That development would be helpful in Bethel, for example,             
 where disposal was a problem.                                                 
                                                                               
 Number 2204                                                                   
                                                                               
 MS. BROWN replied the DEC wanted to facilitate the program rather             
 than be in the way.  The DEC saw it as a great potential.                     
                                                                               
 Number 2216                                                                   
                                                                               
 CHAIR JAMES said there were many small and old subdivisions in her            
 district using a well and a septic system.  The subdivisions were             
 concerned about being shut down because of tri-chloro-ethelene                
 (TCE).  The DEC knew there was contamination in a near area.  She             
 was concerned about the panic if an unacceptable level of TCE was             
 discovered.                                                                   
 Number 2354                                                                   
                                                                               
 MS. BROWN said the DEC did know years ago that some of the wells              
 were contaminated and informed the individual well owners, but the            
 neighbors were not informed.  Moreover, tests indicated that the              
 plume was moving.  The DEC was caught between telling the people it           
 was moving, or wait until it had more information.  The DEC decided           
 it was necessary to inform the people so that they could make an              
 informed decision.  The people panicked so the DEC worked with the            
 city to form a water district.  Moreover, there was not a lot of              
 attention surrounding subdivision growth and many people took                 
 advantage of by digging shallow wells and causing contamination.              
 It took the cooperation of the community and the DEC to work                  
 together to identify and solve the problems.                                  
                                                                               
 TAPE 96-51, SIDE B                                                            
 Number 0000                                                                   
                                                                               
 CHAIR JAMES replied the people in her district were most affected             
 by the first meeting when the properties of TCE were not explained.           
 As a result, the people were concerned to even water their gardens.           
                                                                               
 Number 0059                                                                   
                                                                               
 MS. BROWN replied she agreed with Chair James regarding the first             
 meeting.  The DEC was working on an agreement with the Department             
 of Health and Social Services to include a representative to                  
 address the health issues.  The DEC had a lot of engineers that               
 focused on the properties of TCE, but that did not address the                
 health concerns of the public.                                                
                                                                               
 Number 0078                                                                   
                                                                               
 CHAIR JAMES said because of the confusion her office employed a               
 private laboratory to analyze the properties of TCE.  The people              
 did no want to believe those results either, however.                         
                                                                               
 CHAIR JAMES said this was the best confirmation hearing that the              
 House State Affairs Committee had ever heard.  It was clear why the           
 members would vote to accept Ms. Brown.  More importantly, the                
 information learned today could be delivered back to the                      
 constituents.                                                                 
                                                                               
 CHAIR JAMES thanked Ms. Brown for her presentation today.                     
                                                                               
 Number 0175                                                                   
                                                                               
 REPRESENTATIVE PORTER moved to adopt the name of Michelle Brown for           
 the position of the Commissioner of the Department of Environmental           
 Conservation.  Hearing no objection, it was so adopted.                       
 HB 545 - PUB. EMPLOYEE COST OF LIVING DIFFERENTIAL                          
 The next order of business to come before the House State Affairs             
 Committee was CSHB 545(STA) (9-GH2067/C).                                     
                                                                               
 CHAIR JAMES explained the committee substitute incorporated the               
 provisions of the allowable absences and the determination of state           
 residency of the permanent fund dividend (PFD) program.                       
                                                                               
 CHAIR JAMES called on Patrick Gullufsen, Department of Law, to                
 further explain the committee substitute.                                     
                                                                               
 PATRICK GULLUFSEN, Assistant Attorney General, Government Affairs             
 Section, Civil Division, Department of Law, explained the                     
 department liked the original bill better.  The department wanted             
 in regulation clarity to decide who was entitled to the cost-of-              
 living differential (COLD).  The committee substitute did give                
 clarity.  However, the department also wanted flexibility to allow            
 the Department of Administration to refine and adjust by regulation           
 in the event the PFD criteria did not fit the needs of the marine             
 highway system.  The committee substitute did not allow that                  
 flexibility.  The department, therefore, crafted an amendment to              
 establish that flexibility.  He explained the department could not            
 regulate away the provisions in a statute, but only clarify the               
 provisions in a statute.  There was a basic philosophical                     
 difference here that might or might not be worked out.                        
                                                                               
 Number 0442                                                                   
                                                                               
 CHAIR JAMES said she expected the department to announce certain              
 provisions did not work today.  She was willing to engage in that             
 type of a discussion and remove the provisions that did not work              
 from the committee substitute.                                                
                                                                               
 Number 0473                                                                   
                                                                               
 REPRESENTATIVE GREEN moved that CSHB 545(STA) (9-GH2067/C) be                 
 adopted for consideration.  Hearing no objection, it was so                   
 adopted.                                                                      
                                                                               
 CHAIR JAMES asked Mr. Gullufsen to identify the areas of concern in           
 the committee substitute.                                                     
                                                                               
 MR. GULLUFSEN referred the committee members to page 8 and page 9,            
 subsections (e), (f), and (g).  The subsections discussed an                  
 absence of five years with no intent to return to Alaska.  This               
 regulation obviously pertained to the PFD worth millions of dollars           
 and a situation where an individual might or might not be working.            
 The COLD on the other hand involved employees of the state and                
 whether of not they should receive the COLD because they were                 
 living in Alaska.  The department suggested deleting the                      
 subsections entirely.                                                         
                                                                               
 Number 0568                                                                   
 REPRESENTATIVE PORTER moved that subsections (e), (f), and (g) on             
 page 8 and page 9 be deleted.  Hearing no objection, they were so             
 deleted.                                                                      
                                                                               
 Number 0598                                                                   
                                                                               
 MR. GULLUFSEN referred the committee members to page 10, subsection           
 (e).  The subsection discussed an individual employed by the state            
 while maintaining a home outside of Alaska.  The COLD was designed            
 to compensate for the higher cost of living in Alaska.  Therefore,            
 the department suggested deleting the subsection entirely.                    
 Furthermore, it would cause problems administering the COLD.                  
                                                                               
 Number 0628                                                                   
                                                                               
 REPRESENTATIVE WILLIS moved that subsection (e) on page 10 be                 
 deleted.  Hearing no objection, it was so deleted.                            
                                                                               
 Number 0638                                                                   
                                                                               
 REPRESENTATIVE PORTER asked if the COLD applied to other                      
 occupations within the state.                                                 
                                                                               
 MR. GULLUFSEN replied it applied to very few other occupations.               
 Mr. Cummings, Department of Transportation and Public Facilities,             
 could answer that question better, however.  He explained it was              
 originally passed and designed to apply to the marine highway                 
 system employees.                                                             
                                                                               
 Number 0672                                                                   
                                                                               
 CHAIR JAMES said there was no way of knowing if other employees               
 were considered for the COLD when it was established.  Therefore,             
 any employee that received a COLD would be affected by this bill.             
                                                                               
 REPRESENTATIVE PORTER said the bill referred to AS 23.40.010.                 
                                                                               
 MR. GULLUFSEN stated AS 23.40.010 did not identify which employees            
 qualified for a COLD.                                                         
                                                                               
 CHAIR JAMES said the COLD pertained to Alaskan residents.  There              
 was discussion that the COLD was an incentive for individuals to              
 move to Alaska.  That was not the case anymore, however.  She                 
 questioned if the COLD was even needed.  Nevertheless, it was part            
 of a union agreement and there would be a lot of objection if it              
 was removed.                                                                  
                                                                               
 MR. GULLUFSEN said the department was not suggesting the COLD be              
 removed.                                                                      
                                                                               
 Number 0742                                                                   
                                                                               
 REPRESENTATIVE IVAN asked Mr. Gullufsen if there were any penalties           
 for receiving a COLD when a person knew he was not entitled to it?            
                                                                               
 Number 0766                                                                   
                                                                               
 CHAIR JAMES replied there were no penalties addressed in the                  
 provisions in the committee substitute.  The department was trying            
 to tighten the criteria, however, so that there was not the                   
 opportunity to receive a COLD when a person was not entitled to it.           
                                                                               
 Number 0825                                                                   
                                                                               
 MR. GULLUFSEN said, if the department had clear criteria, it would            
 have the authority to discipline an employee who abused it.  There            
 was also the ability to take criminal action as long as there was             
 clear criteria for the submission of false information.                       
                                                                               
 Number 0855                                                                   
                                                                               
 REPRESENTATIVE OGAN said the department might have the authority,             
 but it was still at the discretion of the department to exercise              
 that authority.  He said it would be prudent to include a penalty             
 of some type in statute.                                                      
                                                                               
 CHAIR JAMES said the committee would deal with that suggestion                
 later.  She asked Mr. Gullufsen to explain the proposed amendment.            
                                                                               
 Number 0880                                                                   
                                                                               
 MR. GULLUFSEN explained the amendment would be added to Section 2             
 as subsection (c).  "(c) The Department of Administration may adopt           
 regulations under AS 44.62 (Administrative Procedure Act) to the              
 extent necessary to clarify and implement the criteria set out in             
 AS 23.40.195, 23.40.197, and 23.40.198 as applied to employees of             
 the Alaska Marine Highway System."                                            
                                                                               
 Number 0888                                                                   
                                                                               
 REPRESENTATIVE PORTER wondered what the amendment would achieve.              
                                                                               
 Number 0902                                                                   
                                                                               
 MR. GULLUFSEN said the three subsections that were just deleted               
 would have been removed.                                                      
                                                                               
 CHAIR JAMES asked Mr. Gullufsen if the amendment was necessary now            
 that they had been deleted?                                                   
                                                                               
 MR. GULLUFSEN replied, "I think so."  There were still going to be            
 questions when applying the PFD criteria to the COLD, therefore,              
 the authority was still needed to adopt regulations when necessary.           
                                                                               
 Number 0930                                                                   
                                                                               
 REPRESENTATIVE GREEN wondered if by adopting the amendment it                 
 returned the committee substitute back to the original bill.                  
                                                                               
 Number 948                                                                    
                                                                               
 CHAIR JAMES said it could be construed that way.  However, the                
 committee substitute tightened the bill so that the Department of             
 Administration could not undue the specifics in statute.  The                 
 department could, however, adopt regulations to delineate the                 
 process.  She did not agree with writing regulations to clarify the           
 laws, but she did admit there were a certain amount of regulations            
 that were needed to establish a process.                                      
                                                                               
 Number 1022                                                                   
                                                                               
 REPRESENTATIVE GREEN said he thought the intent of the bill was to            
 address the marine highway system.  He was concerned about                    
 including a caveat to write regulations.  He reiterated he wondered           
 if anything had really changed if the amendment was included.                 
                                                                               
 CHAIR JAMES asked Mr. Gullufsen to respond to the concerns of                 
 Representative Green.                                                         
                                                                               
 Number 1062                                                                   
                                                                               
 MR. GULLUFSEN said the Department of Administration would look at             
 the PFD regulations and apply them accordingly.  However, over time           
 the regulations might need to be changed to meet the purpose of the           
 COLD.  He cited the 180 days of allowable absence might now work              
 for a marine highway system employee that was gone for six months,            
 for example.  Therefore, the department wanted the ability to fix             
 that provision through a regulation.  If the provision was                    
 established in law, that ability was taken away, requiring further            
 approval from the legislature.  The department wanted the ability             
 to adopt the PFD regulations to fit the COLD without having to come           
 back to the legislature.  The department was not asking for                   
 regulatory authority over a private business enterprise or a                  
 business activity.  It was asking for broad regulatory authority to           
 increase the salary of those that qualified.                                  
                                                                               
 Number 1195                                                                   
                                                                               
 REPRESENTATIVE PORTER asserted, "lets do one or the other."  Either           
 provide a caveat to allow the Department of Administration to                 
 change the provisions, or cite specifics.  He did not agree with              
 including both.                                                               
                                                                               
 Number 1221                                                                   
                                                                               
 CHAIR JAMES replied the Department of Administration would not have           
 the authority to change a provision if it was in statute.                     
 Therefore, if the department did not want it in the bill it needed            
 to be removed now.                                                            
                                                                               
 Number 1237                                                                   
                                                                               
 MR. GULLUFSEN said the committee substitute would put the 180 days            
 PFD requirement, for example, into statute.  The original bill was            
 short and sweat.  It gave the authority to the Department of                  
 Administration to adopt the PFD regulations to the COLD.  The                 
 committee substitute would put the criteria into statute with no              
 authority to change them through a regulation.  They could only be            
 clarified through a regulation.                                               
                                                                               
 Number 1328                                                                   
                                                                               
 CHAIR JAMES referred the committee members to page 3, line 18 and             
 suggested completing the blank.  She read, "(f) An individual has             
 taken action inconsistent with establishing or maintaining state              
 residency if at any time in the last _____ months, the                        
 individual..."                                                                
                                                                               
 MR. GULLUFSEN proposed completing the blank with the number "12."             
 There was no objection.                                                       
                                                                               
 CHAIR JAMES reiterated her intent today was to allow the department           
 to identify those areas of concern in the committee substitute.               
 She stated the language in the original bill was too broad.  It did           
 not define the criteria.  It left it up to the Department of                  
 Administration to define.  She understood if it was left to                   
 regulations it would return to union negotiations for                         
 clarification.                                                                
                                                                               
 Number 1466                                                                   
                                                                               
 MR. GULLUFSEN said the original bill made it clear that the                   
 Department of Administration would not bargain the issue any more.            
 He confessed Chair James made a good argument, however.  It boiled            
 down to an argument of whether or not the legislature wanted the              
 Administration to have the authority and flexibility, or did it               
 want it to be specified in statute.  The department would prefer to           
 have the flexibility and authority.                                           
                                                                               
 Number 1496                                                                   
                                                                               
 REPRESENTATIVE GREEN asked Mr. Gullufsen how the department would             
 handle an employee's time spent away from home?                               
                                                                               
 Number 1536                                                                   
                                                                               
 MR. GULLUFSEN said the state took the position that if while off              
 the ferry one left the state he was not a resident.  On the other             
 hand, the individual was actually present in Alaska while on the              
 ferry and that time should be counted towards residency.  The issue           
 was in court right now.  A decision had yet to be made, however.              
                                                                               
 Number 1602                                                                   
                                                                               
 REPRESENTATIVE PORTER responded this was why the legislature should           
 not try to write a bill to cover all the contingencies.  He                   
 reiterated the bill should go one way or the other.  He preferred             
 the original bill because it gave specific criteria for the interim           
 period while preparing to adopt the regulations.                              
                                                                               
 Number 1652                                                                   
                                                                               
 CHAIR JAMES said the original bill did not include specifics                  
 either.  She would prefer the department outline the criteria                 
 needed.  If there was a state income tax, it would be very simple             
 to determine who was a resident and who qualified for the cost-of-            
 living differential.  She believed the department did not know what           
 criteria it needed.  Therefore, she did not want to pass a bill               
 that would allow the Administration to draft regulations.  It was             
 too wide open.                                                                
                                                                               
 Number 1753                                                                   
                                                                               
 MR. GULLUFSEN said he understood the concerns of Chair James.  He             
 reiterated the original bill allowed the Department of                        
 Administration to adopt the PFD regulations and work with them.               
 Therefore, the legislature would have to trust its ability to                 
 identify the proper purpose and write regulations that accurately             
 reflected that purpose.  If someone did not like them, he could go            
 to the legislature to change them.  He explained Chair James                  
 preferred the opposite approach of starting with a definite and               
 using the legislature to change the statute to fix the problem.               
                                                                               
 Number 1813                                                                   
                                                                               
 CHAIR JAMES replied the Administration just wanted the authority to           
 fix something unprepared.  She reiterated that was too broad for              
 her.  She agreed there were serious concerns involved and the                 
 legislature should be involved in the process as opposed to just              
 giving the authority to the Administration.                                   
                                                                               
 Number 1862                                                                   
                                                                               
 REPRESENTATIVE GREEN said he was curious to see the draft                     
 regulations.  The legislature wanted to streamline the regulatory             
 process and yet the committee substitute just added a lot of pages            
 to the Alaska Statutes.  He wondered if the committee substitute              
 fixed the problem or exacerbated it.                                          
                                                                               
 Number 1910                                                                   
 CHAIR JAMES said she could write the criteria to meet the COLD in             
 two pages.                                                                    
                                                                               
 Number 1932                                                                   
                                                                               
 REPRESENTATIVE GREEN asked Mr. Gullufsen what he anticipated the              
 regulations would look like?                                                  
                                                                               
 Number 1938                                                                   
                                                                               
 MR. GULLUFSEN replied the PFD regulations would be used over a                
 period of time to see how they worked.  The Administration would              
 immediately look at the 180 days provision and determine how that             
 would affect the COLD program.                                                
                                                                               
 Number 2011                                                                   
                                                                               
 REPRESENTATIVE GREEN said the Administration could through                    
 regulations establish criteria now.  He asked Mr. Gullufsen if the            
 Administration really wanted legislative clout to back up the                 
 criteria?                                                                     
                                                                               
                                                                               
 MR. GULLUFSEN replied, "that's right."  There was the argument that           
 the Administration did not have the regulatory authority to                   
 establish criteria now, however.                                              
                                                                               
 Number 2058                                                                   
                                                                               
 REPRESENTATIVE GREEN asked Mr. Gullufsen where would the                      
 legislative clout be once the regulations were changed by the                 
 Administration?                                                               
                                                                               
 Number 2077                                                                   
                                                                               
 MR. GULLUFSEN replied the clout would be because the legislature              
 told the Administration it could change the regulations.                      
                                                                               
 Number 2116                                                                   
                                                                               
 CHAIR JAMES said there was also a time frame issue involved.  If              
 the original bill was moved an entire year would pass before the              
 Administration decided how to implement the regulations.  She                 
 reiterated the more simple approach would be to define the criteria           
 in statute.  She cited, as an example of a criterion, an employee             
 was expected to live in the state when he was not working on the              
 ferry.  The reasons for an absence would also need to be defined.             
                                                                               
                                                                               
 Number 2218                                                                   
                                                                               
 MR. GULLUFSEN replied the original bill said the Department of                
 Administration adopted the PFD regulations immediately.  Over time,           
 it would determine how to change the regulations to fit the COLD.             
 Therefore, there was not a waiting period.  Furthermore, the PFD              
 criteria had been tested in application and in court.  It was also            
 hoped that they would not be controversial.  The Administration               
 would expect controversy if it was to adopt a new definition of               
 residency.                                                                    
                                                                               
 Number 2347                                                                   
                                                                               
 CHAIR JAMES replied one of the most controversial issues around               
 were the PFD regulations.  The Director, Nanci Jones, said they               
 needed to be fixed because they were not working.  She further said           
 it was not clear to her that the PFD regulations would apply to the           
 COLD because an employment benefit and a residency benefit were not           
 the same.  Furthermore, she wondered how the program would be                 
 affected, if the PFD regulations were changed.                                
                                                                               
 TAPE 96-52, SIDE A                                                            
 Number 0000                                                                   
                                                                               
 CHAIR JAMES wondered again if the PFD regulations were the correct            
 ones to be considering.                                                       
                                                                               
 MR. GULLUFSEN said most of the PFD criteria applied to eligibility            
 for the COLD.                                                                 
                                                                               
 CHAIR JAMES wondered if the original bill allowed the Department of           
 Administration to adopt regulations that would fit the COLD so that           
 this would not be an arbitrated issue again.                                  
                                                                               
 MR. GULLUFSEN replied, "yes."                                                 
                                                                               
 CHAIR JAMES said the real criteria was to write regulations so that           
 they were not negotiable.                                                     
                                                                               
 MR. GULLUFSEN replied, "yes."  The Administration anticipated that            
 the regulations for the COLD would be similar to the PFD                      
 regulations.  He reiterated the original bill did ask for the                 
 authority to establish criteria for the COLD.                                 
                                                                               
                                                                               
 Number 0163                                                                   
                                                                               
 CHAIR JAMES said she was concerned about fixing the problem.  She             
 wondered if the original bill fixed the problem by giving the                 
 Administration the authority to write regulations.                            
                                                                               
 Number 0183                                                                   
                                                                               
 REPRESENTATIVE PORTER said that was not exactly correct.  It was              
 established upon passage of the original bill that the PFD                    
 regulations would be applied immediately.  While over time, the               
 Administration would have the ability to craft those regulations to           
 apply specifically to the marine highway system, and to those that            
 it would affect in the future.                                                
                                                                               
 Number 0236                                                                   
                                                                               
 REPRESENTATIVE OGAN said the issue had been dissected enough.  It             
 was time to "fish or cut bait."                                               
                                                                               
 CHAIR JAMES called on the first witness in Juneau, Bruce Cummings,            
 Department of Transportation and Public Facilities.                           
                                                                               
 Number 0292                                                                   
                                                                               
 BRUCE CUMMINGS, Labor Relations Specialist, Alaska Marine Highway             
 System, Department of Transportation and Public Facilities, said he           
 was here to answer any questions of the committee members.                    
                                                                               
 Number 0308                                                                   
                                                                               
 REPRESENTATIVE PORTER asked Mr. Cummings who the COLD applied to              
 besides the marine highway system employees?                                  
                                                                               
 Number 0313                                                                   
                                                                               
 MR. CUMMINGS replied the state paid most employees based on where             
 they worked rather than where they lived.  There was legislation              
 before the legislature that addressed an employee's duty location,            
 such as, Anchorage or Fairbanks.  In the past there were employees          
 that were stationed in Seattle, for example, that were not                    
 necessarily state residents.  However, the current collective                 
 bargaining law required a pay rate for those residing outside of              
 Alaska for every contract.  The other contracts tied pay into where           
 a person worked rather than where a person lived.  The vessel                 
 employees did not have a fixed duty station, so where they lived              
 was considered their duty station.  For everybody else it was                 
 assumed they lived and worked in the same place.  That was not                
 always true for the vessel employees, however.                                
                                                                               
 Number 0439                                                                   
                                                                               
 CHAIR JAMES responded the COLD was to augment the cost of living              
 based on where a person lived.  Therefore, that would only be for             
 those that did not qualify for a geographic differential.  They               
 were not the same.                                                            
                                                                               
 Number 0467                                                                   
                                                                               
 MR. CUMMINGS replied the intent of the geographic differential and            
 what was in the collective bargaining law was the same.  The                  
 premise was that the employees would be paid at a rate based on               
 where they lived to compensate them for the cost of living in that            
 geographic area.  He cited some of the vessel employees lived down            
 south even though they worked in Alaska.  He further cited AS                 
 23.40.210 required a COLD.                                                    
                                                                               
 Number 0552                                                                   
                                                                               
 REPRESENTATIVE PORTER asked Mr. Cummings what body of law covered             
 a state employee that was transferred to Washington D.C., for                 
 example?                                                                      
                                                                               
 Number 0572                                                                   
                                                                               
 MR. CUMMINGS replied AS 39.27.020, the geographic differential                
 provision.  It stated the employee would receive six steps below              
 the rate of pay for those living in Alaska.  It was different for             
 a temporary relocation assignment, however.                                   
                                                                               
 Number 0636                                                                   
                                                                               
 REPRESENTATIVE PORTER asked if there was anything in statute that             
 would affect the official determination of residency in those                 
 circumstances?                                                                
                                                                               
 Number 0650                                                                   
                                                                               
 MR. CUMMINGS replied, "no."  The other labor agreements addressed             
 where a person was working versus where a person was residing.                
 Therefore, one could work in Seattle, for example, and still                  
 qualify for the PFD because he worked for a state of Alaska field             
 office.                                                                       
                                                                               
 Number 0700                                                                   
                                                                               
 REPRESENTATIVE GREEN asked Mr. Cummings, if a person that worked in           
 Seattle then moved to Alaska and received the COLD, would he                  
 receive a higher rate of pay compared to a person already working             
 and living in Alaska?                                                         
                                                                               
 Number 0729                                                                   
                                                                               
 MR. CUMMINGS replied they would receive the same rate of pay at the           
 time they both lived in Alaska.  The person that started working in           
 Alaska would start at a higher rate of pay, however.                          
                                                                               
 Number 0741                                                                   
                                                                               
 CHAIR JAMES thanked Mr. Cummings for his testimony.  She announced            
 she wanted to talk to the department further before taking any                
 action.  She would reschedule the bill for Tuesday, April 16, 1996,           
 for further action.                                                           
                                                                               
 Number 0766                                                                   
                                                                               
 REPRESENTATIVE OGAN said he agreed with Representative Porter after           
 listing to the deliberations.  He also shared the same aversion               
 towards regulations as Chair James.  However, due to the limited              
 amount of time and the limited amount of information, the                     
 Administration would be better off handling the issues involved.              
                                                                               
 Number 0814                                                                   
                                                                               
 CHAIR JAMES said she was not as concerned about the regulations the           
 bill would create.  She was concerned because the original bill was           
 not specific enough.  The bill should give the Administration                 
 guidelines to help write regulations.                                         
 HB 482 - STATE PROCUREMENT PRACTICES & PROCEDURES                           
                                                                               
 The next order of business to come before the House State Affairs             
 Committee was CSHB 482(L&C) (9-GH2020/C).                                     
                                                                               
 Number 0900                                                                   
                                                                               
 CHAIR JAMES explained her biggest concern regarding HB 482 was the            
 single-source procurement practice.  She was concerned about                  
 eliminating the chance for competition.                                       
                                                                               
 Number 0959                                                                   
                                                                               
 DUGAN PETTY, Director, Central Office, Division of General                    
 Services, Department of Administration, explained current law                 
 required that there was clear and convincing evidence that only one           
 source was available, and that evidence had to be cleared by the              
 chief procurement officer.  A strict interpretation of that                   
 provision in some cases required an agency to expend a lot of time            
 to demonstrate that there was only one source.  The provision                 
 allowed for accountability and a public process.  It further                  
 allowed for a determination to be made using criteria that was less           
 stringent than in current law.  In other words, it would streamline           
 the process.                                                                  
                                                                               
 Number 1111                                                                   
                                                                               
 CHAIR JAMES asked Mr. Petty to respond to the additional provision            
 inserted by the Senate.  She read, "(e) except for procurement of             
 supply services, professional services, or construction services              
 that do not exceed the amount for small procurement under AS                  
 36.33.20(a) as applicable.  The authority to make a determination             
 required by this section may not be delegated even if the authority           
 is to contract is delegated."  She asked Mr. Petty if he had a                
 problem with that language?                                                   
                                                                               
 Number 1145                                                                   
                                                                               
 MR. PETTY replied the department accepted the language in the                 
 Senate version, and would find that language acceptable in the                
 House version as well.  He explained the House version barred the             
 chief procurement officer from delegating that determination,                 
 except for small procurement.                                                 
                                                                               
 Number 1200                                                                   
                                                                               
 REPRESENTATIVE PORTER explained a consideration surrounding the               
 single-source procurement issue was, if the state had a large                 
 investment in a particular manufacturing brand, it could have to              
 change brands.  He wondered if there was enough justification to              
 stay with the initial brand or to change.                                     
                                                                               
 Number 1245                                                                   
                                                                               
 REPRESENTATIVE WILLIS said he agreed with Representative Porter.              
                                                                               
 Number 1253                                                                   
                                                                               
 REPRESENTATIVE GREEN asked Mr. Petty if the determination of why a            
 single-source was chosen would be available to the public?                    
                                                                               
 Number 1271                                                                   
                                                                               
 MR. PETTY replied that determination would be available as public             
 information.  A report was kept of alternative procurement.                   
                                                                               
 Number 1311                                                                   
                                                                               
 CHAIR JAMES asked Mr. Petty how the department would handle the               
 concerns of Representative Porter?                                            
                                                                               
 Number 1325                                                                   
                                                                               
 MR. PETTY said Representative Porter made a good point.  His                  
 concerns were seen more in the leasing arena.  A competitive                  
 process would be initiated even though there was a clear indication           
 of a single-source.  Unfortunately, this could result in higher               
 prices than what could be negotiated.                                         
                                                                               
 Number 1416                                                                   
                                                                               
 CHAIR JAMES said she understood that process.  She wondered how HB
 482 would change that process.                                                
                                                                               
 MR. PETTY replied HB 482 would allow for the interjection of common           
 sense.  It would allow for the determination if a bid process was             
 not practical in written format.  The information would be a matter           
 of the public record.                                                         
 Number 1463                                                                   
                                                                               
 CHAIR JAMES said she had seen many times people manipulate the                
 system to get what they wanted.  There was a problem when the                 
 public perceived a transaction that benefited a friend, for                   
 example.  According to Mr. Petty there would be documentation on              
 file to clear any mis-perception, however.                                    
                                                                               
 Number 1535                                                                   
                                                                               
 MR. PETTY stated the language in the Senate version held the chief            
 procurement officer accountable for that determination.  If he                
 knowingly made a false statement, he was guilty of a class A                  
 misdemeanor.  The intent was to include accountability.                       
                                                                               
 Number 1595                                                                   
                                                                               
 CHAIR JAMES said it was important that the state get the best deal            
 possible while at the same time protect the public process.                   
                                                                               
 CHAIR JAMES asked the committee members if the same provision that            
 the Senate included should also be included in the House bill?                
                                                                               
 Number 1628                                                                   
                                                                               
 REPRESENTATIVE PORTER said it was not an unreasonable requirement             
 to have the person in charge of the process be accountable.                   
                                                                               
 Number 1678                                                                   
                                                                               
 REPRESENTATIVE PORTER moved to inserted the same language as in the           
 Senate bill as subsection (e).  Hearing no objection, it was so               
 inserted.  (Amendment 1)                                                      
                                                                               
 Number 1737                                                                   
                                                                               
 CHAIR JAMES announced she had one more concern.  She referred the             
 committee members to Sections 6 and 7, the lease-purchase option.             
 She said a lease-purchase would cost the state more money because             
 it would pay over a period of time for the purchase of the                    
 property.  Therefore, she suggested including a length of time                
 provision.  She was not concerned about the maintenance during the            
 lease, but rather after the purchase.  The state was not willing to           
 fund deferred maintenance.                                                    
                                                                               
 Number 1808                                                                   
                                                                               
 MR. PETTY said he shared the concerns of Chair James regarding the            
 deferred maintenance situation in the state.  The Administration              
 was working on a solution.  It was beyond the scope of HB 482,                
 however.  He also believed the state did not handle leasing well.             
 He cited the Department of Labor building was leased in 1982 at               
 $1.95 per s.f., and in 1996 at $2.32 per s.f., including full                 
 service.  The state had paid in total in excess of $22,000,000 for            
 the building.  Moreover, in Juneau a new school would cost                    
 approximately $165 per s.f., and the capital cost would be                    
 $9,811,000.  Therefore, the state could have bought the Department            
 of Labor building a couple of times.  The state could have owned              
 that building and saved money.  If a lease-purchase agreement was             
 entered into appropriately, it could save the state money.                    
                                                                               
 Number 1986                                                                   
                                                                               
 CHAIR JAMES said she agreed with everything Mr. Petty said.                   
 However, no one wanted to pay the on-going maintenance charges.               
 She was willing to move the bill forward, however.  She stated                
 there was over $1 billion of deferred maintenance for public                  
 facilities that was not being addressed.                                      
                                                                               
 Number 2027                                                                   
                                                                               
 REPRESENTATIVE GREEN asked if the problem could be avoided if the             
 language "including maintenance" was added?                                   
                                                                               
 Number 2038                                                                   
                                                                               
 CHAIR JAMES said the language was not necessary because lease-                
 purchase agreements almost always included maintenance.                       
                                                                               
 REPRESENTATIVE GREEN said the language would do away with the term            
 "almost."                                                                     
                                                                               
 CHAIR JAMES said the issue could not be fixed in HB 482.  It was a            
 problem after the state purchased the facility.                               
                                                                               
 Number 2077                                                                   
                                                                               
 REPRESENTATIVE OGAN asked Mr. Petty how the bill changed the                  
 authority of the department regarding the lease-purchase authority?           
                                                                               
 Number 2087                                                                   
                                                                               
 MR. PETTY replied the Department of Administration was currently              
 granted authority under AS 36.30.085 to enter into a lease-purchase           
 agreement.  The amount was not restricted, except for real property           
 that required the Administration to notify the legislature.                   
                                                                               
 Number 2129                                                                   
                                                                               
 REPRESENTATIVE OGAN said he was the author of a lease-purchase bill           
 this year, therefore, he was hesitant to stray from the current               
 policy.  He did not want to lose the legislative approval.  The               
 language was included for good reasons.  Otherwise it was a capital           
 expenditure without the vote of the people.                                   
 Number 2161                                                                   
                                                                               
 REPRESENTATIVE GREEN asked Mr. Petty if the state had ever                    
 exercised a lease option?                                                     
                                                                               
 Number 2168                                                                   
                                                                               
 MR. PETTY replied, "yes."  He cited the Seward Skill Center, the              
 Spring Creek Prison, the Court Plaza Building, and the Anchorage              
 Times Building.                                                               
                                                                               
 REPRESENTATIVE GREEN asked Mr. Petty if the state had purchased any           
 of the above cited buildings of which repair maintenance was                  
 required?                                                                     
                                                                               
 Number 2197                                                                   
                                                                               
 MR. PETTY replied the Court Plaza Building was under lease to the             
 state of which a portion was transferred to the Department of                 
 Transportation and Public Facilities to maintain it.                          
                                                                               
 Number 2228                                                                   
                                                                               
 REPRESENTATIVE GREEN said liability was another issue to address              
 before purchasing a facility.                                                 
                                                                               
 Number 2243                                                                   
                                                                               
 REPRESENTATIVE PORTER wondered if the state was precluded from                
 entering into an agreement if it was based on legislative approval            
 during the interim.                                                           
                                                                               
 Number 2264                                                                   
                                                                               
 MR. PETTY replied the state was not precluded from entering into a            
 congenial purchase agreement.  There was the possibility of loosing           
 a lease due to timing, however.  It would turn into a political               
 issue.                                                                        
                                                                               
 Number 2289                                                                   
                                                                               
 CHAIR JAMES said there were always two parties in a lease-purchase            
 agreement.  Timing was critical so it was possible that legislative           
 approval would stall a deal.  Moreover, if the state was ever going           
 to control its spending, a cooperative effort between the                     
 Administration and the legislature was necessary.  She did not want           
 to give up everything, however.                                               
                                                                               
 Number 2355                                                                   
                                                                               
 REPRESENTATIVE GREEN wondered if the rent would be higher to the              
 state in a lease-purchase option.                                             
 Number 2379                                                                   
                                                                               
 MR. PETTY replied that was not always the case.  A lessor could               
 take advantage of tax exemptions if the state occupied most of the            
 building, for example.                                                        
                                                                               
 Number 2400                                                                   
                                                                               
 REPRESENTATIVE GREEN said he was concerned about the state entering           
 into a lease-purchase option during the interim.                              
                                                                               
 MR. PETTY said a contingent offer was not popular for a seller.               
 There were some that would work and probably some that would not              
 work.  It was hard to say, however.                                           
                                                                               
 Number 2461                                                                   
                                                                               
 REPRESENTATIVE OGAN moved to delete the underlined language in                
 Sections 6 and 7, "with an annual rent to the department,                    
 University of Alaska, legislative council, or supreme court that is           
 anticipated to exceed $500,000, or with total lease payments that             
 exceed $2,500,000 for the full term of the lease-purchase                     
 agreement."  He was not comfortable giving the department, Board of          
 Regents, legislative council, or supreme court a "blank check" to             
 purchase property without legislative approval.                               
                                                                               
 Number 2494                                                                   
                                                                               
 MR. PETTY said the Sections gave the Administration the ability to            
 take advantage of a good business opportunity.  The motion would              
 restrict the Administration and the opportunity to reduce the cost            
 of government operations.                                                     
                                                                               
 TAPE 96-52, SIDE B                                                            
 Number 0023                                                                   
                                                                               
 REPRESENTATIVE GREEN said he opposed the motion.                              
                                                                               
 Number 0030                                                                   
                                                                               
 REPRESENTATIVE OGAN reiterated he was the author of a lease-                  
 purchase bill this year.  It passed the House and was now in the              
 Senate.  He explained the bill was committing this legislature and            
 the budget in the future to spend a certain amount of money on a              
 capital purchase.  He was not against the state entering into a               
 good deal.  He reiterated the legislature should not be left out of           
 the approval process.                                                         
                                                                               
 Number 0096                                                                   
                                                                               
 REPRESENTATIVE IVAN wondered if the Department of Administration              
 would notify the legislature through the budget process if it was             
 to enter into a purchase agreement.                                           
                                                                               
 Number 0111                                                                   
                                                                               
 CHAIR JAMES said the state would enter into a lease-purchase                  
 agreement to obtain different space, for example, of which would be           
 presented in the budget process.  The state would also enter into             
 a lease-purchase agreement to obtain additional space, of which               
 would also be presented in the budget process.  However, there were           
 times when the legislature was not included in the decision.  She             
 visualized there would be times that an opportunity would be missed           
 during the interim period.  She also agreed with the concerns of              
 Representative Ogan.  She could see both sides.                               
                                                                               
 Number 0240                                                                   
                                                                               
 REPRESENTATIVE PORTER wondered if by reducing the numbers the issue           
 would be resolved.                                                            
                                                                               
 Number 0251                                                                   
                                                                               
 MR. PETTY said the Administration selected the numbers because they           
 were the threshold requirements for notice on the operating side.             
 They were on the minimal side now.  The larger lease-purchase                 
 agreements would still come to the legislature for approval.                  
                                                                               
 Number 0316                                                                   
                                                                               
 MR. PETTY further stated that any lease-purchase transaction must             
 have a subject to funding clause included.                                    
                                                                               
 CHAIR JAMES replied that clause had a different meaning for                   
 different people.  A subject to funding clause scared some, and for           
 others it was considered a boiler plate.                                      
                                                                               
 CHAIR JAMES called for a roll call vote.  Representatives Green,              
 Ivan, Porter and Willis voted against the motion.  Representatives            
 Ogan and James voted in favor of the motion.  The motion failed.              
                                                                               
 Number 0396                                                                   
                                                                               
 REPRESENTATIVE PORTER moved to adopt CSHB 482(L&C) (9-GH2020/C) for           
 consideration.  Hearing no objection, it was so adopted.  The                 
 previous Amendment was included creating CSHB (STA).                          
                                                                               
 Number 0412                                                                   
                                                                               
 REPRESENTATIVE IVAN moved that CSHB 482(STA) move from the                    
 committee with individual recommendations and attached fiscal                 
 notes.  Hearing no objection, it was so moved from the House State            
 Affairs Committee.                                                            
 CHAIR JAMES asked that HB 490 be waived from the House State                  
 Affairs Committee.  Hearing no objection, it was so waived.                   
                                                                               
 Number 0433                                                                   
                                                                               
 ADJOURNMENT                                                                   
                                                                               
 CHAIR JAMES adjourned the House State Affairs Committee meeting at            
 12:37 p.m.                                                                    
                                                                               
                                                                               

Document Name Date/Time Subjects