Legislature(1995 - 1996)
04/13/1996 10:04 AM STA
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
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.