Legislature(1993 - 1994)
02/08/1993 09:05 AM Senate FIN
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* first hearing in first committee of referral
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MINUTES
SENATE FINANCE COMMITTEE
February 8, 1993
9:05 a.m.
TAPES
SFC-93, #14, Side 2 (561-001)
SFC-93, #16, Side 1 (561-001)
SFC-93, #16, Side 2 (001-561)
CALL TO ORDER
Senator Drue Pearce, Co-chair, convened the meeting at
approximately 9:05 a.m.
PRESENT
In addition to Co-chairs Pearce and Frank, Senators Kelly,
Kerttula, and Sharp were present. Senator Rieger arrived
while the meeting was in progress. Senator Jacko was not
present.
ALSO ATTENDING:
Director Gary Bader, Administrative Services, Director Karen
R. Crane, Libraries, Archives & Museums, George Smith,
Deputy Director, Libraries, Archives & Museums, Mary Lou
Madden, Assistant Director, Postsecondary Education
Commission, and Doug Hanon, Finance Officer, Postsecondary
Education Commission, Department of Education; Judy DeSpain,
Deputy Director, Ray Utter, Administrative Manager, AHFC,
and Barry Hulin, Executive Director, ASHA, Department of
Revenue; Mike Greany, Director, and Karen Rehfeld, Fiscal
Analyst, Legislative Finance Division; and aides to
committee members.
SUMMARY INFORMATION
SB 50 - An Act making appropriations for capital
projects; and providing for an effective
date.
Budget Overviews were conducted for the following
departments:
Department of Education
Department of Revenue
Overview by the Department of Education
C0-CHAIR DRUE PEARCE invited Gary Bader, Director,
Administrative Services, to join members at the committee
table and proceed with the Administrative Services
presentation. Co-chair Pearce asked Mr. Bader to outline
departmental requests and not deal with the list of school
requests.
GARY BADER said the first request was in the amount of
$350.0 for State library materials and equipment. Because
of higher costs for magazines and periodicals, the library
had lost 75 percent of its purchasing power over the last
nine years. He felt this funding would purchase a core
collection of materials for research needs.
In answer to an inquiry by Co-chair Steve Frank, KAREN
CRANE, Director, Libraries, Archives & Museums, answered
that funding was $200.0 last year, and the year prior,
$250.0. She said the library had additional needs this
coming year and no money was available in the operating
budget for these acquisitions.
The next priority was a request for the implementation of a
pilot project for a statewide data management system in the
amount of $100.0. Mr. Bader explained a planning session
had been held in Anchorage in October 1991 with DOA, DOE and
private sector representatives in order to work out a
cooperative plan for linking existing state systems whenever
possible.
Mr. Bader stated the next request was for major maintenance
to the Alaska Vocational Technical Center at Seward for a
cost of $236.8. Projects included improvement of the
dormitory area, replacement of the gym floor, renovation of
the mechanics area, redesign of the food service scullery
area, providing ADA requirements, and the removal of the
drilling rig. Discussion followed between Co-chair Frank
and Senator Kerttula regarding the removal of the drilling
rig. Mr. Bader agreed to have the director fax a letter
explaining the removal of the drilling rig. GEORGE SMITH,
Deputy Director, Libraries, Archives & Museums, Division of
Education, explained the drilling rig was going to be moved
to the outside and the area it had occupied inside could be
used for other programs.
Mr. Bader addressed the request for $290.0 for an upgrade
from magnetic storage to micro image optical system. The
magnetic storage in present use is predicted to be full in a
year. The teacher certification records are kept on this
system.
The next project request was for $213.7 for equipment
purchases in the Alaska Vocational Technical Center.
Programs enhanced would be the mechanic's program, building
maintenance and training department, food service, and
library materials. Co-chair Frank asked if the department
would list specific equipment rather than examples. In
answer, Mr. Bader listed dollars dedicated for specific
items - $14,400 would be spent on building maintenance and
training, $15,000 in the food service program, $28,500 in
fisheries, $10,000 for the library, $50,000 in mechanical
training, $80,000 in administration and $15,800 in the
forestry department. He agreed to supply a specific list of
items for the allocated funds.
Mr. Bader directed attention to a request for $140.0 for the
public library construction fund. The federal money
expected to be received was $140.0 and these funds would be
allocated to various libraries around the state. These
funds must be matched by 55 percent of local funds.
The last request was for stabilization of the museum
environment in the amount of $809.5. In FY 1991, $880.0 had
already been appropriated for this project but was not
sufficient to complete it. He said the estimate by DOT for
completion of the project was $1,064.3. SENATOR TIM KELLY
asked what the original amount of the request was in 1991.
Mr. Bader answered $900.0 was the 1991 DOT estimate.
Senator Kelly inquired again why the original estimate was
half the cost of the project.
George Smith stated in 1991, DOT estimated the cost of the
entire project to be $900.0. When the project was put out
to bid, the cost was found to be approximately $1.5M. DOT,
rather than scrapping the project, went ahead with Phase I,
using the money appropriated by the legislature. He
admitted the cost of construction was more than 50 percent
higher than the estimate by DOT. Discussion followed
between Co-chairs Frank, Pearce, Senators Kelly and Kerttula
regarding the discrepancy of DOT's estimates and the cost of
construction, not only for this project but in general. Co-
chair Pearce asked the department to supply copies of the
paperwork by DOT of the estimate and the actual cost of
construction for the museum. Mr. Smith also agreed to let
the committee know what would be done now that the Governor
had reduced the project request from $1,064.3 to $809.5
Co-chair Pearce asked Senator Sharp if a hearing had been
held on EO 87 that transferred facilities maintenance into a
new division in DOT. SENATOR BERT SHARP answered
affirmatively that one hearing had been held but he had not
received a request to move it to the next committee. Co-
chair Pearce asked Senator Pearce if he would move EO 87 on
to the Senate Finance committee.
Co-chair Pearce invited Mary Lou Madden, Assistant Director,
and Doug Hanon, Finance Officer, Postsecondary Education
Commission, Department of Education, to join members at the
committee table and proceed with the postsecondary education
presentation.
SENATOR JAY KERTTULA inquired about the priorities of the
largest capital construction projects. Co-chair Pearce
answered that Senator Rieger would hear those projects in
H&SS committee meetings and within departmental subcommittee
meetings.
DOUG HANON pointed out the focus of the department's request
was to improve staff productivity. In answer to Co-chair's
Pearce's inquiry, he answered there were 92 staff and 18
additional temporary staff who were being terminated on June
30, 1993.
Mr. Hanon stated the first capital project request was for
the intelligent phone dialing system in the amount of
$200.0. The automatic dialing system would dial borrowers
who are 30, 60 and 90 days past due on their accounts.
Discussion followed between Senators Kerttula and Kelly
regarding the difficulty of reaching staff in the
postsecondary education department and the high cost of this
system that would not address the incoming call problem.
MARY LOU MADDEN said ten staff and ten lines to the phone
system had been added to address the problem of incoming
calls. She said the automatic phone system would be used
only for dialing out-going phone numbers of borrowers who
were on the verge of default.
Mr. Hanon said over 1,000 accounts were brought up to date
last year when three temporary employees were hired to reach
past due borrowers. He explained this phone system would
help reduce their default rate which impacts the cost of
money needed by the department for additional student loans.
Co-chair Frank asked if the department's computer system
automatically mailed an 8-day or a 15-day notice to past due
borrowers. Mr. Hanon replied the system could be
reprogrammed to do that but at this time it only mailed a
30-day late notice. Ms. Madden explained that the billing
system was not working correctly but authority was going to
be given to the department to charge a late fee and a 15-day
late notice could also be mailed.
End SFC-93 #14, Side 2
Begin SFC-93 #16, Side 1
Co-chair Frank asked when the automatic phone system reached
the borrower would that call be given to any particular
staff person. Ms. Madden answered staff were assigned
particular collection accounts and the phone system would
connect the delinquent borrower to the assigned staff
person. She said the phone system was going to cut down on
staff time by actually dialing numbers and estimated staff
productivity could be increased three times. Senator Kelly
failed to believe productivity would be increased three
times.
Discussion followed between Co-chairs Pearce, Frank, and Ms.
Madden regarding the computer system and its failure to be
used successfully by postsecondary education. Ms. Madden
indicated in July 1991, when files had been transferred to
the new system, 10-11,000 loans had not transferred
correctly. Many staff hours had been used to correct this
situation. Mr. Hanon agreed there were problems in the
system and steps were being taken to resolve them including
getting the payment notice out correctly, initiating a 15-
day late notice and turning overdue accounts over for
collection.
Ms. Madden, in answer to Co-chair Frank's question, said
approximately 70 of the staff worked with loans and 18 of
those handled overdue accounts. She explained a family loan
was a loan a parent or other family member took out on
behalf of the student. It had a lower interest rate with
payments beginning a month after receiving the loan.
Ms. Madden said the computer enhancement in the amount of
$250.0 was for additions to the existing computer system.
She indicated that the system did generate a 30-day notice
and could generate a 15-day notice if reprogrammed. This
upgrade would include loan origination fees, automatic
deferment, and forgiveness processes.
SENATOR BERT SHARP asked when the first payment was due once
a long was funded. Ms. Madden explained that could vary
depending upon the student's decision to continue his/her
education. She explained the loan provided for a grace
period of a year after a student left school. Therefore,
students could receive a deferment from payments as long as
they attended school or were in the military or peace corps.
She indicated a school usually sent notification if a
student dropped out. About halfway through the grace year,
the department mails out a notice that a payments will begin
in six months.
Ms. Madden, in answer to Co-chair Frank's question, said the
computer company had gone bankrupt that had put together the
original system in 1991. She said the department had one
programmer on staff who was able to do system enhancements
but was unable to because of the day to day workload. Co-
chair Frank interpreted the $250.0 request to equal three
programmers full time for one year to accomplish the
requested enhancements. Ms. Madden explained the request
had not been put out to bid and this was an estimate. Co-
chairs Frank and Pearce felt the request was too high for
the project outlined.
Co-chair Pearce asked Ms. Madden and Mr. Hanon to provide
the committee with information regarding the original RFP
that provided for the computer upgrade in 1991 and how
postsecondary education had arranged payment to the company
that went bankrupt. Co-chair Frank asked the programmer for
postsecondary education to appear before the committee,
explain the computer enhancement request and the high cost.
Mr. Hanon directed attention to the last request in the
amount of $50.0 to provide a study to determine if the
agency's records should be replaced with an electronic
imaging system. This study would be done in conjunction
with the Department of Administration.
Recess 10:13am
Reconvene 10:15am
Overview by the Department of Revenue
Co-Chair Pearce invited Barry Hulin, Executive Director,
Alaska Housing Finance Corp., Judy DeSpain, Deputy Director,
and Ray Utter, Administrative Manager, Alaska State Housing
Authority, Department of Revenue, to join members at the
committee table and proceed with the department
presentation.
BARRY HULIN reported that ten years had gone by since Alaska
Housing had submitted a capital budget to the legislation.
The capital budget now presented was a result of the merger
with ASHA and transfer of programs from DC&RA.
RAY UTTER explained most of the programs were a continuation
from the old DC&RA budget. The first program was low income
weatherization which provided statewide weatherization for
low income people. He explained it was a federal based
program and the state expected to receive $1.6M in federal
receipts and Alaska Housing Finance Corp. (AHFC) would add
approximately $5M, about $1.5M more than what had been spent
in previous years.
Senator Kelly asked why AHFC was coming before the Senate
Finance Committee. Mr. Hulin said the department was now
under the Department of Revenue and any capital budget
requests had to come before the legislature. Senator Kelly
confirmed that AHFC was asking for authority to spend their
own money. Mr. Utter said they needed authority to spend
federal dollars as well.
Co-chair Pearce asked if the income guidelines for the state
matched low income federal guidelines for other programs.
Mr. Utter answered affirmatively.
Mr. Utter directed attention to the Warm Homes for Alaskans
program. This program included the Alaska Craftsman Home
Program, Energy Rated Homes of Alaska and formed a
partnership between the state and the private sector. Co-
chair Pearce asked how this compared with last year's
funding. Mr. Utter answered the funding was approximately
the same, $500.0. He was pleased to announce Alaska was a
leader in the weatherization area. The Chief of Energy
Programs had been invited to a panel in London consisting of
energy experts. He pointed out this program had helped
improve the quality of homes around the state which was a
major problem.
End SFC-93 #16, Side 1
Begin SFC-93 #16, Side 2
Co-chair Frank asked for an explanation of the Supplemental
Housing program. Mr. Hulin said this long standing federal
program had come with the merger and matched federal funds
that come from HUD to the Regional Housing Authorities for
housing projects. Through this program a match of up to 20
percent of the money would be provided for roads, sewer,
water and electric hookup for those projects. He explained,
historically, when HUD gave the Regional Housing Authority
money it was never enough to complete any given project. He
said it leveraged about 5-1 federal dollars.
Co-chair Frank confirmed, that for the first time, the state
would be using almost $10M of HFC's equity to fund what had
been funded out of the general fund and asked what the
general fund appropriations had been in prior years. Mr.
Hulin answered in FY 93 it was $8.2M.
(There is no tape available for the next portion of the
meeting.)
Co-chair Frank asked for a report listing the subsidy
programs and what money had been spent out of the AHFC
reserves.
Senator Sharp questioned the commingling of AHFC and HUD
funds, and asked whether any loans were available to the
senior housing program. Mr. Hulin agreed that federal
restrictions came along with federal funds and that projects
would not pencil out in the black without subsidies.
In answer to SENATOR STEVE RIEGER, Mr. Hulin said the
whereabouts for 1994 projects is unknown at this time.
Senator Rieger felt AHFC should have some knowledge of
upcoming projects especially if they wanted the legislature
to approve a large appropriation.
(Tape is available for the rest of the meeting.)
Discussion followed between Co-chair Frank and Mr. Hulin
regarding an arbitrage refunding transaction that occurred
a year ago December. Co-chair Frank confirmed that this
circumstance was new, and the money must be loaned at below
market to avoid paying federal income taxes and that this
was not due to the merger. Mr. Hulin said programs were in
the process of being identified that could be loaned this
arbitrage money at less than market rate. Mr. Hulin
indicated one possibility was to join with the Regional
Housing Authority and form a lower rate loan pool for rural
and other deserving areas.
Co-chair Frank asked if the weatherization program had been
accomplished through non-general fund sources over the past
several years. Mr. Utter answered that the funds came from
the old Exxon overcharge fund. Mr. Utter also indicated the
original money set aside for weatherization had been
expended.
Mr. Hulin stated that the department would like to take a
longer term approach to housing problems. For instance, it
takes approximately $220M to heat homes in the state. He
felt if this problem was addressed at construction, a big
savings could be accomplished. He hoped the legislature
would support that kind of approach.
Co-chair Frank felt that dealing with HFC over the years had
been a tug-of-war relationship. He indicated this $17M was
a change of posture from prior years. He also wanted a
better understanding of HFC's capability of income for use
in other housing programs.
Mr. Hulin indicated that $220M was given over to the general
fund for FY 93 and has had an impact on the corporation's
liquidity. Cash versus assets was an interesting concept
for AHFC. With the merger and the mandate of the board, the
corporation was making an effort to become more forthcoming
with funding. He said the programs that came from DC&RA are
an integral part of housing and the AHFC felt it should
support those programs.
Co-chair Frank indicated that it was appropriate for the
state's assets to be spent through the legislative
appropriations process but he wanted the legislature to know
what AHFC's total capabilities were in regard to subsidy
programs and contributing funds to the general fund.
Senator Kelly asked if there had been any downsizing in
regard to employees since the merger. Mr. Hulin said 9 or
10 higher paid positions had been eliminated. He said this
budget did not include public housing. At the present time,
the accounting and data processing department were being
merged. He suspected over time there would be more
reductions. There were 28 offices around the state and
those would not be eliminated but were primarily paid for by
HUD. He indicated most of the consolidation is being done
in Anchorage.
Co-chair Pearce announced that there was interest in
obtaining the Cambridge Energy Research Associates oil
pricing information again this year. For the first time,
the House had agreed to pay half of the $17,500 fee. She
said since the Senate's half would be over the $5,000 limit,
even with a 10 percent discount, the committee would have to
approve the expenditure.
Senator Kelly moved to approve the Cambridge Energy Research
Associates contract. Co-chair Frank objected to the motion
for purposes of discussion. Senator Kelly withdrew his
motion. Co-chair Pearce announced the Cambridge contract
would be discussed on Monday, February 15, 1993.
ADJOURNMENT
The meeting was adjourned at approximately 10:55 a.m.
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