Legislature(1997 - 1998)
03/18/1998 09:20 AM Senate FIN
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
MINUTES SENATE FINANCE COMMITTEE 18 March 1998 9:20 a.m. TAPES SFC-98, #80, Sides A and B CALL TO ORDER Senator Bert Sharp, Co-chairman, convened the meeting at approximately 9:20 a.m. PRESENT In addition to Co-chairman Sharp, Senators Phillips, Donley, Torgerson and Adams were present. Also Attending: Senator Jerry Ward; Representative Eldon Mulder; Clarke Gruening; Marilyn Wilson, staff to Senator Bert Sharp; Jack Fargnoli, Senior Policy Analyst, Automated Budget Development Project, Office of Management and Budget; Jim Baldwin, Assistant Attorney General, Department of Law; Richard Vitale, staff to Senator Parnell; Tam Cook, Director, Legal Services, Legislative Affairs Agency; Margaret Pugh, Commissioner, Department of Corrections; Margo Knuth, Assistant Attorney General, Department of Law; Glenn Wright, Mayor of Delta Junction; Doris Fales, Delta Junction Coalition; Ray Woodruff, Executive Director, Delta Junction Coalition; Col. Dave Anderson, Post Commander, Fort Greely; J. Frank Prewitt, President and CEO, Allvest, Inc.; Mr. Chilters; Bob LaResche; and aides to committee members and other legislative members. via Teleconference: Pat Poland, Director, Division of Municipal and Regional Assistance, Department of Community and Regional Affairs from Anchorage; Steve Van Sant, State Assessor, Department of Community and Regional Affairs from Anchorage. SUMMARY INFORMATION SENATE BILL NO. 337 "An Act relating to the mandatory incorporation of certain boroughs in the unorganized borough and to certain third class boroughs; and providing for an effective date." Co-chair Sharp convened the committee meeting and reviewed the agenda. He noted that the evening meeting on SB 337 for the taking of public testimony was scheduled for 6:00 p.m. LIO participation at this hearing was "listen only" and included Anchorage, Delta, Fairbanks, Tok, Kenai and also off-net radio. However, HB 53 would include public testimony via teleconference. Marilyn Wilson, staff to co-chair Sharp was invited to join the committee. She read a short sponsor statement to SCR 11 into the record. It was noted that as Alaska's senior community grew it was necessary to plan for the long-term care and needs of these citizens. The cost of providing long-term care is becoming insurmountable to the State and to private citizens. SCR 11 would create a long-term care task force with a mission to review the findings of the working group established in 1996 and to develop an equitable plan to provide a sound and affordable long-term care option for all Alaska's senior citizens. It was urged the committee pass SCR 11. Senator Torgerson MOVED amendment #1 and WITHOUT OBJECTION it was ADOPTED. Senator Adams MOVED amendment #2. Co-chair Sharp requested that some line numbers be inserted on page three line fifteen and Senator Adams concurred. (pause on record) Senator Donley OBJECTED for discussion purposes. Senator Adams said rural elders were being moved into Anchorage and basically the services needed to be coordinated. He wanted a review of the existing elder care services in rural Alaska to make it compatible with the pioneer home system. Senator Donley voiced his concern with the setting up of a task force under the Administration because he felt they grasped for something that was not originally intended by the Legislature or statutes. Senator Parnell voiced his concern along similar lines. He recommended the deletion of "rural" because the care should be provided all elders throughout the State. Senator Phillips MOVED amended amendment #2 to delete after "demands" and insert "." WITHOUT OBJECTION it was ADOPTED. Senator Donley MOVED amended amendment #2 to delete "rural" and insert "including rural Alaska". WITHOUT OBJECTION it was ADOPTED. Co-chair Sharp asked the committee if there was any objection to amended amendment #2 and WITHOUT OBJECTION it was ADOPTED. Senator Phillips MOVED amendment #3 and referred to page two, line twenty-one. Senator Adams requested the amendment be submitted in writing. Senator Phillips indicated that he would have the drafters come up with the appropriate amendment #3 to be submitted on the Senate Floor. There being no objection, Senator Phillips MOVED SCR 11(FIN) out of committee and WITHOUT OBJECTION it was REPORTED OUT with included conceptual amendment #3 and accompanying fiscal notes: LAA/Leg. Council, $20.7; Gov./Exec.Operation, zero; and Department of Commerce and Economic Development, zero. SENATE BILL NO. 76 "An Act relating to long-term plans of certain state agencies and recommendations regarding elimination of duplication in state agency functions." CS FOR SENATE BILL NO. 76(STA) "An Act relating to results-based government and the state budget; relating to state agency program and financial plans; relating to the withholding or reduction of appropriations to a state agency; and relating to state agency performance and other reports." Co-chair Sharp invited Senator Parnell to review his sponsor statement for the committee. Senator Parnell said under this legislation the Legislature would establish policy by issuing mission statements and desired results for each State agency to achieve. The results would be reported quarterly to the Legislature for continuity and effective oversight. The bill would enable government to be more responsive to the needs and priorities of Alaskans. Senator Adams referred to page one, lines nine and ten, lines eleven and twelve of CSSB 76(STA). He said one should take a look at what other States are doing and noted that this type of performance does not work. He felt this was premature and felt the executive budget accomplished what was trying to be set out in missions and measures. He further felt it would not work for all agencies. Senator Parnell responded and said they have done far more with the budget discussions and mission statements and found them to be very useful. Senator Adams referred to page three, line thirty-one and quoted: "The copies shall be accompanied by a statement of "Truth in Budgeting prepared under (e) of this section.". He felt the public should be informed of what this meant. He said the Administration should put a fair budget before the public. The Legislature, who has the appropriation powers, should also be included in "truth and budgeting". Senator Phillips responded to Senator Phillips and explained how public policy is measured. Jack Fargnoli, Senior Policy Analyst, Automated Budget Development Project, Office of Management and Budget was invited to join the committee. He noted the importance of this bill to Ms. McConnell, Director, Office of Management and Budget and Governor Knowles. He noted much effort spent working on this piece of legislation and also with Senator Parnell. He said they agreed basically with everything in the bill and the intent of the sponsor. The only difference was with respect to the timing of it. Mr. Fargnoli said they wanted to work out a few operational concerns with the bill so there would be no disruption to anyone. He told the committee that Mr. Jim Baldwin was present to answer any legal questions. Senator Adams referring to page five, line fifteen asked who would pay to gather opinions? Mr. Fargnoli said that information may not be available and it was rather expensive to search for information. Senator Parnell advised the committee that departments already do customer surveys and there would be no additional costs. Jim Baldwin, assistant Attorney General, Department of Law was invited to join the committee. He explained how they would advise the Governor regarding this bill if it were presented. He noted some issues raised in the last committee of referral. He concurred with Mr. Fargnoli and said the main question was how this bill was going to be implemented. Mr. Baldwin described a present litigation with the Legislature regarding proper responses to the Legislature with respect to intent language inserted in the budget. His main concern was the Legislature's intent with respect to SB 76 to include the framework for the results- based government into the budget itself. He felt this was a legal issued the committee should directly consider and explained that it was exactly what was being raised in the present litigation he had referred to. What kind of operative effect can intent language have as far as binding agencies to a particular action? Many jurisdictions implementing the results-based budgeting do not have the kind of provisions in their constitutions that Alaska has. Therefore, the ability of the Legislature is limited to do certain things within budget bills. He referred specifically to the "Confinement Provision, Article II". It read: "Appropriation bills shall be confined to appropriations." He continued to explain the Governor's counterclaim. He said he feared the very worthwhile effort of the Legislature to implement results-based budgeting would get bound up in a long running legal dispute. Therefore, goals would not be achieved. (Tape #80 switched to side B at log 591.) Mr. Baldwin, in continuing, said money could be moved between allocations, and felt the bill was merely a guideline. However, he said it was somewhat ambiguous and should be meant to have flexibility as a guideline or allocation, which may be acceptable and not violate some of the provisions he previously alluded to. But he thought the legislative intent was that the agency shall follow the goals to the maximum extent possible. Without intending any offense to the committee and its jurisdiction, formulation of a budget is assigned in the Constitution to the Governor. There are certain things, however, the Legislature can do, i.e., specify the time the budget is to be submitted. They cannot tell the Governor how he is to prepare his budget. In another litigation case in the State, the Court did decide the Legislature could properly specify when certain budget documents were open to the public. He did not read that case that the Legislature had the power to tell the Governor how to exercise his constitutionally assigned power to form the budget. He continued to voice his concern that the truth in budgeting provision may go beyond what is necessary pointed that out for the committee. Senator Parnell noted there were several options open to the Legislature. He felt they could work with the Governor and the executive branch in what the missions were, what the desired results were and what was trying to be achieved with the dollars spent. He said it should not be a problem for the Governor to use the law as a guideline for action. If there was intent language not vetoed by the Governor then that intent language could be used as a guideline. With reference to truth in budgeting he did not feel they were telling the Governor what to do. Senator Adams asked for a time line on the settlement of the mentioned litigation. Mr. Baldwin said they recently entered into a stipulation with the attorneys and the case was ripe for presentation to the Superior Court by early summer. However, he expected one side or the other would appeal the decision for what it involves. That decision, appealed to the Supreme Court, could be a year away. Senator Parnell MOVED amendment #1. Senator Adams OBJECTED for purpose of discussion. Richard Vitale, staff to Senator Parnell was invited to join the committee. He said the amendment would clarify the original intent of the legislation in that the reporting of quarterly reports would only be on the results and the measurements that were done, including the results of that measurement, and not on the lines that followed after that. Senator Adams WITHDREW his objection. Therefore, WITHOUT OBJECTION, amendment #1 was ADOPTED. (pause on record) Co-chair Sharp asked Senator Parnell to comment on the fiscal note from the Department of Health and Social Services, which proposed to add two individuals to the department. Senator Parnell said the fiscal notes related to the prior version of the bill and not the one now before the committee. He asked the Senate Finance Committee to issue a zero fiscal note. There were no additional duties placed on the agency. Co-chair Sharp asked about the fiscal note from OMB and if it should be the only one attached to the bill. Mr. Vitale, advised the Co-chair that all the fiscal notes should read zero. (at ease - return) Mr. Fargnoli was recalled to join the committee. He explained the fiscal note submitted by OMB and said that the work cannot be done without impact. Senator Parnell said agencies participate in the budget process each year and it is built into the base of their budget. Results-based budgeting was being implemented in the committee and it does take time. He continued to argue the fiscal notes should be zero as stated by Mr. Vitale. The original bill had a long-range planning component to it, which required the agencies to do five years of planning. The present form of the bill indicates that the Legislature will establish the missions and desired results for the agencies and issue them guidelines. There would be no additional cost doing that at this time, based upon the already ongoing process. There is cost to doing it and already the work is being done as part of the budget process. Senator Adams, in referring to section one, that mission statements and desired results should represent the priorities of the majority of Alaska residents, and some way that information needs to be gathered. He felt that in gathering this information there was a cost involved outside the agencies. Mr. Fargnoli concurred with Senator Adams. He noted there were external costs needed to implement the missions and measures. Also the internal costs as related to information system and what kinds of information were to be gathered generally have had to have substantial retellings. And that is not in any agencies' base at this time. This is the largest hidden cost in the results-based government. Otherwise one runs the risk of using proxy information. It cannot be represented to be cost free in anyone's budget. Senator Parnell MOVED that a zero fiscal note be attached to the current bill. Senator Adams OBJECTED. A roll call was taken and by a vote of 4 yeas and 1 nay (Adams) the motion PASSED. Co-chair Sharp said a zero fiscal note would be attached to the bill as passed out of committee. Senator Parnell MOVED CSSB 76(FIN) with attached zero fiscal notes and individual recommendations. Senator Adams OBJECTED. By a roll call vote of 4 yeas and 1 nay (Adams) CSSB 76(FIN) was REPORTED OUT with zero fiscal notes and individual recommendations. SENATE BILL NO. 337 "An Act relating to the mandatory incorporation of certain boroughs in the unorganized borough and to certain third class boroughs; and providing for an effective date." Co-chair Sharp recalled SB 337 before the committee. He noted the section summary in the file provided by Tam Cook from Legislative Legal. Senator Adams voiced concern over the propriety of the bill before this committee. He said it should properly be before Community and Regional Affairs committee with like bill, SB 30. The debate regarding mandatory boroughs was already before this committee. Co-chair Sharp noted the concern of Senator Adams and also that objection was voiced on the Senate Floor. Tam Cook, Director, Legal Services, Legislative Affairs Agency was invited to join the committee. She briefly walked the committee through the section summary. She noted that there have been mandatory borough proposals before the Legislature since the Fourteenth Legislative Session. She explained that the bill required the incorporation of areas currently in the unorganized borough into third class boroughs, but it would treat the third class borough differently with respect to providing education. She said as far as she was aware the Legislature had never considered a bill such as this. Essentially, the bill required incorporation of third class boroughs along the lines that the local boundary commission has recommended for borough incorporation but would preserve home rule cities and first class cities within the new third class boroughs the power to continue to be independent school districts. The bill contemplated the creation of a type of third class borough such as Haines. It would not allow the borough, however, to take over the education responsibility that is now being provided by home rule and first class cities in the unorganized boroughs. She noted the cities would be part of the borough but would continue to operate the school districts same as presently. Technical changes were made in this bill to treat these particular types of cities in the new boroughs as though they were not in a borough for the purpose of exercising their own local taxing ability. The obvious dilemma posed by the bill is the fact that in a third class borough the borough assembly serves as the school board for that type of municipality. Under this bill, the cities, which would be operating independent school districts, will none the less be part of the borough, and those individuals would presumably be voting for the borough assembly members. She said there was no proposed solution for that result at this time. However, this was the most interesting legal and practical problem the bill raised at this time. Senator Adams asked that the bill be reviewed section by section. He said he had further problem with the assembly acting as a school board. Ms. Cook said the findings and purpose was self-explanatory. The second section was the heart of the mechanism that would be used to form the new borough. It placed the duty upon Community and Regional Affairs to prepare incorporation proposals for each of the model boroughs that have already been identified by the local boundary commission. During this process there is a public hearing requirement. The proposal would outline the specifics that would apply to each individual borough. The State Assessor was required to make an estimate of the true and full value of taxable property in each of these boroughs within a fairly short time period, by 1 January 1999. However, the actual boroughs would be phased in by Community and Regional Affairs, depending on the size of the borough, over a four- year period. Receiving all the proposals at the same time overwhelms neither the department nor the local boundary commission. The Constitution requires there be standards for borough incorporation and those standards are actually set out in statute. If the local boundary commission determines that a particular proposal does meet the standards then the borough is set for incorporation. They can request changes to a proposal and send it back to Community and Regional Affairs. Once a proposal is accepted by the local boundary commission then there is an election of initial officers and there are time periods within which the election must be held. The borough essentially will be incorporated once those initial officers have been elected. Senator Adams asked what would happen if no one ran for any of the elected seats, there were no officers and they did not want to be a borough. Ms. Cook indicated there was no mechanism to address that possibility in the bill. Senator Phillips asked about a write-in possibility. Ms. Cook reiterated that possibility was not addressed. She noted that section five contained technical changes to existing law, which included a change to the chapter dealing with education. She noted the different treatment for home rule and first class cities in the new boroughs and the fact that they would continue to be independent municipal school districts. The new third class boroughs would also be school districts. Section six was a technical amendment to define the term "non-area wide". Section seven was cleanup language. Section eight referred to property tax and the taxing powers of cities located within boroughs. She removed the application of this section to third class boroughs organized after a certain date. Section nine was a new amendment noting the assessment of taxes. Senator Adams, with reference to section eight, asked if cities within a borough under present law would remain the same if the bill were to pass? Ms. Cook said only those types of cities within the new boroughs would be affected. It would not change existing situations with respect to boroughs and cities currently in existence. That was achieved by saying the provisions only applied to third class boroughs incorporated after a certain point in time, i.e. 1 January 1999. Therefore the present bill did not alter the relationship in Haines between its city and its borough. She explained that existing law did not allow the formation of any new third class boroughs. Haines was the only one being preserved with a slightly different relationship as between the cities and the boroughs. Section ten was the sales and use tax provision. She explained that it had been attempted in this section to keep the home rule and first class cities independent of the borough with respect to their power to collect sales and use taxes. Senator Adams referring to home rule and first class cities that collected the levy on sales and use tax, asked if it went directly to them? Ms. Cook concurred. In further response to Senator Adams she indicated that under existing law a borough that imposes a tax on an area wide basis was required to use that tax for an area wide service. One that collects a tax on a non-area wide basis was required to use that tax for a non-area wide service. Senator Adams further inquired if a third class was area wide if there was only one power and that was education? Ms. Cook concurred. Co-chair Sharp asked if establishing enclaves of present cities, for school purposes, out of the new borough that would be formed, what powers would that particular borough have that the cities would participate in other than schools? Was not the only purpose of those boroughs going to be schools? Ms. Cook responded that essentially that was correct. Third class boroughs do have the power to establish service areas. A service area could include a city or a portion or a city. She explained this was with respect to existing law having to do with third class boroughs. They had a very limited governmental authority, the most limited of all the municipalities in the State. They can only exercise the power of taxation and the power of education on an area wide basis. They do, however, have the power to exercise other municipal functions on a service area basis. Ms. Cook continued to section twelve, which made the act conditional upon the passage of SB 36, which is now presently in the House, and would change the formula funding. If a version of SB 36 did not pass in conjunction with the way this bill was drafted, it would not take effect. Section thirteen noted an effective date of 1 July 1998. Senator Adams asked if the version of SB 36 referred to by Ms. Cook was the same version, which passed the Senate? Ms. Cook indicated that it was not. However, she said that the way the present bill was drafted it stated that if any version of SB 36 passed. She said the committee may want to alter this provision. Co-chair Sharp thanked Ms. Cook for her time and assistance to the committee. Senator Adams asked if someone was available from the Department of Community and Regional Affairs to testify on the bill. Co-chair Sharp indicated that Pat Poland was present. Pat Poland, Director, Division of Municipal and Regional Assistance, Department of Community and Regional Affairs testified before the committee via teleconference from Anchorage. He noted that Steve Van Sant, State Assessor was also present via teleconference. He said the department had many major policy concerns regarding the mechanisms proposed by this legislation. These included equal protection issues, incompatibility with the concept of borough government in Alaska, fiscal impacts on first class and home rule cities in the unorganized borough. He noted that while the bill may enhance the fundamental right of equal protection in some regards, it would significantly diminish it in other respects. For example, he noted that the bill stipulated that each home rule and first class city within a third class borough incorporated after 1 January 1999 must operate a city school district. The same duty or authority was denied to home rule and first class cities in third class boroughs formed prior to 2 January 1999. It also was denied to all other organized boroughs. The department is unaware of any rational basis for treating home rule and third class cities in third class boroughs formed after 1 January 1999 differently. Another significant concern regarding equal protection exists with respect to the election and operation of the assemblies of those boroughs created under this legislation that would include home rule and first class cities. Those assemblies would be comprised of residents of the entire borough, including individuals living in home rule and first class cities within the borough. Yet, those assemblies would be almost exclusively governing matters with respect to education and taxation. In a number of instances, home rule and first class cities in the boroughs to be formed under this legislation would comprise of substantial or even majority population of the borough; this circumstance being the result of a grossly inappropriate form of local representation. As written, the bill leaves in place the provision of AS 29.20.300(b), which stipulates the assembly of a third class borough was also the school board for the borough. Residents of the borough created under this bill, who live inside home rule or first class cities would seem to be unqualified or at least inappropriate for the borough school board, since they would be residents of a separate school district. The department further believed that this present bill was incompatible with the traditional concept of borough government in Alaska. He said the intent of the legislation was to provide for the uniform requirement of local contributions and support of schools in all regions of the State. The legislation accomplishes that end by abandoning the borough government concept in at least ten prospective boroughs, which would include sixteen separate home rule or first class cities. (Tape #81, Side B switched to Tape #82, Side A.) Mr. Poland continued circumstances appeared to conflict with the intent of Article 10, Section 7 of the Constitution, which provides in relevant part that, "City shall be a part of the borough in which they are located." He noted that borough governments were intended to provide essential services on a regional basis and to use regional resources; to serve both urban and rural areas. He said SB 337 disregarded these fundamental principles. The department believed that third-class boroughs were not viable institutions. He referred to Haines and said they were the only third class borough formed between 1968 - 1985. Due to inadequacies the Legislature repealed the law allowing the incorporation of third-class boroughs thirteen years ago. Some inadequacies were lack of area-wide planning, platting and land use regulations, inability of third-class boroughs to provide any area-wide service or function other than education and taxation. Further limitations on the third- class borough have resulted in proliferation of service areas to meet the needs of residents; conflicts within the City of Haines which has effectively been forced to provide certain services with benefit the entire Haines Borough, specifically tourism activities. Due to these conflicts, both the City of Haines and the Haines Borough are developing a petition to dissolve both local governments and consolidate under home rule borough. It was felt that if a third-class borough could not function adequately under such small circumstances, then it cannot be expected to function adequately in a region encompassing vast areas with diverse populations. In referring to first class borough and home rule cities the fiscal impact would be significant. Certain State and Federal funds would be eliminated. The obligation to provide education would continue, however, the funding loss by the cities and gained by the new boroughs would be required to be used to provide education services in areas outside the cities only. Unorganized areas would feel these impacts most strongly. Some impacts that could be experienced were illustrated as follows: Wrangell- Petersburg would lose fifty percent of raw fish tax revenues now being received based on fish processing occurring within respective city boundaries. Based on a five year average Petersburg would lose $385,000 and Wrangell about $35,000. These cities would no longer be eligible for Federal payments under the National Forest Receipts Program or the Federal Payment in Lieu of Taxes Program. The combined annual loss to these cities would be $700,000 for Petersburg and $500,000 for Wrangell. He further noted that the Aleutians West Borough would annually lose $1.4 million in fish tax. Unalaska would lose $1.5 million; Cordova and Valdez would lose their fish tax and also their Federal National Forest Receipts Program; Craig, Klawock and Hydaburg would suffer similar losses. The creation of boroughs would cause much resentment and animosity. In wrapping up, Mr. Poland said provisions penalizing the formation of boroughs should be removed. Co-chair Sharp thanked Mr. Poland for reading his testimony into the record and asked that a written copy be submitted to the committee. He asked how it could be justified mandatory borough formations stifled economic development when noting that borough formation was mandated back in the '70's, even after public votes of two and three times against it. Senator Phillips referred to a public outcry against paying of local taxes a couple of weeks ago. The answer was definitely "no" in unorganized areas for education purposes. (It is noted a malfunction in Senator Phillips' microphone.) ...at least this way they have local control how and where money was being spent with regards to education. Co-chair Sharp noted that there would be public testimony this evening from 6:00 p.m. - 8:30 p.m. Senator Adams noted that the State Assessor was present and asked regarding page two, line eighteen wherein the State Assessor shall estimate the full and true value of the property tax. He said that in the past a mixture of communities had been taken in order to try to get the full and true value. Specifically, he asked how would the department get the true value of communities down in Lower Kuskokwim? Steve Van Sant, State Assessor, Department of Community and Regional Affairs testified via teleconference from Anchorage. He explained the Lower Kuskokwim would be difficult. The assessment would be more formula generated as opposed to specific property evaluation. Senator Adams further asked if the formation of third-class boroughs would cause the State of Alaska to lose any money to new boroughs that would be formed; i.e. any pipeline tax? Mr. Van Sant said the possibility certainly existed along the pipeline corridor if more communities decided to levy a property tax. One recommendation by the department would be that if the third-class boroughs are required to have a four mill equivalency for local contribution for education, that the evaluation of the pipeline corridor be excluded from that full value. Otherwise, it would force them to levy a property tax, which would take the money out of the State's general fund and put it into a local tax base. Senator Adams said the way the legislation was presently written it provided for people throughout Alaska more government and more taxes. He asked if this would stifle economic development; i.e. a mine in his district or Delta Junction, by having to put taxes on the project or its workers? Mr. Van Sant said he could not answer this question. Co-chair Sharp set aside this bill in and said it would be taken up again this evening at 6:00 p.m. in order to hear the public testimony scheduled at that time. He called HB 53. HOUSE BILL NO. 53 "An Act relating to the authority of the Department of Corrections to contract for facilities for the confinement and care of prisoners, and annulling a regulation of the Department of Corrections that limits the purposes for which an agreement with a private agency may be entered into; authorizing an agreement by which the Department of Corrections may, for the benefit of the state, enter into one lease of, or similar agreement to use, space within a correctional facility that is operated by a private contractor, and setting conditions on the operation of the correctional facility affected by the lease or use agreement; and giving notice of and approving a lease-purchase agreement or similar use-purchase agreement for the design, construction, and operation of a correctional facility, and setting conditions and limitations on the facility's design, construction, and operation." CS FOR HOUSE BILL NO. 53(RLS)(title am) "An Act expressing legislative intent without the force of law concerning correctional facility space and the Cleary v. Smith case; adding, as a general power of municipalities, the power to provide for, and enter into agreements concerning the confinement and care of prisoners; relating to authorizing the Department of Corrections to enter into agreements to lease facilities for the confinement and care of prisoners with the City of Delta Junction and with the Municipality of Anchorage; and providing for an effective date." Representative Elder Mulder was invited to join the committee. He read his sponsor statement into the record. He said this bill would accomplish three things. First, in the intent section, it gave the Court express Legislative intent that they would work with the Commissioner of Corrections to relieve overcrowding conditions. Second, the department would be authorized to contract with the communities of Delta Junction/Ft. Greely re-use authority for the conversion of Ft. Greely to a private prison. Third, the Commissioner of Corrections would be authorized to contract with the Municipality of Anchorage for the replacement of the Sixth Avenue Jail. Representative Mulder noted several good reasons for this bill, including: jobs for Alaskans, inmates would be held in Alaska and there were no other reasonable proposals on the table at this time. He specifically noted that by the end of FY '99, Alaska would have over 850 inmates being held in a private prison in Arizona, costing the State well in excess of $14 - $15 million. That kind of expenditure could be utilized to help fund Alaska payroll to pay for Alaskans. (Tape malfunction at this point.) Representative Mulder told the committee that this bill would go along way to ensure the security of the future of Delta Junction and providing for a healthy re-use of the facility and an expansion of the economy in Delta Junction. Margaret Pugh, Commissioner, Department of Corrections was invited to join the committee. She introduced Margot Knuth, Assistant Attorney General, Department of Law. Ms. Knuth said that creation of beds would not solve the overcrowding in Alaska. (Further tape malfunction.) She noted that the Bethel jail had been grossly overcrowded for years and that in general, overcrowding in Alaska was at an intolerable level. She drew the committee's attention to several other proposals that could be considered regarding the overcrowding issues, such as expansion of the Palmer facility and ownership of the facility at Delta Junction. She noted that the re-use proposal would be helpful to Delta Junction. However, with reference to the expansion of the Palmer facility, there would be little to no transportation costs to keep the inmates in-State. However, all issues must be clarified including the cost effectiveness of the facility in Delta Junction and if services could be provided reasonably elsewhere in the State. She explained a small technical issue with the title of the bill. In response to a question from Senator Adams regarding BRAC law she said she could not explain it but would contact Department of Community and Regional Affairs for him. Senator Donley asked about the title change. Ms. Knuth said it was necessary because Delta Junction was a second class borough and Fort Greely was outside the city boundary. With regards to sections two and three of the bill extra territorial powers applied and if not included in the title it would create a technical problem. Senator Donley said he did not see any existing conflict, however. Ms. Knuth said that a second-class city did not have the power to house criminals, and therefore without the title change the sections would not be effective. (Tape #82, Side A switched to Side B at approximately 11:40 a.m.) Senator Donley felt it was inclusive in the title where it was provided in the title where it said "...enter into agreements to lease facilities for the confinement and care...". This could give notice they were included and was all that was required. Ms. Knuth further stated that if the title were amended it would probably avoid litigation at some further point. This was a preventative suggestion. Co-chair Sharp said he could only continue the hearing on this matter until noon and did want to hear from the Delta contingent that had travelled to Juneau to give testimony. Further hearings on this bill could not be before 27 March. In response to Senator Donley, Co-chair Sharp said the bill would not be moved today. Co-chair Pearce had several questions she wanted to ask and he wanted to give everyone a chance to testify on this bill who wanted to. After short discussion with Senator Donley regarding rescheduling of this matter, Co-chair Sharp said he would try to work it in earlier, including Saturday or Sunday hearings. He then invited the Delta contingent to join the committee. Glen Wright, Mayor of Delta Junction testified before the committee. He said this bill would help the community help itself by bringing about three hundred jobs and allowing a quality of life for the area. Doris Fales, Delta Junction Coalition testified before the committee. She said this bill would help create jobs. She said the Coalition had worked with the community in order to promote economic growth. Ray Woodruff, Executive Director, Delta Junction Coalition testified before the committee. He told the committee that turning the post into a prison was one of the first and only major proposals received. Letters were written to approximately 118 Federal and State agencies asking for any interest in Ft. Greely. No interest or answer was received from them. The Army also went through the same procedure, receiving no interest. The community had an interest, however and brought the matter to a vote. He said the vote on this proposal brought out the most voters in two years. The majority of the community supported the bill. Co. Dave Anderson, Post Commander, Ft. Greely testified before the committee. He described the BRAC process and realignment program as currently planned for the committee. He noted that the Army had supported the community of Delta Junction and its re-use efforts. These efforts included the surplusing of approximately 1-1/2 million square feet of facilities on the installation and 18 hundred acres property. The Army would retain all training areas and ranges for continuing training and testing missions in Alaska as used by the Army and Air Force throughout the year. The approved realignment plan was to reduce fifty percent of employees in FY 2000 and fifty percent in FY 2001. Re-use of the facility would negate all requirements for demolition of the property currently programmed at approximately $48 million. He voiced his concern with the process, including taking care of the employees of Ft. Greely during the transition. Senator Phillips asked about the city election in mid- January. Mr. Woodruff said the election was conducted as close to a complete election as possible. It was an opinion poll and no one was turned away who was a registered voter or had registered to vote. This was conducted on an area- wide basis rather than just the City. Senator Phillips asked if it was a special election. Mr. Woodruff indicated that it was not an official, special election. Senator Adams asked for an explanation of the BRAC law. It was his understanding the Governor set up the coalition to finding re-use of the facility. He also asked for an explanation on the conveyance organization agreement which had to take place and asked where it was in the process with the Governor. Mr. Woodruff said a letter had been provided the Governor requesting the final stages of the process be implemented through the LRA. It has not been responded to as of yet and the Department of Community and Regional Affairs has been contacted. He noted for the committee that this was a change in the way the Federal government did business. It only went into effect last year, and they became aware of it sometime in December last year. Senator Adams asked that if there is no signature on the conveyance what would happen? Colonel Anderson said he did not fully understand the question. Senator Adams further explained that due to costs, what would happen if the Governor did not sign the conveyance. Colonel Anderson said the local Re-use Authority had been recognized by both the Governor and the Federal government. Ft. Greely reservation qualifies for rural economic development conveyance with no cost to a community. He felt this was the main drive since the property could be obtained at no cost by the local Re- use Authority. Senator Torgerson asked if this was for a particular plan. His understanding was that Delta would take ownership of the facility. Colonel Anderson concurred. Senator Torgerson voiced further concern that the Governor may not sign the conveyance if he found that prison beds could be supplied cheaper at another location. Colonel Anderson said if that happened the facility would be open for bid again or demolition. In further response to Senator Torgerson's question regarding an agreement, Mr. Wright explained that the only agreement made was between the Re-use Authority and all this. The City does not enter into any agreement until the bill is passed and the Governor signs it. The City will work with the Department of Corrections. Senator Torgerson said it was his understanding there were provisions in the bill that said it should be competitively bid, however, it looked like that had been ignored and an agreement signed anyway. Mr. Woodruff explained the lease document that was worked out. This was in order to get started on the lease request. There was no intention to shortcut any provision of AS 36.30. He said even by pushing everything hard it would take approximately fourteen months to complete the project. Therefore, a lease document was signed. However it would not be valid if the Legislature did not pass the bill, the Governor did not sign it, if the Department of Corrections refused to get a contract with Delta Junction, or if Delta Junction did not get their proper contract the lease would then be invalid. He said ample exclusionary clauses had been included also. Co-chair Sharp thanked the Delta contingent and continued the taking of testimony. J. Frank Prewitt, President and Chief Executive Officer of Allvest, Inc. was invited to join the committee. He explained the site photography and site plan for the committee. He said that the reutilization of Fort Greely was good public policy in terms of returning dollars to the State of Alaska and helping out Delta Junction. He noted that the Greely proposal was the best in the past eight years. He said the issue of centralization and regionalization was not an either-or proposition. Each State needs long-term felon sentence beds that have sufficient economies of scale to accommodate those offenders through the period of their incarceration. Jail space is also needed. Therefore, use of the Greely proposal would alleviate overcrowding in a cost-effective fashion. He felt the argument was a philosophical disagreement between privatization and a government delivery of correctional services. The private sector has filled in to accommodate the void left by the government's inability to respond quickly enough to overcrowding concerns or by the cost of government delivery of correctional services, which in some states such as Alaska is extreme. Many alternatives to incarceration have been explored. As an example he said that during the Hickel administration the Department of Corrections did nothing more than sort through their offender population moving low-risk offenders out into less costly alternative facilities, such as halfway houses and treatment programs. He felt this was a correct process as these low-risk offenders needed to be moved out of long- term, costly hard beds. He referred to the Bethel facility and said alternatives were available to the overcrowding at that facility. Further, he said that they believed the Greely proposal provided relief in a cost-effective fashion and said both the debt service and the operating cost of the facility on a daily bed rate would be under $70/day/inmate as compared to the State's present costs. Services at Greely were also anticipated to meet the highest standards of the industry, both structurally, operating and hiring and training standards. The direct impact of the Greely proposal would be relief in the present prison population. There would be no loss of State jobs, an augmentation of correctional services, State-operated facilities to be safer because over-crowding would be relieved, cost containment for the Department of Corrections and economic development for Delta Junction. Mr. Chilters, Delta Junction was invited to join the committee. He referred to an aerial photograph which was passed out to committee members only of the Ft. Greely site. He noted that the facility must meet all ACA, ADA and codes for re-use. He explained the reutilization of the existing facility included revitalization of the facility's infrastructure, security, access for the handicapped, medical, secured entrances and it's relationship with the community. Mr. LaResche, Delta Junction was invited to join the committee. He explained to the committee how the contract would work and how it complied traditionally with states using this method. He said it was a fairly simple chain of contracts and financing whereby the State would contract with the City of Delta Junction to provide prison beds, the facilities and operations for twenty years. Then, Delta Junction would contract with the lessee/owner of the facilities to provide the capital facilities themselves. He said that this lessee/owner policy and procurement process went out with competitive solicitation. Allvest won the procurement process. The facility owner who would be leasing the facility to the City renovates the buildings for use as a prison and finances the whole thing with private financing. At this point, he noted that the State was used to financing and owning things with State money, i.e. the Anchorage facility. In this case, however, financing and security would be for Allvest. If Allvest were to default on the bond or the prison to fall or not meet its criteria, the State would not be liable for paying for it. Delta Junction, again, would contract with someone else to operate the facility. As stated in the bill, the Department of Corrections may require that Delta Junction use a process similar to the procurement code to pick the private operator. He believed this process was simple and highly effective and would allow the State to procure complete services for under $70. For the record, Mr. LaResche noted that the State previously had three years to respond to an RFP in order to own the facility and they showed no interest whatsoever. Co-chair Sharp thanked the testifiers for appearing before the committee. Senator Donley notified the co-chair that he could cancel his 4:30 p.m. meeting on the Aleyeska Central School so the Senate Finance Committee could meet earlier on this matter. He noted the Anchorage Chief of Police and others from out of town were present and wanted to testify. Co-chair Sharp said it would be a possibility for those who were in town. However, the committee could not get teleconference participation for those out of town. Also, the co-chair and Senator Torgerson had a Senate Resources Committee meeting from 3:30 p.m. to 5:00 p.m. There proceeded discussion amongst committee members as to possible times to continue the hearing to. (Tape #81, Side B switched to Tape #82, Side A.) Co-chair Sharp said the committee would further consider a possible time for continuation of this matter and he would make an announcement from the Senate Floor. He appreciated the offers from Senator Donley and also from Senator Phillips who is vice-chair and could run the meeting, however, the committee room and teleconference were not available. He said advised those on teleconference and present at the meeting he would get word back as soon as possible as to when this bill would be rescheduled for public hearing to include public testimony. ADJOURNMENT Co-chair Sharp adjourned the committee at approximately 12:40 p.m. until tomorrow at 10:00 a.m. SFC-98 -21- 3/18/98
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