Legislature(1999 - 2000)
03/27/2000 09:07 AM Senate FIN
| Audio | Topic |
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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
March 27, 2000
9:07 AM
TAPES
SFC-00 # 65, Side A and Side B
CALL TO ORDER
Co-Chair John Torgerson convened the meeting at
approximately 9:07 AM.
PRESENT Co-Chair John Torgerson, Co-Chair Sean Parnell,
Senator Al Adams, Senator Lyda Green, Senator Randy
Phillips, Senator Gary Wilken
Also Attending: ALISON ELGEE, Deputy Commissioner,
Department of Administration; NANCY SLAGLE, Director,
Division of Administrative Services, Department of
Transportation and Public Facilities; EDDY JEANS, Manager,
School Finance and Facilities Section, Education Support
Services, Department of Education and Early Development;
LARRY WIGET, Executive Director, Public Affairs, Anchorage
School District; STEVE KALMES, Director of Transportation,
Anchorage School District; BECKY CERNEY, Director of State
Legislation, American Medical Association
Attending via Teleconference: From Mat-Su: JOE LE BEAU
SUMMARY INFORMATION
[NOTE: Due to power fluctuations, tapes contain
intermittent blank areas. There is no meeting activity
occurring during these pauses. NO PART OF THE MEETING IS
OMITTED.]
SB 273-OIL SPILL RESPONSE; NONTANK VESSELS & RR
The Committee adopted two amendments, heard public
testimony and reported the bill from Committee.
HB 112-ESTABLISH ALASKA PUBLIC BUILDING FUND
The Committee adopted a committee substitute plus an
amendment. Testimony was taken from the Department of
Administration and the Department of Transportation and
Public Facilities. The bill was HELD in Committee.
SB 290-PUPIL TRANSPORTATION COST REIMBURSEMENT
The Committee heard testimony from the Department of
Education and Early Development, and from school districts.
Two amendments were discussed but no action was taken and
the bill was HELD in Committee.
SB 256-PHYSICIAN NEGOTIATIONS WITH HEALTH INSURE
The Committee heard testimony from the American Medical
Association and HELD the bill.
COMMITTEE SUBSTITUTE FOR SENATE BILL NO. 273(RES)
"An Act requiring oil discharge prevention and
contingency plans and proof of financial
responsibility for nontank vessels and railroad tank
cars; authorizing inspection of nontank vessels and
trains; and providing for an effective date."
This was the second hearing for this bill in the Senate
Finance Committee.
Amendment #1: This amendment deletes "may" and inserts
"shall" from page five line 28 of the Senate Resources
committee substitute. It also inserts a new sentence on
line 29 requiring the commissioner to adopt regulations by
a specific deadline. The amended language then reads:
"(a) The Department of Environmental
Conservation shall proceed to adopt regulations
necessary to implement the changes made in this
Act. The commissioner of the environmental
conservation shall adopt the regulations no later
than March 1, 2000."
Co-Chair Parnell moved for adoption. Co-Chair Torgerson
explained the purpose of this amendment was to alleviate
some of the discomfort expressed at the last hearing
regarding the negotiated regulation-making process
There was no objection and the amendment was ADOPTED.
Amendment #2: This amendment deletes ", interpret," from
page six line four of the committee substitute. The amended
language reads as follows:
"(b) If, under AS 46.04.055(f), added by
sec. 1 of this Act, the Department of
Environmental Conservation adopts regulations by
negotiated regulation making under AS 44.62.710 -
44.62.800, or if, notwithstanding the authority
provided in AS 46.04.055(f), the Department of
Environmental Conservation, using negotiated
regulation making under AS 44.62.710 - 44.62.800,
adopts regulations to implement or make specific
the requirements of the provisions added or
amended by this Act, the Department of
Environmental Conservation shall provide to the
members of the legislature, if in session, or to
the legislative council if the legislature is not
in session, a comprehensive report summarizing
the activities undertaken to adopt the
regulations using the negotiated regulation
making process authorized by AS 44.62.710 -
44.62.800."
Co-Chair Parnell moved for adoption.
Without objection, the amendment was ADOPTED.
JOE LE BEAU testified via teleconference from Mat-Su and
urged the Committee to move forward with this bill.
Co-Chair Parnell offered a motion to report from Committee,
CS SB 273 (RES), 1-LS1464\I, as amended. There was no
objection and the bill REPORTED FROM COMMITTEE.
AT EASE 9:11 AM / 9:14 AM
HOUSE BILL NO. 112
"An Act establishing the Alaska public building fund;
and providing for an effective date."
This was the fourth hearing for this bill in the Senate
Finance Committee. Co-Chair Torgerson spoke of a proposed
Senate Finance Committee substitute explaining that it
addresses his concerns voiced at an earlier hearing.
[TAPE MALFUNCTION - Power outage, meeting recessed to wait
for generator power.]
Co-Chair Torgerson continued that the committee substitute
limits the legislation to apply only to the eight buildings
identified in the fiscal note. Those buildings are: Alaska
Office Building, Robert B. Atwood Building, Court Plaza
Building, Douglas Island Building, Fairbanks Regional
Office Building, Juneau Community Building, Juneau Public
Safety Building, and Juneau State Office Building.
Co-Chair Parnell moved to adopt, as a workdraft, HB 112, 1-
LS0522\D.
Senator Green objected to ask about the earlier question of
consistency of charging private and government tenants and
whether this committee substitute resolves the issue
because of the limited number of buildings.
Co-Chair Torgerson responded that the committee substitute
doesn't differentiate between private and federal
occupancy. He explained that the intent was to limit the
Department of Administration from instituting this
depreciation calculation and subsequent rent collection on
other state-owned facilities.
Senator Green wanted to know how the committee substitute
impacts the depreciation calculation method.
Co-Chair Torgerson stressed that the purpose of the bill is
to capture federal and other revenues as rent payments. He
continued that the committee substitute recognizes this but
doesn't allow the department to expand the process beyond
the eight buildings.
Senator Adams wanted to know if the Administration had
plans to include any other state-owned buildings besides
the eight identified here.
ALISON ELGEE, Deputy Commissioner, Department of
Administration confirmed the chairman's assessment. She
elaborated that these facilities had been selected because
they presented the best opportunity to maximize the
collection of additional federal and other funds through
the agencies located in the facilities. She stated that the
Administration did not intend to expand the program before
FY 03, after the program operated a full year and was
established.
There was no objection to the motion and the committee
substitute was adopted as a workdraft.
Amendment #1: This conceptual amendment makes a technical
correction to page two line six of the committee substitute
to delete "unexpected" and insert "unexpended". The amended
language reads:
"(d) The unexpended and unobligated balance
of an appropriation from the Alaska public
building fund lapses into the Alaska public
building fund at the end of the fiscal year for
which it was appropriated."
Co-Chair Parnell moved for adoption. Without objection, it
was ADOPTED.
Co-Chair Torgerson requested that the Administration
explain the fiscal note to the Committee.
Ms. Elgee apologized that she could not and that the
sponsor's staff had been expected to attend the meeting for
the purpose of explaining the fiscal note.
Co-Chair Torgerson told the Committee that David Teal,
Director, and Danith Watts, Fiscal Analyst, of the Division
of Legislative Finance, as well as other co-chair staff had
reviewed the fiscal note. The consensus, according to Co-
Chair Torgerson, was that the fiscal note adequately
reflected the Committee's intent in establishing the Alaska
public building fund. However, he noted that he disagreed
with the department's claim that two staff positions would
need to be added to implement the program, as indicated on
the fiscal note.
Ms. Elgee explained that the funds allocated on the fiscal
note for personal services would be used to offset
vacancies for existing positions and that no new positions
would be created. She noted that the positions were
classified as accounting positions and would manage the
bill-paying process and to work with the federal government
to secure federal funds. She added that a portion of the
funds noted on the fiscal note was intended to help with
the vacancy of the facilities planner position.
Senator Wilken asked how the funding for these positions
factored in with the supplemental budget request for vacant
facilities planner positions. He wanted to know if the
total was funding for four positions if the bill and the
supplemental request were both adopted.
Ms. Elgee corrected that the intent was to only have two
facilities planner positions. She clarified that the
funding requested in the supplemental budget was for a
contracting officer, which did not apply to this program.
She stated that accounting was this program's the greatest
need.
Co-Chair Torgerson relayed a previous conversation where
the question was posed as to how many existing positions
that performed the same duties required for this program
were in the Department of Transportation and Public
Facilities.
NANCY SLAGLE, Director, Division of Administrative
Services, Department of Transportation and Public
Facilities, responded that the department currently does
not have any staff that collects rent since rent is not
currently charged. She continued that the funding received
for building maintenance is general fund dollars. This
bill, she said transfers those general funds to other
agencies to be combined with other types of funds, such as
federal receipts to be paid to the Department of
Transportation and Public Facilities as rent.
Co-Chair Parnell asked who currently negotiates leases for
state-owned facilities.
Ms. Slagle replied that the Department of Administration
currently performs that function. She said that the
Department of Transportation and Public Facilities only
deals with state-owned facilities.
Co-Chair Torgerson said this bill affects approximately 30
tenants, including state agencies. Of those tenants, he
said six would be able to collect federal or other funds,
such as the permanent fund. Therefore, he had a hard time
understanding why two positions were needed to negotiate
two-thirds of the rental agreements with state agencies.
Ms Elgee replied that besides the actual collection of rent
payments, there was development work required to
substantiate the actual replacement value of the buildings,
which the depreciation is based upon. She talked about the
necessity to reimburse the Department of Transportation and
Public Facilities for the maintenance and operations of the
facilities noting that this would be additional work.
AT EASE 9:28 AM / 9:33
Co-Chair Torgerson announced his intent to change the
fiscal note to reflect funding for only one new position.
Co-Chair Torgerson ordered the bill HELD in Committee.
SENATE BILL NO. 290
"An Act relating to state funding for transportation
of public school students; and providing for an
effective date."
This was the first hearing for this bill in the Senate
Finance Committee.
Senator Wilken spoke to the bill, which was sponsored by
the Senate Finance Committee. He spoke to his surprise at
the beginning of this session when a supplemental budget
request was submitted requesting funding for additional
$7.4 million for pupil transportation. He shared that in
the past, the state has provided the additional funds to
cover between 90 to 100 percent of the transportation costs
but that the large amount requested this year was
unexpected.
Senator Wilken stated that he wanted money to go to the
classroom rather than the bussing program.
Senator Wilken admonished that school districts have no
vested interest in the pupil transportation contracts
although they were the parties that negotiated the
contracts with the providers. He stated that this
legislation would involve the school districts in the
negotiations since they would now be required to cover 50
percent of the transportation costs.
Senator Wilken spoke to the four primary reasons why the
cost of the contracts had such a dramatic increase. He
noted that the minimum wage in Alaska has increased by one
dollar since the previous contract negotiations. He shared
that statue requires the minimum wage to be doubled for
pupil transportation employees. Therefore, a 16 percent
increase was automatically made in the new contracts.
Senator Wilken also attributed contract alignment as
another relevant issue, saying that by combing the routes
of more than one school district would attract more
bidders. He noted that more than one company has bid for
these contracts in the past. He supported the competition
saying it promotes a better product at a lower price.
Because of this, he said the Department of Education and
Early Development has been working to align the contracts
and has been successful.
Senator Wilken then talked about contract specification
changes, saying that while realignments might be the right
thing to do, the cost to the state has to be considered as
well.
Senator Wilken concluded that the fourth factor was changes
allowed by the Board of Education that increased the costs
for pupil transportation with no regard to what it costs
the school districts, who do not argue against these
changes because the state pays the bill.
Senator Wilken stated that these factors drove this
legislation to involve the school districts and "put them
at risk with their taxpayers' money" just as the state is
currently impacted.
Senator Wilken explained that this bill recognizes the
contract amounts in FY 01, as finalized and approved for
funding by the legislature, as the "funding floor" and that
future increases would be measured from this base. Funding
for contracts negotiated after FY 01 would be split fifty-
fifty between the state and the school districts.
Senator Adams expressed that he wanted FY 00 to be the base
year and have the funding ratio change reflected in the FY
01 operating budget. He stressed the need for the
legislature to have accountability between the districts
and the contractors. He strongly supported the concept of
the bill. He spoke against the state paying 100 percent of
the cost. He compared the average cost per route per year
to the cost per contract and to the cost per student per
year.
Senator Wilken said the intent was to affect the contracts
negotiated after the ones that go into effect in FY 01. He
asserted that make the legislation retroactive to FY 00
contracts would "muddy the waters" and the legislation
would be more difficult. He added that the issue of
district versus contract would be addressed with this
legislation because the school district would have to
decide whether it wants to share the cost or negotiate a
better deal with the carrier or balance the cost versus the
services.
Senator Green understood that those contracts currently in
place in addition to those contracts to be renegotiated
this year are the baseline for future computations.
Senator Wilken affirmed.
Co-Chair Torgerson clarified that it actually depends on
how much the legislature appropriates. If the legislature
decides not to fund the $5 million increase, he stated that
the FY 01 base would be only the amount the legislature did
approve. He noted that if the legislature appropriated no
increase, the baseline would be the FY 00 amount.
Senator Green was concerned about those districts that were
not scheduled to renegotiate new contracts this year. She
thought it was unfair and that those districts would be
penalized since their baseline would be lower. She wanted
those districts that did not renegotiate this year but
would have significant increases to be allowed
consideration.
Senator Wilken noted that all the major districts would
have negotiated contracts this year and that except for
Kenai, all contracts would start in FY 01. He stated that
no further negotiations would take place before the bill
was enacted.
Senator Adams wanted the department to address the
effective date.
EDDY JEANS, Manager, School Finance and Facilities Section,
Education Support Services, Department of Education and
Early Development, stressed that the contracts would not
indicate the reimbursement rate. He explained that the
level of funding the legislature actually appropriates this
year is the amount that would dictate the baseline.
Co-Chair Torgerson repeated Senator Green's question of how
many districts had already negotiated their contracts and
how many districts were left.
Mr. Jeans answered that the districts in alignment to FY 01
were Anchorage, Mat-Su and Fairbanks with a total of
approximately 440 buses. The rest, he said are small
contracts of two or three busses per district and were
staggered as to when their contracts were due for
renegotiations.
Senator Green asked if there was a built in inequity by
accepting those contracts that had large increases and
therefore allowing those districts a higher base. She
thought the districts that had not yet renegotiated their
contracts would be locked in at a previous, lower base.
Mr. Jeans repeated that the base year would reflect the
amount this legislature appropriates. He noted that every
contract includes cost of living (COLA) increases,
including the existing contracts. He stressed that school
districts would "feel a pinch" in the coming year because
they would be required to fund part of the COLA.
Senator Green asked if that pinch would be felt equitably
across the state in the major school districts.
Mr. Jeans was unsure if he could answer the question.
Senator Green asserted that the question must be answered
before the legislation could proceed. She expressed her
concerns about different bases for districts.
Senator Wilken referred to a spreadsheet titled, History of
Contract Rate Increases, dated February 17, 2000 supplied
by the Department of Education and Early Development that
contains renewal year information. [Copy on file.]
Mr. Jeans explained the spreadsheet indicates that the
Anchorage School District previously had two contracts, one
for 90 buses and another for 77 buses that came due for
renegotiations a year apart. He stated that the department
has since aligned those contracts and that they would both
be up for bid in the year 2001. He added that the same was
true for the school districts in Mat-Su and Fairbanks and
that the three districts were working together to issue a
joint Request for Proposal (RFP).
Mr. Jeans then addressed that effective date saying that it
could be in 2000 and would not impact the intent of the
bill.
Senator Adams commented that in looking at the district
operated routes versus contracted routes, he discovered
that the contracted routes were significantly less
expensive than the routes operated by the districts. He
asked if more of the routes could be contracted.
Mr. Jeans replied that Laidlaw is the major bussing
contractor in the state and that it held the contracts for
Fairbanks, Anchorage and Mat-Su. He shared that the
information Senator Adams referred to was the Anchorage
School District, which runs a duel system.
Co-Chair Torgerson noted the worksheet also shows rate
increases and the percentages of those increases. He asked
if the increases were spread out over the length of the
contract.
Mr. Jeans replied that those increases go into affect right
away and that there would be a 48 percent increase in the
Anchorage contracts in the first year.
Co-Chair Torgerson asked if this increase includes the COLA
clauses.
Mr. Jeans responded that the COLAs are built into contracts
for the out-years and so the 48 percent does not include
the COLA.
Co-Chair Torgerson asked the range of COLAs in the newly
negotiated contracts and if there is a ceiling on what
amount the COLA could be.
Mr. Jeans answered that most contracts are tied directly to
the Anchorage CPI for COLA adjustments.
Co-Chair Torgerson clarified that the FY 00 supplemental
appropriation recently approved by the Committee contained
a 48.9 percent increase for the Anchorage contracts. He
asked if the next year would bring an increase to this
amount because of the COLA and that the total increase over
FY 99 could be 52 percent.
Mr. Jeans affirmed.
Senator Green asked who requires the inclusion of the COLA
language in the contracts and if it was the legislature,
the board of education, the department or another entity.
Tape: SFC - 00 #65, Side B 9:57 AM
Mr. Jeans responded that COLA increases have been included
in the contracts as long as he has worked for the
department and that "it's something that's simply thrown
into the contracts."
Senator Green asked if that meant the COLA adjustments do
not have to be included in the contracts.
Mr. Jeans explained that if COLA adjustments were not
included in the contracts, the result would be that the
contracts would increase for the projected amounts anyway.
Co-Chair Torgerson stressed this issues dealt with the
"heart of the bill," that the legislature's role in the
process is to appropriate the funding to cover the cost of
the contracts. He asserted that he thought this year's
increase was inappropriate considering the state's budget
situation. He stated that the department should not have
authorized the large increases.
Co-Chair Parnell then focused on the Anchorage School
District's contracts and noted that page two of the
spreadsheet showed the 48.9 percent increase only reflects
the increases on the contracted routes. He asked if the
district also has cost increases on the district operated
routes and how they are being addressed.
Mr. Jeans deferred to the first page of the spreadsheet
that showed the total increase including the actual
operating costs to the district for the district operated
routes. He showed where the data for the two routes was
broken down.
Co-Chair Torgerson asked if any other school districts have
district-owned busses and if that information was reflected
in the spreadsheet.
Mr. Jeans replied that some other districts did own their
own busses but were not reflected in the spreadsheet at
this time.
Senator Phillips relayed that the previous fall the state
Board of Education increased the state's reimbursement from
90 to 100 percent of pupil transportation costs through
regulations. He asked what was the rationale behind that
change and how much that increased the state budget.
Mr. Jeans replied that the state board did increase the
reimbursement rate from 90 to 100 percent. He noted that SB
36, passed into law in 1998, stipulated that district-
operated routes would be reimbursed at least 90 percent and
that the current reimbursement reflected the maximum
allowed. He stated that public comments submitted to the
department in response to the new regulations argued that
if reimbursement for the district-operated routes were to
increase to 100 percent, the contracted routes should also
be increased to match. He said that was the board's
rationale for the increase.
Senator Phillips asked how much the increase cost the
state.
Mr. Jeans answered that 3.9 percent increase was reflected
in the spreadsheet and totaled approximately $210,000.
Senator Leman commented that the increase was closer to
ten-percent.
Senator Leman then referred to the impact of the minimum
wage in influencing this legislation. He commented that he
did not approve of the statutory requirement stating that
drivers are to be paid at least twice the minimum wage. He
shared that the reason for this statute was to attract more
drivers and that the argument supporting that bill said
there would be little fiscal impact on the state since
drivers were already paid above that. He asked if drivers
were currently paid more than twice the minimum wage.
Mr. Jeans said contracts show the drivers are paid just
above that amount and explained that the statute allows
that contracts don't have to be renegotiated each time the
minimum wage was increased. Instead, he said, the wages
remain the same until the contracts expire and are
renegotiated.
Senator Leman lamented, "we bring some of this on
ourselves." He suggested repealing the bus drivers' minimum
wage statute citing complaints about unfunded mandates.
Co-Chair Torgerson noted that the Committee would not pass
this bill out today so it was open to amendments.
Senator Adams asked how many contracts in the state had a
CPI attached and what would happen if a provision were
added in this bill that prohibited CPI from any contracts.
Mr. Jeans said if such a provision were in statute, he
believed the bidders would simply include the cost
elsewhere to cover the out-year COLA increases.
Senator Adams then asked if the price of the contracts
reached a certain point if the witness thought the state
should operate pupil transportation itself.
Mr. Jeans did not believe the department wanted to operate
busses in the state.
Senator Wilken referred to Senator Phillips's earlier
question about the cost of contracted routes versus
district-operated routes saying his calculations of the
cost increase for district-operated routes was $470,000.
Senator Green commented that the legislation was coming
from the desire to avoid uncontrolled costs. However, she
stressed there are some districts that will see growth due
to increased student population and those districts should
not be penalized. For those districts with declining
student populations, she believed there should be a cap on
additional costs due to renegotiated contracts.
Co-Chair Torgerson asked if Senator Green's view was that
the contracts renegotiated this year should have been for
less.
Senator Green affirmed.
Co-Chair Torgerson stated that he did not disagree with
that sentiment and noted Senator Green had submitted an
amendment to address the issue.
Senator Leman suggested that it would be more appropriate
to calculate adjustments on student miles rather than
enrollment. He realized that it could involve a complicated
formula but stressed that was the fairest method.
Senator Green pointed out that the State of Alaska is not
required to provide student transportation. With that in
mind, she hoped to reach a point where the state could make
equitable payments to assist the school districts.
LARRY WIGET, Executive Director, Public Affairs, Anchorage
School District, began his testimony.
AT EASE 10:11 AM / 10:17 AM [Related to power outage.]
Mr. Wiget proceeded, stressing that garbage truck drivers
probably make more money than school bus drivers do.
He thanked the Committee for the supplemental appropriation
to cover the costs for the FY 00 pupil transportation.
STEVE KALMES, Director of Transportation, Anchorage School
District, spoke to the factors that resulted in the
increased costs of the contracts. He listed the new
requirements for background checks and drug and alcohol
testing for drivers, increased safety regulations and
chiefly, a lack of competition. He related that when the
contract when out for bid, the district received only one
proposal.
Mr. Kalmes assured the Committee that the district was
making efforts to try to control costs. One example he gave
was that the district is running fewer buses with more
students than in did 1986.
Mr. Kalmes spoke of the district's collaboration with the
school districts in Fairbanks and Mat-Su to establish a
baseline for service.
Mr. Kalmes stressed that one of the difficulties in this
legislation is that different districts provide different
levels of service. He said that those districts currently
providing a lower level of service would be impacted harder
than those providing a higher level of service that could
then be reduced.
Mr. Kalmes referred to earlier discussions regarding the
COLA increases. He also believed that if it were
eliminated, there would be significantly higher up-front
costs on a five-year contract. He addressed the recent jump
in fuel prices, warning that if the contracts could not
contain an allowable increase for fuel prices, the
contractors would bid on the high end of predicted future
fuel prices. He thought that the district has been better
able to control costs because it is allowed to include COLA
adjustments in the contracts. He did not think shorter
contracts would be the answer either because of the lack of
competition. He said that it would not be feasible for a
potential new contractor to establish itself if it was only
guaranteed the contract for a short period of time.
Mr. Kalmes stressed that there are incentives for cost
control in Anchorage, because the pupil transportation
funds compete directly for classroom dollars. He shared
that the district has an upper limit of its budget due to a
tax cap.
Mr. Kalmes next addressed the minimum wage issue, which was
$11.30 per hour for school bus drivers. However, he
lamented, the beginning wage for a transit driver in
Anchorage was $15.02 per hour and the beginning wage for a
trash truck driver was $19.93 per hour. After 14 years of
services, he added, school bus drivers only earn $15.75 per
hour and that school bus drivers make less money today than
they did in 1986. He told the Committee that the contractor
in the district has had to hire over 100 drivers in the
past year, which reflects an over 50 percent turnover. He
stressed that the school bus drivers are not overpaid, are
not competing for these positions and that it is difficult
to maintain a quality workforce.
Mr. Kalmes returned to his comments on setting a baseline
and the impact it would have on districts based on the
level of service provided. He suggested establishing
criteria of acceptable services and allowing the districts
to pay for any additional services it chooses to provide.
Mr. Kalmes asserted that competition was the biggest issue
and that the state no longer had multiple contractors
bidding on services as it did in the 1970s and 1980s. He
explained that Laidlaw was the biggest contractor in the
nation and operated in Canada as well and that a British
firm recently purchased the next two largest contractors.
He stated that the hope was that by the districts combining
to offer a single large contract, another contractor would
try to enter the market. He shared that the last time the
contracts were renegotiated, the district gave an option of
a two-year or a seven-year contract. This was unsuccessful,
he said but that the district was continuing to try to
attract an Outside contractor.
Senator Phillips noted that the spreadsheet indicates about
one-third of the routes were for special needs
transportation. He wanted to know the cost of special needs
pupil transportation versus that for other students.
Mr. Kalmes told of a study the district did in recent years
that found the cost for special needs students was
approximately 14 times the cost of regular students.
Senator Phillips requested the exact figures.
Senator Phillips then referred to the 176 contracted routes
versus 84 district-operated routes and asked for an
explanation of why the district-operated routes cost $905
and the contracted routes only cost $637. He noted that the
contractor has twice as many miles to cover.
Mr. Kalmes responded that the district was broken into
service areas and the difference was what services were
included in that cost. He stated that the contracted rate
only includes the cost of the daily rate for the busses for
contracted services. For the district-operated routes, he
continued all the related costs were figured into the rate,
which included all district transportation employees. He
stated that while his entire salary was figured into the
district-operated routes, half of his time was spent
dealing with contracted services. He added that the routing
department also was included in the district-operated
routes and that when that department was added in-house,
the number of total routes was reduced. He also said safety
training staff, crossing guards and other salaries were
included in the district-operated routes.
Mr. Kalmes also pointed out the significant increases to
district costs in 1999 reflected the purchase of 30 new
busses. He said in the future, these large purchases would
be reduced because the department was implementing a
replacement schedule control the cost fluctuations.
Senator Phillips commented that the legislature was trying
to find a "common denominator" and used various
measurements to determine that. He asked the witness to
identify which measurement he would chose to provide equity
and quality services.
Mr. Kalmes responded that regarding the Anchorage School
District, the salaries of the district employees whose
duties are related to contracted services should be
included in the contracted costs rather than the district's
costs. He stated that when using this method, the total
costs were in line with the actual operating costs.
Senator Phillips if legislation passes, what would the
witness use to determine a common denominator.
Mr. Kalmes statewide basis, calculating cost per student
mile it would be equitable because it costs more to
transport students in Barrow than in Anchorage. He
suggested setting certain standards to identify the costs
that are reimbursable and if a district wants to provide
more services they could pay for them. For example, he said
some districts provide transportation to private school.
Senator Leman asked if the highest paid drivers were paid
twice the minimum wage.
Mr. Kalmes replied that the district currently pays
starting drivers $11.55 per hour and that Laidlaw pays its
beginning drivers $7.30 per hour, which will increase July
1, 2000. He shared that $11.30 is twice the minimum wage.
Mr. Kalmes went on to explain that there used to be two
service providers competing for the district's contracts
and that the contract was usually awarded to each provider
on alternating terms. He said this was because the current
contract holder had to gradually increase the salaries of
drivers over their five-year time of employment. Then the
competing provider, he stated would be able to under-bid
the existing provider, because it could use a starting
salary for all drivers, which the existing provider could
not. Until Laidlaw bought out the competing providers, he
said no contractor was ever able to win consecutive
contracts. He stated that the providers won the contracts
"on the backs of the drivers," which he said was one of the
reasons the statute was changed to require the drivers'
salaries to be at least twice the minimum wage.
Senator Leman thought that statute does not dictate what
the drivers of transit or sanitation services were paid. He
surmised that the salaries were market-based, although he
did not know whether that was appropriate.
Senator Leman also had been told by Anchorage School
District, that one reason for the district-operated routes,
was the measure of competition they instituted with the
contractor. He asked if that would not also drive the
market for school bus drivers.
Mr. Kalmes believed it has helped control the costs and has
also helped the district control costs. He cautioned that
the biggest problem is driver shortage and that it is
difficult to keep employees. He attributed the problem to
the need to increase salaries.
Senator Leman requested a better summary of the cost
allocation than the Committee currently had.
Senator Wilken remarked the conversation relating to the
spreadsheet did not belong in the Committee and was the
reason for the legislation. He asserted the discussion
belonged in the school districts since they would be
sharing in the cost.
Senator Wilken disagreed with having the legislature
setting a model contract that districts have to follow. He
thought the process should be done at the local level
especially if the districts will be sharing in the costs.
He added that he did not object to national standards as
they apply broadly to Alaska.
Senator Green asked how much the Anchorage School District
currently contributes to pupil transportation.
Mr. Kalmes answered that he did not know exactly but that
the amount was over one million dollars. He explained these
costs reflect the district's percentage of the services
that are not required under regulation, including hazardous
training and mid-day kindergarten routes.
Senator Green requested detailed information because she
thought there would be major differences between the
amounts contributed by each district to cover local needs.
Co-Chair Torgerson announced that amendments for SB 256 and
SB 276 would not be heard at this meeting.
Co-Chair Torgerson said when first presented with the bill,
he was inclined to disallowing the supplemental budget
request and requiring the districts to renegotiate
contracts. He said he requested the next witness to prepare
an informal survey of the districts for their reaction.
[Copy on file.]
KARL ROSE, Executive Director, Association of Alaska School
Boards thanked the Committee for the supplemental
appropriation. However, he said that this legislation
pertains to FY 01 and the association had questions to the
bill as currently written.
Mr. Rose stated one of the questions related to the
baseline that the bill establishes using FY 01 contracts.
He asked if the baseline was 100 percent of the contracts
or if it was undetermined, as earlier discussion indicated.
Mr. Rose remarked that he thought it was inappropriate to
address co-payments in the manner prescribed in the bill
because of the recent changes to the foundation funding
formula implemented through SB 36. He argued that the
updated formula does not account for transportation
expenses and to therefore require a co-payment for pupil
transportation was an unfunded mandate.
Mr. Rose understood the need to provide incentives to
school districts to try to control the costs. However, he
stressed the to instigate the co-payment requirement
without addressing the need for securing the necessary
revenue through the foundation formula was inappropriate.
He stated that the districts have tremendous needs and do
need the $5 million the new contracts require.
Co-Chair Torgerson wanted district to be involved in the
process so the legislature was not "blindsided" with
greatly increased contracts.
Co-Chair Torgerson stated that although amendments would
not be acted upon at this meeting, he wanted to explain
them for the benefit of those present.
Amendment #1: This amendment makes the following changes to
the title of the bill:
Page 1, line 1, following "students;"
Insert "and to minimum expenditure for
instruction;"
The title then reads:
"An Act relating to the state funding for
transportation of public school students; and to
minimum expenditure for instruction; and
providing for an effective date."
The amendment also inserts a new bill section to read:
"Sec. 2. AS 14.17.520 is amended to read:
(a) A district shall budget for and spend a
minimum of 80 [70] percent of its school
operating expenditures in each fiscal year on the
instructional component of the district budget."
New Text Underlined [DELETED TEXT BRACKETED]
Co-Chair Torgerson said he prepared this amendment because
he felt it was important that the districts focus on the
bigger concern of directing most funds directly to
instruction than the concern over bussing contracts. He
asserted the ten-percent increase over what was stipulated
in SB 36 was in direct response to the Board of Education's
action the past weekend to allow the administrative costs
to be included in classroom expenditures. He noted the
allowed administrative costs consisted of salaries of
principals, assistant principals, support staff for school
administration, supplies, materials, communication and
school administration travel. He stressed that while the 80
percent figure might not be the best choice, it was not the
legislature's intent to allow the state school board
administration to arbitrarily redirect the funds to
administration.
Senator Green added that if changes to SB 36 were
considered, the Committee also needs to look at the waiver
provision that allows some districts to have a higher
percentage of funds spent for administrative costs. She
stressed that the waiver provision was very liberal.
Co-Chair Torgerson said that while the waiver provision was
important, the board's action circumvented the entire
waiver process. He admonished that the board was making
changes to the funding formula process before it even took
effect.
Senator Adams noted that while as much money as possible
should go to students, it was not possible to meet specific
percentages. He spoke to fuel costs and the extensive
deferred maintenance needs.
Co-Chair Torgerson understood that concern as discussed
when SB 36 was debated upon and that was his reason for
supporting the waiver.
Tape: SFC - 00 #66, Side A 10:50 AM
Amendment #2: This amendment inserts language into the bill
on page 1, following:
(2) 100 percent of the cost of operating the
student transportation system when the transportation
is provided under a contract with the school district,
except that only 50 percent of those costs that are in
excess of the amount received by the school district
for student transportation reimbursement in fiscal
year 2001 shall be reimbursed to the school district.
The added language reads:
"; the 50 percent limitation imposed under this
paragraph does not apply to student transportation
system operating costs that are incurred as a result
of an increase in student enrollment."
New Text Underlined [DELETED TEXT BRACKETED]
Senator Green explained the amendment, which exempted
districts that have increased enrollments from the 50
percent limitation.
Senator Adams requested the effective date be considered.
Co-Chair Torgerson was disappointed the Committee did not
hear from more school districts and said the bill would be
brought up again.
Senator Wilken noted a resolution in support of the bill
from the Fairbanks North Star School District.
The bill was HELD in Committee.
COMMITTEE SUBSTITUTE FOR SENATE BILL NO. 256(HES)
"An Act relating to regulation of managed health care
and allowing physicians to collectively negotiate with
a health benefit plan that has substantial market
power."
This was the second hearing for this bill in the Senate
Finance Committee.
BECKY CERNEY, Director of State Legislation, American
Medical Association based in Chicago, Illinois testified to
the alarming trend with the increased number of unfair
contracting provisions that hamper the ability for
physicians to provide proper care. She said some of the
contract provisions related to the ability to refer
patients to specialists, administer certain medications and
interpreting what medically necessary care is in the best
interest of the patient.
Ms. Cerney shared that the efforts to correct these
provisions have been unsuccessful resulting in 13 states,
including Alaska, that have introduced legislation to
permit physicians to enter into contract negotiations as a
collective group.
Ms. Cerney told the Committee it might hear from
representatives of the insurance industry saying that
physicians are already permitted to negotiate over
contracts. That is not true, she stressed, citing that two
or more physicians are prohibited under the anti-trust law
from coming together to negotiate over contracting
provisions. She suggested the representatives could be
referring to the ability of independently practicing
physicians to come together. She remarked that this
provision was ineffective because it asks physicians to
give up "their practice autonomy" for the purpose of coming
together to discuss these matters. She said that the cost
of forming these units was over $1 million.
Ms. Cerney asserted that physicians needed to be allowed
another way to negotiate for provisions that are most
affective for their patients. She stated that this bill
would enable physicians to deliver the care that is most
proper to their patients.
Ms. Cerney spoke to the strong trend in the nation with to
adopt statewide regulations to address this matter. She
added that six additional states were "watching and
waiting" and that this was a good opportunity for Alaska to
help its patients.
Senator Green asked if any practices currently in place in
Alaska were based on the Medicare model with restrictions
on provided services, unauthorized prescriptions, etc.
Ms. Cerney would have to defer to someone in Alaska's
medical industry.
Senator Green commented that a major concern of many
physicians related to Medicare restrictions and she wanted
to know if the insurance companies' restrictions were
nearly as egregious as those were.
Ms. Cerney spoke to her experience with Medicare provisions
and stated that said some are much more favorable than
those imposed by some private sector insurance providers.
Co-Chair Parnell noted the primary criticism of this bill
is that the health care costs would rise and asked the
witness to address the matter.
Ms. Cerney asserted that argument is raised for every
legislation pertaining to managed care regulation. She
admitted there is a provision in this bill that would
submit the oversight entity, the attorney general, to
impose a fee to cover the administrative review. If this
bill were to result in premium increases, she said she
would be "astounded" and that other threats of increased
costs have proven untrue.
Co-Chair Parnell asked which states or studies should the
Committee refer to with regard to increase costs.
Ms. Cerney answered there are a number of studies that came
out of the managed care liability legislation that can be
applied to other types of legislation. She cited a study
for the Kaiser Family Foundation that projected cost
increases associated with liability legislation would be
between three to 13 cents per member per month. She said
the actual outcome of the liability legislation were even
less because there has been less litigation than expected.
Senator P. Kelly asked what would be the affect on cost of
a state action doctrine that did not include fees He had
heard that a similar doctrine had been attempted elsewhere.
Ms. Cerney replied that it was impossible to separate the
two issues from any bill. She explained that whenever
contractual items were negotiated, it would be necessary to
look at the contract in its entirety. She stated there are
a number of instances of the Federal Trade Commission (FTC)
pursues physicians for negotiating over an individual
provision because it is assumed that any negotiations would
affect the physicians' reimbursement.
Co-Chair Torgerson noted those on teleconference.
Co-Chair Torgerson asked Senator P. Kelly to prepare a
committee substitute that incorporates all five submitted
amendments rather than having the Committee act upon each
one. [Copy of amendments on file.]
Co-Chair Torgerson ordered the bill HELD in Committee.
ADJOURNED
Senator Torgerson adjourned the meeting at 11:01 AM.
SFC-00 (25) 03/27/00
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