Legislature(2005 - 2006)SENATE FINANCE 532
04/19/2005 09:00 AM Senate FINANCE
| Audio | Topic |
|---|---|
| Start | |
| SB142 | |
| SB160 | |
| SB100 | |
| SB70 | |
| SB112 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | SB 142 | TELECONFERENCED | |
| + | SB 160 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | SB 131 | TELECONFERENCED | |
| += | SB 70 | TELECONFERENCED | |
| += | SB 100 | TELECONFERENCED | |
| += | SB 112 | TELECONFERENCED | |
MINUTES
SENATE FINANCE COMMITTEE
April 19, 2005
9:10 a.m.
CALL TO ORDER
Co-Chair Green convened the meeting at approximately 9:10:29 AM.
PRESENT
Senator Lyda Green, Co-Chair
Senator Gary Wilken, Co-Chair
Senator Con Bunde, Vice Chair
Senator Lyman Hoffman
Senator Donny Olson
Senator Bert Stedman
Senator Fred Dyson
Also Attending: JANE ALBERTS, Staff to Senator Bunde; NONA WILSON,
Legislative Liaison, Department of Transportation and Public
Facilities; KIP KNUDSON, Deputy Commissioner of Aviation,
Department of Transportation and Public Facilities; VERN JONES,
Chief Procurement Officer, Division of General Services, Department
of Administration; KEVIN BROOKS, Deputy Commissioner, Department of
Administration; JIM DUNCAN, Business Manager, Alaska State
Employees Association; SCOTT HAWKINS, Representative, Alaska Supply
Chain Integrators; PETE FORD, Southeast Region Manager, Alaska
State Employees Association; KIM CARNOT, Staff to Senator Green;
DEAN GUANELI, Chief Assistant Attorney General, Criminal Division,
Legal Services Section-Juneau, and Chief Assistant Attorney General
Office of Special Prosecutions & Appeals, Office of the Attorney
General
Attending via Teleconference: PAMELA LEWIS, Statewide Chief,
Aviation Leasing and Airport Land Development, Department of
Transportation and Public Facilities; From Nome: MITCH ERICKSON,
Representative, None Chamber of Commerce; From Anchorage: LAURA
LAWRENCE, Procurement Specialist, Central Region, Department of
Transportation and Public Facilities; BARRY JACKSON, Resource Data,
Alaska Supply Chain Integrators
SUMMARY INFORMATION
SB 142-REGIONAL SCHOOL BD LAND OWNERSHIP
The Committee heard from the sponsor and the Department of
Transportation and Public Facilities. The bill reported from
Committee.
SB 160-STATE PROCUREMENT ELECTRONIC TOOLS
The Committee heard from the bill's sponsor, the Department of
Administration, the Department of Transportation and Public
Facilities, Alaska Supply Chain Integrators, and took public
testimony. A committee substitute was adopted and the bill was held
in Committee.
SB 100-ENHANCED 911 SURCHARGES
The Committee heard from the sponsor, adopted a committee
substitute and one amendment, and reported the bill from Committee.
SB 70-CRIMES INVOLVING CONTROLLED SUBSTANCES
The Committee heard from the bill's sponsor and the Department of
Law. A committee substitute and one amendment were adopted. The
bill was held in Committee.
SB 112-TAX ON REAA RESIDENTS
The Committee heard from the bill's sponsor. A committee substitute
and one amendment were considered but not adopted and the bill was
held in Committee.
CS FOR SENATE BILL NO. 142(L&C)
"An Act relating to ownership of land by regional school
boards; and providing for an effective date."
This was the first hearing for this bill in the Senate Finance
Committee.
Senator Bunde, the bill's sponsor by request of the Senate Labor
and Commerce Committee, stated that this bill would correct
"conflicting statutes regarding the ownership of land for State
airports". While "the Legislature clearly intended to allow
regional school boards the option of greater control of their
facilities through acquisition of title, there is no record that
the Legislature, however, intended to do so at the cost of federal
liability, significant loss of federal funding, and a degraded
state airport system".
Senator Bunde noted that members' bill packets include a December
11, 2001 Department of Law legal opinion [copy on file] addressed
to then-Commissioner of Department of Transportation and Public
Facilities (DOT), Joe Perkins, that reviewed the intent of the
Legislature in regards "to this issue and the conflicting lands
needs".
Senator Bunde, reading from the Sponsor Statement, stressed that,
"several regional schools are located on state properties, some in
very close proximity to active runways and airport infrastructure.
At various times, regional school boards have requested that DOT&PF
convey full title of the airport land to the schools. This has
caused confusion, staff time in both the Departments of Education
and DOT&PF, as well as attorney costs, to defend DOT&PF's title to
its airport property."
Senator Bunde emphasized that the State receives "a substantial
amount of money to build and maintain runways" from the Federal
Aviation Administration (FAA). There was no Legislative intent "to
breach FAA grant agreements". This bill would benefit the public,
the regional school boards, the Department of Education and Early
Development and DOT by clarifying the intent of the conveyance
language to exclude airport properties."
JANE ALBERTS, Staff to Senator Bunde, directed the Committee's
attention to a list of areas on a handout titled "REAAs where
Airport/DOT needs may overlap:" [copy on file], which was provided
by Pamela Lewis of the DOT. The handout identifies areas in which
"there could be possible conflicts between the Department of
Transportation and Public Facilities and the Regional School
Boards". It should be noted however, that there is no indication
that a conflict "might be brewing" in any of these areas at this
time.
Senator Bunde read the list for the record: possible areas of
conflict in the Northern Region would include Anvik, Bettles,
Galena, Noatak, Pilot Station and Unalakleet; areas in the Central
Region would include Aniak, Cold Bay, Illiamna, Lime Village and
Willow.
Senator Hoffman asked the manner through which this legislation
would resolve the conflict.
Senator Bunde responded that the bill would clarify that the State
would "control airport land and that the airport land could not be
absorbed by the school district".
Senator Hoffman asked regarding the situation that prompted a
school district to seek title of the airport property.
NONA WILSON, Legislative Liaison, Department of Transportation and
Public Facilities, expressed that one example of the confusion
caused by the existing State Statute occurred when the Yukon-
Koyukuk Regional School Board made an administrative claim for
school property at the Bettles Airport in the year 2001. The school
in Bettles, which was constructed in the 1970's, "is very close to
the active runway, and is, in fact, partially in front of the
building restriction line (BRL). A BRL limits construction of
improvements near a runway for safety purposes. The school is
actually located in an area identified by DOT and the FAA as being
needed for future aviation purposes".
Ms. Wilson continued that during subsequent discussions with the
school district, DOT "obtained an Attorney General's Opinion,
basically, in order to protect the integrity of the airport". While
some non-conflicting BRL areas were identified, perimeter and
runway safety issues were, in accordance with FAA guidelines, non-
negotiable.
Ms. Wilson informed the Committee that similar Rural Education
Attendance Area (REAA) airport title requests were made by the
Aleutian Regional School District near Cold Bay in 1986 and at the
Lake and Peninsula School District in 1994. Rather than the purpose
of the bill being to challenge school districts, its purpose would
be to "rectify some language that has created some sticky
situations in the past".
Senator Hoffman voiced that, while he understood the position of
DOT, he surmised there must be safety concerns on the part of the
schools. To that point, he asked that an opinion on behalf of "the
school board's interest" be provided; there must be some education
concerns as otherwise there would be no desire to disrupt
transportation in those areas. A solution might be to move the
location of the school.
Ms. Wilson deferred to Ms. Lewis of DOT who was more familiar with
the situations in the Northern communities.
Senator Hoffman asked whether a representative of the Department of
Education and Early Development might be available to provide their
perspective as opposed to someone working for DOT.
Co-Chair Green asked whether a local community city council or
school board member might better provide the schools' position.
Senator Hoffman replied that the Department of Education and Early
Development would be able to provide information regarding the
situation for each of the communities on the aforementioned list.
Senator Bunde, Chair of the Senate Labor & Commerce (L&C)
Committee, conveyed that the Department of Education and Early
Development had raised "no interest or concern" during the L&C
Committee hearings on this bill.
Co-Chair Green asked whether the Regional School Boards, the Alaska
Association of School Boards, or the Alaska Municipal League had
presented testimony to the L&C Committee.
Senator Bunde replied in the negative.
PAMALA LEWIS, Statewide Chief, Aviation Leasing and Airport Land
Development, Department of Transportation and Public Facilities
testified via teleconference from offnet site in Fairbanks to
provide insight to the issues that might have prompted the Regional
School Boards to ask for title to the airport property. The Bettles
request occurred at a time when "the school was fighting" to remain
open due to a decline in student enrollment. "The community
desperately wanted the school to stay open." DOT had leased the
land to the school for several years; however, "at some point" in
the future, the building might have to be relocated behind the BRL.
She speculated that the reason for the title request might have
been an attempt "to secure a place for them to retain the school."
The issues behind the Cold Bay or the Lake and Peninsula School
District requests were unknown to her. However, she noted that a
tremendous amount of DOT time and resources were exerted in the
effort of explaining why the title to that land could not be
""relinquished".
9:23:24 AM
Senator Hoffman clarified that rather than his question being about
the issues relating to the relinquishing of the title, which was
the focus of this bill, his question was in regards to the "bigger
issue" of the safety of the students in the schools. "Students and
airplanes don't mix." Therefore, he questioned whether any of the
school district efforts were an attempt to address that issue by
acquiring the land so that such things as a fence might be erected
to further students' safety. Student safety should be a concern.
9:24:38 AM
Ms. Lewis expressed that she "absolutely agreed" with Senator
Hoffman about the safety issue. However, to her knowledge, none of
the requests were based on the premise of acquiring land to erect
fences or an effort to make the facility safer. To that point, the
Department of Transportation and Public Facilities has taken
responsibility for such things as erecting fences to address the
"serious concerns of runways and students not mixing".
9:25:47 AM
Senator Hoffman asked, therefore, about the "conflict" that had
prompted the school districts to further the airport title
requests.
Senator Bunde speculated that a school district might have desired
to control the airport land, which in many communities might be the
primary means of accessing a community, in speculation of it being
"a potential revenue generator".
Senator Bunde noted that, in addition to the student safety
concern, another safety concern is that walkers and things as four-
wheelers often utilize runways for recreation.
Senator Bunde remarked that the State has two choices in regards to
this bill: either continue its ownership of the airport land or
return the money that the federal government "has provided to
develop that airport". Fencing the airport area to address the
safety issue would be the "cheaper" of the two options.
9:27:09 AM
Co-Chair Green understood that the bill's primary purpose would be
to resolve the conflict that exists between the federal FAA
policies and State Statute regarding the conveyance of airport land
titles.
Senator Bunde concurred. However, the safety issue is a valid
concern. One manner to address that issue would be to control
access to the airport land. DOT might desire to address that
concern by erecting fences. That would be a separate discussion, as
the local community might not desire that.
9:28:13 AM
Co-Chair Green pointed out that it is common for things such as
schools, businesses, the runway, and other major components of a
village to be built in concentrated areas in small communities.
9:28:44 AM
Senator Olson asked whether the BRL specifications have been
altered over time.
9:28:58 AM
Ms. Lewis responded that the BRL was revised in the 1980s as a
result of a new master plan being developed for the Bettles
airport. The FAA approved that master plan and "a grant for further
development" of the airport was also approved shortly thereafter.
She was unsure of the conditions of the original BRL.
Senator Olson understood that the current Bettles' BRL specifies
that the State owns title to land up to 750 feet from the middle of
the runway.
Ms. Lewis concurred.
Senator Olson asked whether different classes of airports had
differing BRL standards. Some airports have the capacity to handle
large aircraft such as jets while others could only accommodate
small aircraft.
Ms. Lewis affirmed that there are different classes of airports.
Senator Olson asked whether this would result in there being
different BRL parameters.
Ms. Lewis was uncertain as to whether the type of airport or its
classification was pertinent to this discussion. This bill is
limited to addressing the title "to the land underlying the school
facilities". She deferred to Kip Knudson, the DOT Deputy
Commissioner of Aviation to address that question.
Senator Olson asked whether the Northwest Arctic Borough School
District, the Lower Yukon School District, and the Bering Strait
School District, which are in his election district, were notified
about this legislation. He also distributed a map [copy on file]
depicting that the community of Noatak's school is adjacent to its
airport.
Ms. Lewis remarked that rather than separate notices being sent to
the school districts, routine notification regarding the
legislation was conducted.
Senator Olson surmised therefore that the three school districts
"have not been notified of this possible action."
Ms. Lewis reiterated that routine notification procedures had been
conducted.
9:32:08 AM
KIP KNUDSON, Deputy Commissioner of Aviation, Department of
Transportation and Public Facilities, voiced concern that safety
issues were being interjected into the bill at hand. Despite the
State's massive land holdings, there is extremely high competition
for buildable land in village areas. The fact that airports have
some of the best land in the villages is part of the reason that
some schools are located on airport property. No other economically
feasible building site might have been available. Such situations
have led to there being "an uneasy relationship" between DOT and
the villages.
Mr. Knudson stated that safety concerns have been an on-going
issue. DOT would request that schools be built elsewhere were other
building sites an option.
Mr. Knudson shared that prior to the introduction of this bill, he
had discussed the issue with Eddy Jeans, Director, School Finance,
Department of Education and Early Development. Mr. Jeans contacted
the affected school districts about the proposed bill; no "negative
feedback" had been received.
Mr. Knudson reiterated that the focus of the bill is limited to the
issue of land title. No request would be made to a school district
to remove a school from the airport land, unless, through the
development of a long-range plan, another feasible site might be
identified. Were that the case, DOT would assist in facilitating
that option in conjunction with any construction project that might
be occurring.
Senator Bunde, referencing the Noatak map provided by Senator
Olson, spoke to the beach erosion issue facing the community. He
noted that relocation of the school was included in the long-range
plan to address the erosion issue.
Senator Olson clarified that a river rather than the ocean was the
cause of the erosion being experienced in Noatak. To that point, he
whether Mr. Knudson needed a copy of the Noatak map for reference
purposes.
9:34:50 AM
Mr. Knudson responded that he was "painfully aware" of the erosion
issue facing the Noatak community. The dilemma was whether to move
the school for $20 or $30 million or to move the airport for $20 or
$30 million.
Senator Olson noted that, as depicted on the map, the erosion was
projected to encroach upon the airport's land by the year 2010. He
asked therefore whether future plans might include moving the
airport.
Mr. Knudson informed the Committee that the Department was
currently developing a master plan. Alternatives, including moving
or retaining the airport, were being evaluated. Nonetheless, "the
school is the most pressing issue at the moment".
Co-Chair Green understood that the State, specifically DOT, had no
intention of transferring title of property to any regional school
board, primarily in order to avoid litigation and the repayment of
FAA funding. Thus, the issue at hand is an attempt to address the
federal and State conflict. While Legislators would like to resolve
the issue to better their own district, "the greater cause of what"
is being addressed in this legislation must prevail.
Senator Olson asked Mr. Knudson how non-support of this legislation
would affect federal funding of the identified Rural airports.
Mr. Knudson assured that "at this point", DOT is "not at risk of
losing federal funds". The issue would be to resolve "the conflict
and confusion that arises between the State Statute allowing
districts to claim title to State land and the federal requirement
that we maintain our airport boundaries". This legislation would
"resolve a nagging bureaucratic problem."
Co-Chair Wilken moved to report the bill from Committee with
individual recommendations and accompanying fiscal notes.
There being no objection, CS SB 142(L&C) was REPORTED from
Committee with zero Fiscal Note #1, dated March 18, 2005, from the
Department of Education and Early Development and zero Fiscal Note
#2, dated April 4, 2005, from the Department of Transportation and
Public Facilities.
SENATE BILL NO. 160
"An Act relating to a procurement and electronic commerce
tools program for state departments and instrumentalities of
the state; and providing for an effective date."
This was the first hearing for this bill in the Senate Finance
Committee.
9:38:24 AM
Senator Bunde, the bill's sponsor by request of the Senate Labor &
Commerce Committee, stated that this legislation would assist in
modernizing the State's procurement methods by transitioning the
State away from a "pencil and paper" procurement system toward an
electronic (e-commerce) system. This "Supply Chain Modernization
Program" would provide financial benefits to the State. He read
segments of the Sponsor Statement as follows.
…it is very important that the Legislature remain focused on
the need to deliver long-term reductions in the cost of
government. Therefore, this bill renames, expands and extends
the pilot procurement, eCommerce and supply chain management
program authorized by HB 313 in the 2003 Legislative Session.
The program is already delivering savings in the cost of
overhead and administration. … It needs to be expanded and
extended to reach its full potential.
Overhead costs represent a significant portion of the total
cost of government. However, the State of Alaska generally
performs overhead functions using outmoded tools and methods.
Private industry has delivered considerable gains in
productivity during the past two decades by contracting out
back-office functions to specialist firms and installing
modern computer-based systems. It is time that State
government embraces these techniques and participates more
fully in the U.S. productivity boom.
Senator Bunde noted that projected annual net labor cost savings
for the fourteen primary State agencies in which the e-commerce
system would be implemented would range from two to five million
dollars. Total cost savings for goods and services could range
between five to twenty-five million dollars. In addition, an
increased degree of efficiency would occur, as the e-Commerce
system would increase the speed of acquisitions and purchasing.
9:41:04 AM
Senator Bunde stated that the adoption of HB 313 during the 2003
Legislative Session authorized a three-year "Pilot Procurement and
Internet e-Commerce Program" specific "to two agencies and two
other state instrumentalities. Cost savings on administrative
salaries and benefit burden are currently projected to exceed
$150,000 over this two-year period. This represents a savings on
procurement administration of over 20%. Cost savings on goods and
services will evolve over time as the program matures and other
regions and agencies are added, and the resulting volume savings
and purchasing can be obtained." Support of this bill "would help
move the State of Alaska into the Twenty-first century".
Senator Hoffman recalled the discussions that transpired in 2003
when HB 313 was adopted. Because there was concern regarding the
possible impacts of the Program, it was limited to two State
agencies and two other State institutions for a three-year period
in order to allow the Legislature could evaluate the program.
Therefore, he questioned the reason for considering this
legislation at this time as it would "be premature" to continue it
prior to a complete report being compiled.
9:43:05 AM
Senator Bunde stated that there is evidence that the program is
working well. "It has worked exceptionally well in the private
sector". Acting now would be financially beneficial.
Senator Hoffman voiced concern about whether sufficient data is
available from which to make a determination as to the success or
failure of the program. While evidence might support there being
monetary savings, other drawbacks might become evident. He urged
that the complete report be finalized before further action
occurred.
9:44:17 AM
Senator Bunde anticipated there to be resistance to changing the
process, regardless of whether action was taken now or in three
years time. Monetary savings, "sooner rather than later", should
prevail. Others might disagree with this position.
Co-Chair Green noted that an abundance of back-up material [copies
on file] accompanies Senator Bunde's sponsor statement.
9:45:04 AM
VERN JONES, Chief Procurement Officer, Division of General
Services, Department of Administration, shared that, upon the
passage of HB 313, which implemented the State's Pilot Procurement
Program, the Department issued a Request for Proposals (RFP) for a
private contractor to outsource State procurement functions for the
Southeast Region of the Department of Transportation and Public
Facilities (DOT). A feasibility study was conducted as required
under organized labor bargaining unit agreements, and subsequently,
the contract was awarded to Alaska Supply Chain Integrators (ASCI).
The bill, which has a contract termination date of June 2006,
limited the pilot procurement program to two departments and two
instrumentalities of the State. ASCI has been coordinating the
procurement program for DOT for nine months.
Mr. Jones stated that this bill would eliminate the restrictions on
the number of State departments and instrumentalities that could
implement this procurement program. In addition, it would eliminate
the June 2006 termination date of the program. The Labor & Commerce
committee substitute being considered would require the contractor
contract include the Alaska Bidder and other preferences
requirements.
9:46:52 AM
Senator Hoffman asked whether sufficient information is available
from which to determine the success of the program.
9:47:17 AM
Mr. Jones responded that it is "the Administration's position that
this program is still in transition". At this time, it would be
unfair to label it as being a "failure"; it would be premature "to
draw any firm conclusions" about the program.
Senator Olson asked whether Mr. Jones' remarks could be indicative
of there being "a sense" that the program is a failure.
Mr. Jones responded that that is not the Department's or the
Administration's position. He clarified that it would be
"premature" to label the program as either a success or a failure.
9:48:27 AM
Senator Olson understood that the University of Alaska has a
different procurement mechanism in place. To that point, he
inquired as to whether the University has opted out of the State's
procurement process.
Mr. Jones explained that the University is required "to adopt
substantially similar procedures to those contained in the
Procurement Code". Therefore, while the University "is not
technically governed by the Procurement Code, they, in essence
follow the spirit and intent and most of the provisions that are
contained in the Procurement Code."
Senator Olson asked for further information in this regard.
Mr. Jones responded that Alaska Statute 36.30 requires the
University "to comply substantially with the provisions" in the
State Procurement Code.
Co-Chair Wilken, noting that the backup material contains the first
audit of the Pilot Program, asked the status of the second audit.
9:49:53 AM
Mr. Jones responded that, while the complete second quarter audit
is not yet available, the cost of goods portion of the second
quarter audit has been completed and is available.
Co-Chair Wilken asked when the second audit in its entirety would
be available.
Mr. Jones anticipated that the second audit to be completed within
the next week.
Co-Chair Wilken asked whether the second audit would contain
information pertaining to the three-month quarter ending December
31, 2004.
Mr. Jones affirmed.
Co-Chair Wilken noted that a substantial amount of information was
provided in the first audit. He asked Mr. Jones to identify
information in the audit from which the Committee could "form an
opinion".
Mr. Jones understood Co-Chair Wilken's remarks to infer that "the
first quarter audit was really inconclusive".
Co-Chair Wilken disagreed that to be the point of his remarks, as
he could not understand the report. "This is a report built to
confuse not to inform." The hope is that the second report would
provide "decision makers" with more substance. He asked who was
responsible for the report.
Mr. Jones affirmed that he was.
Co-Chair Wilken opined that it was "a very poor report". Subsequent
reports should be improved.
Co-Chair Wilken asked how much staff time is being devoted to the
project.
Mr. Jones responded that the time varies. A number of people,
including himself, a dedicated DOT contract administrator position,
and a Department of Administration contract manager, devote a
substantial amount of time to the program.
9:52:21 AM
Co-Chair Wilken specifically asked the number of hours in each
workweek that Mr. Jones devotes to this "important" project.
Mr. Jones determined that he spends a couple of hours a week on the
project.
Co-Chair Wilken expressed that "a deal is a deal". He disclosed
that his being one of the initial supporters of the project;
however, now he is "a little concerned" and "conflicted" about the
efforts being exerted to the program. The expectation was that six
quarterly progress reports would be provided. He noted that the
privately owned company, British Petroleum, has experienced good
results with this type of a program.
Co-Chair Wilken perceived the Administration to be "somewhat
detached" from this effort. "Some influence/management direction"
must be provided to the project; else wise, the Legislature would
continue to receive reports similar to the first audit report.
Therefore, he supported tabling further action on the legislation
until the next Legislative Session. That would allow three more
audit reports to be compiled through which the Legislature could
better evaluate the program.
Co-Chair Wilken characterized the current program scenario as being
"set adrift" with "the bureaucracy fighting the privatization
people" and there being no one in the middle to bring the two sides
together. "Someone needs to manage the program" in order to provide
the Legislature the information necessary to make decisions about
the program. He suspected that, were that done, the decision would
be to support the program. The benefits of the program as
highlighted in Senator Bunde's remarks would be realized.
Co-Chair Wilken stated that were the concept of the pilot program
undermined by "delays, a lack of cooperation, and falsehoods on
both sides", the Committee might be required "to craft it at this
table" during the next Session. That would not be the preferred
course of action. "Really good data, understandable by the
Committee, understandable by this Legislature" must be provided by
next January.
Co-Chair Wilken noted that he had conveyed his reluctant to vote in
favor of this legislation to Senator Bunde. This hearing would be a
determining factor in his decision.
9:55:39 AM
Senator Bunde moved to adopt committee substitute, Version 24-
LS0224\C as the working document. This committee substitute would
serve to "clean up" some provisions of the bill.
Senator Hoffman objected for explanation.
KEVIN BROOKS, Deputy Commissioner, Department of Administration,
assured the Committee that the Department is committed to the
effort to analyze the Pilot Procurement Program.
9:57:05 AM
Mr. Brooks spoke to the Department's assistance in developing
language in the committee substitute that would "clean up" Title 36
preferences currently applicable to State purchases. These
preferences have been expanded over time and, as result, have
become quite cumbersome. While no changes were made to the
preferences themselves, efforts were made to develop language that
would make the application of those preferences "easier to
administer as procurements are made".
Senator Hoffman asked for assurance that the changes included in
Version "C" would, therefore, be limited to "cleaning up" current
language.
Mr. Brooks affirmed.
Senator Hoffman removed his objection.
9:58:26 AM
Senator Dyson inquired to the obstacles that "have kept our
existing workforce from" being more innovative in the purchasing
process.
Mr. Brooks responded that no State's procurement office employee
would "dispute" the fact that "the implementation of e-commerce
tools would be a great benefit to the State". Some monetary
investment would be required to automate the existing "labor
intensive paper process" which is "based on a procurement code that
in many cases is not meant to be as efficient as it is to be fair".
It is designed to provide any bidder a chance to bid for public
dollars. The rules governing the Pilot Procurement Program
contractor in procuring goods and services for the State are "more
relaxed" than those required of a State agency.
Mr. Brooks noted that, although not occurring on a wide scale
basis, efforts have been undertaken across departments to automate
the procurement processes. Some have been successful.
9:59:52 AM
Mr. Brooks stated that the Department's perspective on the bill "is
that there is room for improvement" in the manner in which the
State currently procures goods and services. He disagreed that the
Pilot Program "has been cast adrift", as the Department is anxious
to determine whether the program would work.
Senator Dyson restated the question as to what might have prevented
the State from advancing its procurement methods to align with
procurement trends that have occurred elsewhere over the past
twenty-five or thirty years; specifically whether the State's
existing procurement code or Statutes are preventing the existing
workforce from accomplishing "these really imaginative things".
Mr. Brooks expressed that "the procurement code is not an
impediment to automating" the procurement progress.
Senator Dyson asked whether any of the State's bargaining unit
agreements were an impediment to transitioning toward more
efficient modes of conducting procurement.
Mr. Brooks did not recognize bargaining unit agreements as being an
impediment.
Senator Dyson asked whether the Legislature has refused to provide
the necessary resources, specifically computers and networks that
would be required to advance the process.
Mr. Brooks responded that the necessary computer resources and
staff are available; however the necessary software that would be
required to automate State government has not been procured.
Senator Dyson asked the reason for the absence of such software.
Mr. Brooks responded that no recent software-funding request had
been made; higher priorities, such as new payroll and accounting
systems, have preceded the procurement software request. However,
it should be noted that "the procurement module for automation" is
in the Department's five-year plan going forward.
Senator Dyson opined therefore that since the issue is not the law,
the procurement code, or the people, then "ultimately" it's the
lack "of will to do it". To that point, he asked whether it was the
Department's intention "to move towards the very best, most modern
kind of procurement system" available.
Mr. Brooks affirmed that to be the intent.
Senator Dyson voiced appreciation for the fact that an entity was
willing to participate in the Pilot Program and "commit a lot of
money and resources" to demonstrate that such a program would work
in the State's environment. "That's the genius of the free
enterprise system."
Senator Dyson asked what might occur where the State to authorize a
private contractor to conduct all or a major portion of the State's
key goods and services procurements functions, and then the
contractor discontinued their service, went out of business, or
increased their fees astronomically.
Mr. Brooks speculated that the alternative would be for the State
to reassume the responsibility or hire another contractor.
Senator Dyson asked how much notification of separation is
specified in this legislation.
10:05:10 AM
Mr. Brooks communicated that the Pilot Program established by HB
313 would terminate in June 2006, or in approximately 14 months.
During that time period, efforts would be exerted to determine
whether the program would be feasible to expand to other State
departments. SB 160 would provide the authority needed to expand
the program in such a manner. In addition, passage of SB 160 would
assure the contractor that the State could continue the program.
Senator Dyson recognized, as did the Department, that this program
could provide a multitude of possibilities. However, the specific
question is how, after the State "committed major portions of its
State business into their hands", the State would continue to
conduct "its business" were the contractor to un-expectantly "cease
to function".
Mr. Brooks "speculated" that the State would be required to hire
staff or hire another contractor.
10:06:30 AM
Senator Dyson asked whether the conditions in this bill would
adequately provide the time and file/software access that would be
required were the State required to resume those functions.
Mr. Brooks replied that in that event, "the procurements being
performed by the contractor would be available to the State".
Senator Dyson specifically asked whether the State would have
access to the associated software files.
Mr. Brooks replied in the negative; software files are proprietary
to the contractor.
After a brief exchange with Senator Dyson, Mr. Brooks stated that
even thought the software was proprietary, the fact that the State
had provided data to the contractor at the onset of the Pilot
Program, would allow that action to be reciprocated at the
termination of the program. However, he voiced being unfamiliar
with the specific terms of the contract.
Senator Hoffman asked whether other states have privatized their
procurement process.
Mr. Brooks remarked that no other state has outsourced its
procurements.
Mr. Jones affirmed that to be correct.
Senator Hoffman asked regarding "the public policy reason" for that
decision.
Mr. Brooks voiced being unsure of the reasons that other states had
not furthered such a privatization endeavor. "The issue for Alaska
is" whether we can "provide this service better; there is fair
evidence that procurement can be done more efficiently". The public
policy issue question should include "who does procurements for the
State". The issue of public trust is involved when there is "an
expenditure of State funds; do we value that vendors have a fair
shake at State dollars and that there is a fair and open process
for doing that". These questions are valid, and this Pilot Project
would provide the opportunity to determine the answers to such
questions. Even though "the jury is still out" on whether the
program would be an overwhelming success, this bill would further
the opportunity to investigate the endeavor. While "the data is
inconclusive" at this point, there is no reason to discontinue the
investigation as to the program's potential.
10:09:30 AM
Senator Olson, noting that "an essentially zero" fiscal note
accompanies the bill, asked what specific costs would be associated
with utilizing a private contractor.
Mr. Brooks responded that whenever a privatization effort is being
considered that would displace State employees, the bargaining unit
must be notified, a plan must be developed, and a feasibility study
must be conducted. The effort only moves forward were there to be
"savings in the labor costs". The bargaining unit agreement
contains specific guidelines regarding the conditions of the
feasibility study. It is anticipated that an automated process,
whether it be conducted by a private entity or by the State, would
also "realize savings in the actual" procurement costs of goods.
Senator Olson asked regarding the exemptions that are currently
specified in the State's procurement code.
10:11:00 AM
Mr. Brooks asked for further clarification of the question.
Senator Olson understood there to be several exemptions currently
specified in the State's procurement code. Thus his question was to
"the end result" of those exemptions.
10:11:20 AM
Mr. Jones stated that there are currently 47 exemptions specified
AS 36.30.850 of the State's procurement code. Rather than
indicating that entities were exempted from abiding by the code,
the result is that certain classes or commodities of goods and
services are exempted across the board. For example, "dentists and
doctors are not required to abide by the competitive bidding
requirements". Such things as grants and certain investment
instruments are also exempted. At times, the issue of there being
47 exemptions has been mistakenly interpreted to mean that there
were 47 agencies or entities "that didn't have to abide by the
code". By and large, these exemptions exempt a certain class of
goods or services from the code.
Senator Olson asked regarding the recourse the bill would provide
to a vendor who might wish to protest an award.
Mr. Jones responded that while protest provisions are included in
the State's procurement code, no such provisions were included in
the current contract. "There is no allowance for that."
10:13:10 AM
Mr. Brooks remarked that Co-Chair Wilken's earlier comments
regarding the audit reports were "points well taken". While early
reports pertaining to the program "were lacking", the fact is that
they were being developed during the transitioning phase of the
program. Going forward, the Department would require that the
successes of the program be identified and articulated. "Accurate
and timely reporting" must occur in order to meaningfully make
those measurements. He assured that such efforts would occur, and
that, "as the program moves forward" … "data that everyone could
agree with" would be provided.
10:14:15 AM
Co-Chair Green revisited the issue of what changes were included in
the Version "C" committee substitute being considered by the
Committee, as it is noticeably longer than the previous version,
Version 24-LS0524\X. Specifically, she asked whether language in
Section 1(g), page two, lines 11 and 12, and Section 1(l), page
two, lines 28 through 30 of Version "X" had been revised in some
manner in Version "C".
Mr. Jones communicated that two major changes occurred in the
transitioning of language between Version "X" and Version "C". One
of those changes was the Statute reference change from AS 36.30.190
as specified in Section 1(a), page one, line ten of Version "X" to
AS 36.30.265 in Version "C". This change would allow the Department
"to award a contract of this type via an RFP rather than a low bid
invitation to bid situation. The second change in Version "C" was a
series of changes starting on page two" that would incorporate "all
the procurement preferences", currently specified in AS 36.30 into
this bill. This action would serve to "apply them to the
procurements that are made by the contractor". As previously
mentioned the existing Statutes are confusing and do not interact
well. Therefore, existing procurement language was altered in
Version "C" in order "to make all the preferences uniform,
understandable, and a little simpler to apply and administer".
Co-Chair Green corrected her earlier remarks about Version "C"
being larger than Version "X" as she had discovered that two copies
of Version "C" had been inadvertently stapled together in her bill
packet. Version "C' was not as large as it had appeared.
10:17:27 AM
Co-Chair Green asked whether the Automatic Bid Award language had
been eliminated in the Version "C" committee substitute.
Mr. Jones asked for further clarification.
(e) Except as otherwise provided under (g) or (h) of this
section, if a bidder qualifies as an Alaska bidder, is
offering services through an employment program, and is the
lowest responsible and responsive bidder with a bide that is
not more than 15 percent higher than the lowest bid, the
program contractor shall award the contract to that bidder.
This subsection does not give a bidder who would otherwise
qualify for a preference under this subsection a preference
over another bidder who would otherwise qualify for a
preference under this subsection.
(g) If a bidder is an Alaska bidder, is a qualify entity, and
is the lowest responsible and responsive bidder with a bid
that is not more than 10 percent higher than the lowest bid,
the program contractor shall ward the contract to that bidder.
This subsection does not give a bidder who would otherwise
quality for a preference under this subsection a preference
over another bidder who would otherwise qualify for a
preference under this subsection or (h) of this section. In
this subsection "qualifying entity" has the meaning given in
AS 36.30.170(e).
Co-Chair Green specified that language in Version "X", Section
1(e), page two, lines eight through 14 and Section 1(g), lines 19
through 25, specified that an automatic bid could be awarded were
certain conditions in place. She understood that this language was
changed in Version "C"; therefore, she asked to the reason for that
change.
Mr. Jones responded that while the Version "X" language would work
in a bid process, it would not be appropriate for an RFP process.
Mr. Brooks reiterated that the endeavor was to clean up the
preferences; there was no intent to change any of them. Any
provision that was included in Version "X" is included in Version
"C". "Just in cleaner more straightforward language."
There being no further objection, the Version "C" committee
substitute was ADOPTED as the working document.
Co-Chair Wilken asked what would occur on June 30, 2006, were this
legislation not adopted. In other words, the question is whether
the process would revert to how it functioned prior to the
implementation of the Pilot Program.
Mr. Jones replied that absent this legislation, the Pilot Program
contract would expire on June 30, 2006. "There are, however,
extension optional renewals included in there should the
legislation amend that sunset date."
Co-Chair Wilken asked, for clarification purposes, whether the
extension option language was included in HB 313 or in SB 160
Version "C".
Mr. Jones stated that HB 313 specified a termination date of June
2006 and SB 160 would eliminate the termination date provision.
Adoption of SB 160 would allow the State "to amend" the existing
contract going forward.
Senator Bunde highlighted the fact that the adoption of SB 160
would provide the option to extend the contract; its extension
would not be mandatory. This is a "permissive" bill that would
allow the project to continue were it deemed warranted.
Senator Hoffman asked whether the Administration would promote
legislation making the program more permanent were it determined
that such a program would produce "considerable savings" to the
State.
Mr. Brooks responded that while the Administration was interested
in determining whether such a program would work, he was unsure as
to whether the Administration would introduce such legislation.
Senator Olson voiced being uncomfortable that there was not more
support for a program that is supposedly "working and working
well", as acclaimed by the bill sponsor's remarks.
Mr. Brooks expressed that his testimony was that "we have not
determined that this has been successful in saving money. We have
very preliminary data; only a couple of quarters have been
analyzed". There is support for continuing the procurement pilot,
as further analyses would provide more complete information. "The
jury is still out on … whether privitization of all State
government" would be the appropriate action.
10:22:19 AM
Co-Chair Green recalled there being frustration and delays in the
implementation of the program. That situation might have impacted
the amount of reporting that has been provided to date. As a
result, the evaluation process has been more difficult. The delay
also shortened the amount of time that the contractor was able to
manage the procurement system. This bill would provide more time
"for the program to be in place".
Mr. Brooks stated that Co-Chair Green has a "good point", as he
also questioned the progression of the endeavor since HB 313 was
adopted. The first year was dedicated to the development of a plan,
conducting the feasibility study, developing the project RFP and
selecting the vendor. Therefore, the contractor was unable to
undertake the DOT procurement process in July 2004. As a result,
rather than having three years in which to evaluate the program,
only two years would be available. This bill would assure the
vendor that the program would not terminate in 14 months. It would
also provide the Administration sufficient flexibility in which to
determine which other departments and agencies would benefit from
such an endeavor.
Co-Chair Wilken agreed that the original timeline was of concern;
however, the vendor's actual involvement in the procurement process
began on June 30, 2004, and only one report, which took
approximately four months to compile, has been provided. The second
report is not yet completed. A total of four reports should be
available were action on this legislation delayed until January
2006. However, it is uncertain as to whether a decision made at
that time would be sufficient "to make plans for June".
Co-Chair Wilken suggested that the Committee consider extending the
Pilot Program another year. That would provide time for "a solid
basis of information" to become available. He opined that the four
reports that could be available in January might not provide a lot
more information than is available now.
Co-Chair Green characterized that issue as being "the heart of the
conversation".
10:27:11 AM
Mr. Brooks expressed that the intent is to provide "better and
quicker information". The second quarter report would be completed
shortly and the third quarter report, ending March 2005, should be
available within the next 30 days. A 30-day turnaround after the
end of each quarter is the goal. The report for the quarter ending
on December 31, 2005 should be available in January 2006.
Co-Chair Wilken understood therefore that six quarterly reports
would be completed by January 2006.
10:28:08 AM
JIM DUNCAN, Business Manager, Alaska State Employees Association
(ASEA), informed the Committee that ASEA represents approximately
8,000 State employees. ASEA members hold a significant portion of
the 200 State jobs that would be impacted by this legislation. He
voiced being very concerned about the impact that this legislation
would have on the livelihood of all State employees represented by
bargaining units.
Mr. Duncan questioned the appropriateness of furthering this
legislation prior to more Pilot Project quarterly reports being
compiled. The data provided in the lone report is insufficient upon
which to make a sound judgment. While the report provides a
multitude of figures and information, it does not provide any
substantive conclusion about the program as previously inferred by
Co-Chair Wilken when he asked for assistance in identifying which
portion of the audit findings could be utilized as a base upon
which to further a decision. He referred the Committee to "Section
Two - Department's Comments on Audit" of the "Department of
Transportation and Public Facilities Report on the Outsourcing
Procurement Pilot February 14, 2005" as attached to DOT
Commissioner Mike Barton's February 16, 2005 memorandum [copies on
file] addressed to Ray Matiashowski, Commissioner of the Department
of Administration. Section Two stated that, "It is clear from the
audit conclusions that under ASCI management there has been no
improvement in service and the cost of goods to the state have
actually increased. Based on these finds we recommend that there be
no expansion of the pilot until ASCI's performance demonstrates
significant benefit to the state." Mr. Duncan declared that, "that
is a clear and very direct statement." This language should answer
Co-Chair Wilken's question.
Mr. Duncan stated that while the second quarter, October 1 through
December 31 2004, audit has not as of yet been completed, the
"Costs of Goods" portion is available and indicates that there was
a 16.3 percent increase in the cost of goods to the State during
that quarter. An increase in the cost of goods also occurred during
the first quarter. These increases, combined with the DOT
recommendation against expanding the pilot program, "are very good
indicator[s] that there are questions about whether this is really
saving the State money or not", in regards to the cost of goods. He
asked that the Members strongly consider this information. "The
trend is there," and its continuance would clearly indicate that
the program would not save the State money. A final decision on the
program should not be made until all the reports have been
provided.
10:32:43 AM
Mr. Duncan characterized the "privatization of State jobs" as being
an important issue. The response to Senator Hoffman's question as
to whether any other state has pursued privatizing procurement was
"no", no other state or municipality has done it. There had been
discussion during a different committee hearing on this bill
regarding the fact that the Municipality of Anchorage was doing
"something innovation and different" in regards to its procurement.
"While that is true and should be applauded, the City's effort to
streamline its procurement system "is being done by government
employees".
Mr. Duncan addressed Senator Hoffman's question as to whether there
was "a good public policy reason" against privatizing the
procurement process by providing an Executive Office of the
President, President George Bush, Office of Management and Budget
Washington, DC 20503 Circular No. A-76 (Revised) dated May 29,
2003, [copy on file]. The Bush Administration has sought to
privatize "jobs wherever they can", and this circular addressed the
development of a policy regarding the performance of commercial
activities. The "Policy" component of the circular reads "Policy.
The longstanding policy of the federal government has been to rely
on the private sector for needed commercial services. To ensure
that the American people receive maximum value for their tax
dollars, commercial activities should be subject to the forces of
competition." Continuing, he pointed out that section "b." of the
Policy section specifies that government agencies shall "b. Perform
inherently governmental activities with government personnel."
Mr. Duncan continued that the question of what would be defined as
an inherent governmental activity is addressed in section "B.a."
and section "B.a.(4)" of the circular.
a. An inherently governmental activity is an activity that is
so intimately related to the public interest as to mandate
performance by government personnel. These activities require
the exercise of substantial discretion in applying
governmental authority and/or in making decisions for the
government….
(4) Exerting ultimate control over the acquisition, use, or
disposition of United State property (real or personal,
tangible or intangible), including establishing policies or
procedures for the collection, control, or disbursement of
appropriated and other federal funds."
Mr. Duncan stated that the Bush Administration has determined, as
evidenced in this Office of Management and Budget circular, that
the procurement of federal property, which could be viewed in
Alaska's case as the purchase of State property, "is an inherently
governmental function that should be performed by government
employees".
Mr. Duncan stated that this position is supported by the fact that
there must be "significant public trust in the procurement
function". "There should be no question" as to how Government
procurement dollars are used or how contracts were developed.
Mr. Duncan reminded the Committee that the State's procurement code
was developed in 1985 as the result of a "significant" procurement
issue that occurred relating to a Fairbanks facility. A select
State Senate Committee developed the model procurement code, which
was endorsed by the American Bar Association. The procurement code
was adopted in order to regain public trust in regards to the
procurement process. While the Code has been amended over time, it
remains a good model.
Mr. Duncan declared that this bill would exempt the contractor from
the conditions of the State's procurement code. "The rules would no
longer be those that you have in Statute", but would instead be
those set by the contractor and the seated Administration. He spoke
against providing that authority to those entities. The Legislature
should desire a procurement process that would be "conducted with
integrity and would follow" Statutory guidelines.
Mr. Duncan shared that in addition to serving in the Alaska
Legislature, he once held the position of commissioner of the
Alaska Department of Administration. One of his responsibilities as
Commissioner was to oversee the State's procurement process. While
he has heard that there are problems with the State's procurement
process; he did not experience any problems when he was
commissioner. Such things as provisions that allow a dissatisfied
"vendor to protest and to understand" the reason for their getting
an award could slow the process down; however, the process "still
works and it works the way it's supposed to".
Mr. Duncan noted that the State employees involved in the
procurement process are professionals who "do their job and … do it
well". He noted that a request "for the tools to do e-procurement"
was, as is currently the case, on the Department's capital project
requests when he was commissioner. While the current request was
pre-empted by the need for a new payroll system, that request is,
and was, there. "There is nothing in the State's procurement system
that would prohibit the use of electronic tools by State employees.
The only need is the purchase of electronic software."
Mr. Duncan urged the Committee to wait and evaluate the results of
the Pilot Project audit and evaluate whether the process could be
conducted "just as efficiently and effectively" by government
employees were the required tools in place. These considerations
should occur before the legislation moves forward.
10:40:27 AM
Senator Bunde noted that, as Mr. Duncan had expressed in his
opening remarks, Mr. Duncan's position was to represent the
interests of ASEA members. Therefore, it could be assumed that even
were the audit findings to determine that the process would save
money, Mr. Duncan would be obligated to oppose it because it would
eliminate State jobs.
Mr. Duncan affirmed his responsibility to protect ASEA members'
jobs; he would not support the loss of those jobs. However, "a
different angle" is the anticipation that the first two quarterly
reports would not reflect any money being saved; "matter of fact"
the costs are increasing. While the contractor would argue that
they have saved the State $200,000, those savings were the result
of the elimination of State jobs rather than being the result of a
decrease in the cost of goods and services. The union would be
reviewing the forthcoming quarterly audits during the interim to
further evaluate the program. It would also be determining methods
in which the process could be more efficiently handled within State
government. Even thought his job is to protect State employee jobs,
it is also his job to work with the Legislature and the Department
of Administration to further such efficiency.
Mr. Duncan argued that even though this process is being touted as
a public/private partnership, that would not be the case as jobs
were being eliminated. Last year ten State procurement positions
were eliminated. Some decry that positions for those individuals
were created in other State departments. That might have been the
case in the 1980s and 1990s, but that is not the case today due to
budgeting constraints. Another consideration is that were all State
procurement jobs eliminated there would be no option to secure a
procurement jobs in another department.
10:43:36 AM
MITCH ERICKSON, Representative, None Chamber of Commerce, testified
via teleconference from Nome to voice concern in regards to the
"expedited" manner in which this bill is advancing. The Pilot
Project is still in the initial process and therefore, a proper
analysis could not be provided. There is confusion as to whether
the contractor would be held to the same procurement standards as
the State would. Were they not, then the process could be likened
"to comparing apples and oranges". Business conducted by the State
is significant to local economies. There is fear that transitioning
to a centralized procurement system would negatively impact local
businesses. The State currently "commands a best pricing system due
to its size", and "the fact that the State would pay for its
purchases" is important. It should also be noted, "that eCommerce
is not an exclusive private sector function;" it could easily be
implemented in the State system.
Mr. Erickson communicated that one consideration of the Costs of
Goods information, particularly in regards to Rural communities, is
that "the landed cost are the true costs". The purchase price is
not the true cost. The belief is that, without proper analysis,
State offices in Rural areas would be required to carry larger
inventories in order to compensate for "the inefficiencies"
resulting from a centralized procurement system. Currently, when an
item is needed, it could be purchased locally.
Mr. Erickson urged that a thorough evaluation of the program be
conducted before this bill, or a similar bill, was advanced. The
bill's appearance now is one of being "back-doored; it does not
reflect well on the Legislative process".
10:46:07 AM
Senator Bunde responded to the back-door argument by stating that
this bill has transited through the Legislative process. He
suggested that the action of the State buying locally could be
considered as a form of revenue sharing.
AT EASE 10:46:43 AM / 10:47:58 AM
Senator Bunde communicated that a companion bill is also
progressing through the House of Representatives committee hearing
process.
Co-Chair Green stated therefore, that there would be numerous
committee-hearing opportunities in this regard.
10:48:31 AM
SCOTT HAWKINS, Representative, Alaska Supply Chain Integrators
(ASCI), communicated that ASCI, the contractor operating the Pilot
Procurement Project program, was founded in 1999 to provide supply
chain activities for the oil industry, primarily Prudhoe Bay
operations. Over the past six years the company has increased in
size to approximately 150 employees, most of who reside in
Anchorage, the Mat-Su Valley, and the Kenai Peninsula. A small
office recently opened in Juneau. A significant number of the
employees in the Anchorage area graduated from the University of
Alaska's global statistics program. The company specializes in
back-office process management: helping both public and private
sector entities streamline and automate back office duties more
efficiently and expediently.
Mr. Hawkins characterized this "permissive bill" as being "very
important to the future of this program". "There is little danger
that it would run amuck".
Mr. Hawkins provided Members a handout titled "ASCI State
Procurement Pilot Review and Outlook" [copy on file]. The company's
perspective as program operator is that "the most important
criteria" for the program is to produce cost savings. As discussed
"from the very beginning", staff and personnel cost savings are
foremost in the cost-savings endeavor. "There is also the potential
to save money on the cost of goods." Those cost savings would occur
over a longer timeframe, and would be most successfully
accomplished when the program is applied across several agencies
and several regions, as the result of purchasing larger amounts of
goods and more agreements and automation occur.
Mr. Hawkins referred the Committee to page four of the company's
handout titled "Cost Savings Achieved". That information projects
that over the first two years of the project, $163,089 in savings
would be realized in personnel costs.
Mr. Hawkins noted that it has been stated that the second quarter
cost of goods report reportedly indicates that an increase in the
cost of goods occurred. However, language in the report actually
states that, "The Division of General Services, after consultation
with Legislative Audit, does not believe the data can be
extrapolated in order to draw firm cost increase/decrease
conclusion, but that the data may serve to identify potential areas
for improvement. The data documents less than one percent of the
purchases."
Mr. Hawkins stressed that, "these benchmark audits have been a
feature of the program from the beginning". To that point, he
opined that "the term 'audit' might be too strong a term" to
characterize the activity. A benchmark provides a snapshot of data
with the purpose of providing a record of the program, the
methodology being used, and to highlight possible areas for
improvement. The reports were not designed "to provide full program
reviews".
Mr. Hawkins stated that Co-Chair Wilken's description of the audit,
as being "disappointing" would be correct were one looking for a
conclusion. That is not the purpose of the benchmark; the purpose
is to provide "on-going snapshots of data…" The Costs of Goods
report for the first quarter "is particularly troublesome", as it
is based on seven items. "Seven items out of several thousand that
were done." As such, no "level of statistical validity" could be
extrapolated. Approximately thirty items were included in the
second quarter Cost of Goods report. That is also an insufficient
number upon which to draw any conclusions. The purpose of the
report is to provide information pertaining to such things as
vendor trends. ASCI "was particularly concerned about the Costs of
Goods piece being taken out of context". Therefore, ASCI conducted
"an analysis of all the transactions to date under the web tools."
For the period October 1 through December 31, 2004, the web tools/
catalog transaction comparisons provide "high data integrity". This
analysis, which is depicted on page five of the handout, indicated
there being a three-percent reduction in the cost of goods for the
second quarter and an overall two-percent reduction for both the
first and second quarter periods. This analysis of 972 catalog
transactions would sufficiently "provide statistical validity".
There are mechanisms through which to provide assurance that the
State "is getting the best price available to it at any given
time". There is evidence that the program is working.
10:55:50 AM
Mr. Hawkins concurred with Mr. Brooks comments that, "the
Administration is struggling with how to evaluate the program".
However, he submitted that, "on the basis of cost of operations"
and the early indications that the eCommerce web tools are showing
worth, "the record is very clear that we are seeing that value".
Mr. Hawkins stated that, "the program has accomplished a great deal
in its first few months". Procurement procedures and rules have
been established. The rules "are hard-wired into the contract" and
while being substantially similar to the rules of the State's
procurement code in regards to such things as requiring quotes for
procurements under a certain amount; "there is a lot less red
tape"; specifically in regards to the appeals process. While the
current appeals process has some value "or else it wouldn't be in
the procurement code", "more often, it is a source of delay and
keeps the agencies from getting the goods and services they need in
a timely manner".
Mr. Hawkins stated that there are several reasons supporting the
action of privatizing the procurement process. The activity
associated with the process could not be classified as being
"glamorous stuff". While "most managers do not wake up in the
morning thinking about" how to improve the process, procurement is
the nature and focus of ASCI's business. The company has "an on-
going desire for excellence in the process".
Mr. Hawkins communicated that the State could acquire the
technology contusive to improving the process in-house; however, as
a condition of the State's collective bargaining unit agreements,
there is the requirement that the technology and the associated
process "must be deployed effectively and has to deliver cost
savings". ASCI must deploy technology, build catalogs, and operate
the process "within the existing baseline cost structure and still
show a cost savings after that".
10:58:48 AM
Mr. Hawkins opined that were the State to invest in eCommerce
software and associated technology, it would be unlikely that a
reduction in personnel would occur. Cost savings are a requirement
under the contract with ASCI.
Mr. Hawkins communicated that the pilot program got off to a slow
start and is operating at a very small level; however, the
program's footwork has now been established. Nonetheless, the
current size limitation could be likened to operating "a backhoe in
a sandbox". This legislation would allow "the full potential" of
the program to surface, as the installation of a massive eCommerce
system across multiple departments would provide the most benefits.
Mr. Hawkins stated that were the status quo program to continue,
there would be insufficient time to implement it on a larger scale
were the program ultimately deemed successful. From ASCI's
standpoint as an employer, due to the limited time remaining in the
Pilot Project, "little assurance" could be provided to employees"
that the project would even be renewed. This makes it difficult to
retain employees.
Mr. Hawkins shared that the company has learned that the entire
scope of the procurement operation could not be absorbed. There
would still be the need for State employee counterparts,
particularly in regards to large projects such as construction.
11:01:22 AM
Senator Stedman asked whether the Alaska Marine Highway System
(AMHS) would continue to be excluded from the privatization
procurement process under the conditions of this legislation.
Mr. Hawkins affirmed. The types of procurements required by the
AMHS could not feasibly be absorbed; construction and Vessel
overhaul procurements would be difficult to manage.
Senator Bunde remarked that the loss of a job is not taken lightly.
To that point, he asked whether the ten State employees whose jobs
were eliminated by the implementation of the Pilot Project were
offered employment by ASCI.
Mr. Hawkins stated that such action had occurred. Some of the ten
employees retired, others were offered other positions at parity.
It should be noted however, that there was a difference in the
benefit packages offered by ASCI and the State. While none of the
ten displaced workers accepted a position with ASCI, it is
understood that those individuals obtained other State government
employment.
11:03:57 AM
Senator Dyson asked how the State could "protect itself" were ASCI
services to be withdrawn.
Mr. Hawkins responded that this is a prudent consideration at any
time a contractor is performing a major task. ASCI recognizes that
halting its services without proper notice would destroy the
company's reputation. Such action would be unacceptable, and "would
be extremely unlikely". The company "would be legally bound to
provide these services", and the company would "arguably be legally
obligated for the damages" the State would incur "were a breach of
contract to occur.
Senator Dyson appreciated the response, however, noted that were
the contract extended for a longer period of time, procurement
staff positions and support would be weaned from State operations.
Perhaps a draft amendment should be considered that would mandate
that at the end of the contract, electronic files and associated
software would be available in order for the State to transition to
another vendor or to re-absorb the process. To that point, he asked
Mr. Hawkins to contemplate such a proposal.
Mr. Hawkins responded that the company "would be happy" to consider
such an amendment. The current contract includes provisions
requiring that electronic records be provided to the State. ASCI
has no "desire to hold someone over a barrel"; the purpose of the
software tools is "to automate and streamline and do good things
not to cohere people with". The tools currently accompany ASCI
services and should ASCI "services be decoupled …. the company
would be happy to negotiate a licensing agreement that would allow
the tools to continue to operate". Therefore, such an amendment
would be acceptable.
11:07:57 AM
PETE FORD, Southeast Regional Manager, Alaska Public Employees
Association (APEA) Bargaining Unit, provided testimony on behalf of
Bruce Ludwig, Business Manager, Alaska Public Employees
Association, as follows.
The Pilot Program authorized by HB 313 was rushed through in
the final days of the 2003 Session. There were no measurements
of success included in the bill, no benchmarks for comparison,
and nothing to enable anyone to determine if the Pilot Program
was a success or a failure.
Frankly, there does not appear to have been a lot of thought
given to the Pilot Program. There was one hearing in House
Finance, and one in Senate Labor & Commerce. The bill title is
misleading. When we talked with legislators after HB 313 was
passed, we were told it "just enabled e-commerce." In fact, it
did much more than that.
Alaska Supply Chain Integrators (ASCI), who brought HB 313
forward, was the only "responsive" bidder, and was awarded a
contract for Southeast DOT&PF. The State determined that they
could save $250,000 per year by eliminating the warehouse, and
using fewer employees through the internet purchasing process.
ASCI actually began work on July 11, 2004, and 10 state
employees were laid off.
Since the Pilot Program began, only one quarter of performance
has been audited. The second audit is currently in progress,
and the third audit should be getting underway soon.
The Pilot Program is supposed to operate until June 30, 2006,
when it is scheduled to expire. As the Department of
Administration has testified, the jury is still out. It is too
early to extend, or make permanent, the Pilot Program. This
Bill should be held over while sufficient record is
established to be able to intelligently make a decision
whether the Program has been a success or not.
While Mr. Hawkins has been quick to characterize the Pilot
Program as a success, we have heard many negative reports
regarding the Program and the service it is providing. For
instance, we have heard that the actual cost of goods and
services purchased through ASCI is as much as 16% greater than
comparable costs made through the state's existing procurement
processes. If true, this would mean that the state has paid
more than $2 million more than necessary for goods purchased
through the Pilot Program. We have heard that there are some
1,500 invoices, valued at more than $250,000, that remain
unpaid because the Purchase Orders do not match the invoices.
This affects the State's relationship with its suppliers, and
denies many Alaska businesses timely payment, creating
difficulties for those businesses. We have hear that, of the 7
orders for parts ordered through ASCI for the engine overhaul
of the M/V Kennicott, 6 orders were shipped to Juneau and had
to be re-shipped to the shipyard in Portland where the work
was actually being done.
Of the original $250,000 projected savings, about half was for
eliminating the warehouse. But the warehouse has not been
eliminated; there is no savings there. We have also heard that
the ASCI employees working the Pilot Program are required to
work extreme amounts of overtime; anticipated savings will be
further reduced when those overtime bills are paid. It seems
likely that the anticipated savings may not be borne out after
the final audit - any savings will certainly be substantially
less than the grand amounts "anticipated".
In addition, since ASCI does not have to follow the State
Procurement Code, their procedures do not meet the minimum
requirements of federal purchasing, and they cannot order
equipment, materials or services for construction projects
funded or partially funded by federal monies. All purchases
involving federal monies are still worked by state procurement
personnel - there is no savings there.
There is also the matter of overhead, which was not budgeted.
With a zero fiscal note, the State has had to assume the cost
of overseeing the contract. The reality of the "anticipated",
promised savings seems more and more remote.
In summary, it is way, way too early to extend the current
Pilot Program. From the anecdotal information we have heard
(and formal, official audits are not yet available), instead
of saving the State $150,000, the Pilot Program will more
likely cost the State additional millions of dollars. We think
that the Pilot Program should run its course and have its
effectiveness fairly and fully evaluated. We ask that you hold
this Bill and check the progress and performance of the Pilot
Program next year. We urge you to be sure to obtain direct
testimony from the Department of Transportation and Public
Facilities, the "customers" of the Pilot Program, and get
their impressions and opinions regarding the value of the
Pilot Program's performance.
11:13:26 AM
Senator Bunde asked "what level of savings" would be required to
garner ASEA's support of the program.
Mr. Ford responded that he could not "answer that in a vacuum,
without being able to look at real life figures"; however, ASEA is
not opposed to the State saving money and has supported "the
concept" of a State eCommerce program, as it would produce monetary
savings. State personnel should be involved in such an endeavor.
11:14:52 AM
LAURA LAWRENCE, Procurement Specialist, Central Region, Department
of Transportation and Public Facilities testified via
teleconference from Anchorage and shared with the Committee that
she has been employed in the Department's procurement office for 21
years. She opposed the bill as both an employee and as a concerned
citizen. As a condition of her position as a procurement
specialist, she must abide by the procurement code; otherwise, she
could be guilty of a Class C felony and be subject to prosecution
under Alaska Statute 36.30. Her bidding practices have earned her a
reputation for integrity with both in-State and out-of-State
vendors, and federal employees. The State's procurement code was
established "to prevent unorthodox purchasing" that had previously
occurred. ASCI has already admitted that its conducting of State
business with one of its own supply companies was a mistake. She
questioned how many such mistakes would occur absent the State
procurement practice obligations. Continuing she questioned how
much business would be averted to specific companies or ASCI's
"favorite vendors". Such action would be a disservice to the
State's entire business community as well as to the State's
taxpayers. Competitive bids for purchases under $150,000 are not
required under the Pilot Program. Bid competition by both small and
large companies for projects under that range are plentiful. Many
bids are awarded to small operations, and, to that point, she asked
how small companies might fare were the new program implemented.
She detailed the many responsibilities that accompany each bid as
well as the variety of bids that occur. She also noted that
warranty work is also an important consideration, especially when
accepting a low bid from an out-of-state company. ASCI, being a
private company, would have no obligation to in-State vendors.
Ms. Laurence noted that the aftermath that might result were a
private contractor to remove their service should also be a
consideration. This is a very controversial bill. There is no
indication that money would be saved or that better service would
be provided. State employees would lose their jobs. Many small
Alaskan companies would be disadvantaged; particularly when goods
and services under $150,000 would not be required to be put to bid.
Ms. Laurence supported the purchase of computer software components
that would allow the State to conduct eCommerce activities in-
house. Were State employees hands "untied" they could provide all
the services and supplies, equal to or better than an out-sourced
company could. State jobs would be maintained and the use of in-
State vendors would continue to stimulate the State's economy and
provide local jobs. This project has not been undertaken long
enough to provide sufficient data and should not be advanced at
this time.
Co-Chair Green asked, in respect of the Committee's limited time,
that Ms. Laurence provide her written comments to Members via
facsimile.
11:22:10 AM
BARRY JACKSON, Resource Data/ASCI, testified via teleconference
from Anchorage and informed the Committee that he retired from the
State of Alaska Department of Administration, Division of General
Services after 31-years of service including service as a
contracting manager, deputy director, and acting director. He was
also on the Board of APEA and a founding member of ASEA. He
informed the Committee that he had assisted ASCI in winning this
contract and has since instructed DOT employees how to use the ASCI
eCommerce application.
Mr. Jackson noted that an effort was made in the Price of Goods
reporting to compare the price of goods purchased by ASCI with the
price of goods that had been awarded by State employees. To that
point, the benchmark report would provide information as to whether
prices increased, decreased or held status quo; however, the report
would not provide information as to the reason for any change.
While the statistics provided might be interesting, the
representation is a dangerous one in that "someone might think it
was meaningful and base a decision on it. It is a statistic with an
overwhelming potential to mask the truth."
Mr. Jackson stated that the State's standard practice is to measure
"its procurement successes by comparing the prices offered at the
moment of bid opening against each other. The State has never
judged its own purchasing performance by comparing the price it
paid last year with the price it pays today. This kind of
benchmarking is an approach that … General Services would never
condone having applied to themselves, precisely because of its
potential to paint a completely false picture of their actual
performance."
Mr. Jackson addressed the concern about "potential corruption" by
stressing that "in all significant aspects of the existing contract
…. the contractor is required to employ competitive practices which
are fundamentally the same as those actually practiced by the
State. There is not much difference between professionally
administered public and private purchasing practices, except for
mountains and mountains of red tape, institutionalized delay,
antiquated systems and huge performance and efficiency gaps."
Mr. Jackson suggested that, "an independent contractor with
preservation of investment as its most potent motivation has an
unbiased primary interest in simply doing its job as efficiently
and economically as possible for the State". He would also argue
that, "an independent contractor is in a stronger position to
resist pressures to commit bad practices. Such pressures do exist
and are difficult for State employees to resist because their jobs
or careers can be put in jeopardy. These pressures and consequences
are not idle speculation … they are real" as he knows "from long
experience".
Mr. Jackson characterized the project audits as intense "scrutiny".
The quarterly audits are quite frequent and are "questionably
conceived and yield such wrong edit interpretations from
opponents". They are "significant mechanisms for building
resistance to the further implementation of the pilot, especially
in the pilot agency". Were the same audit procedures applied to the
State procurements, "numerous purchasing violations and bad
practices" would come to light.
Mr. Jackson countered the union's position that more money could be
saved were eCommerce tools provided to State employees by stating
that had the unions submitted a proposal to compete for the Pilot
Project, he doubted whether their proposal could have won were it
to have "preserved every one of those jobs that were lost" in the
winning competitor's proposal. "Who's kidding who here?" The unions
would have had to implement an eCommerce system as least on par
with the one implemented by ASCI, and they would have had to
eliminate more jobs than ASCI in order to win. "Enlightened unions
have found another perspective, one which is ultimately much more
valuable to union members."
Co-Chair Green, in recognition of limited time, asked that the
testimony be concluded. Further comments, in written form, were
welcome.
Mr. Jackson stressed that, "the fiscal train wreak is coming"; it
is "just around the corner". When it arrived, "it would not
magically leave purchasing positions untouched. Failing to enable
e-commerce now" would "severely cripple" the State's procurement
system in the future. This bill would provide the State "a rare
opportunity to look toward the future" and improve the situation.
The technology is available and could be implemented; it would save
money. "All that is needed is the resolve to do the obvious."
Co-Chair Green announced that the bill would be HELD in Committee
in order for the bill's sponsor to provide further consideration to
the comments that had been offered.
CS FOR SENATE BILL NO. 100(L&C)
"An Act relating to enhanced 911 surcharges imposed by a
municipality."
This was the third hearing for this bill in the Senate Finance
Committee.
11:28:27 AM
Co-Chair Green noted that her staff had assisted Senator Bunde's
staff in the development of this bill.
Senator Bunde, the bill's sponsor, moved for the adoption of CS SB
100 (FIN), Version 24-LS0407\R as the working document.
Co-Chair Green objected for explanation.
KIM CARNOT, Staff to Senator Green, noted that a memorandum from
Co-Chair Green's office, dated April 18, 2005 [copy on file] had
been distributed. It detailed the changes included in the Version
"R" committee substitute as follows.
Section 1. AS 29.10.200(37) is amended to include the enhanced
911 system under Home Rule applicability.
Section 2. AS 29.35.131(a) 911 surcharge is amended
Page 2
· Line 11 -- $1.50 surcharge for wireline and wireless
· Line 13 - 15 --L&C version language allowing for vote to
go about cap remains in the bill.
· Line 15 - 17 -- requires parity between wireless
telephone and wireline telephone surcharge
· Line 24 - 26 -- requires notification by the municipality
when the surcharge is assessed and when it is
changed.
Section 3. AS 29.35.131 is amended by adding two new sections
· (i) Page 2 Line 30 - Page 3 Line 26 defines appropriate
use of the enhanced 911 surcharge
· (j) Page 3 Line 27 - Page 4 Line 3 requires enhanced 911
providers to execute an agreement addressing the
duties and responsibilities of each and establishing the
priorities for the use of the E-911 surcharge
revenue.
Section 4. Amends AS 29.35 to allow municipalities to require
implementation of E-911 from a multi-line telecommunications
system.
Section 5. AS 29.35 is amended to apply to home rule and
general law municipalities.
Section 6. AS 29.35.131(h) is repealed (home rule
applicability).
Ms. Carnot noted that Sections 1, 5, and 6 would make structural
changes in order "to make the bill generally applicable to any form
of government; any form of community in the State".
Ms. Carnot stated that the majority of the changes made are in Sec.
2 of the bill. While a $1.50 limitation would be imposed, language
in Sec. 2 would allow the decision to increase the surcharge above
that amount to be made locally. In addition, parity in the
surcharge amount must occur in regards to wireless and wired phone
service. There would also be a requirement that a municipality
rather than the telephone company must notify phone customers at
the time a surcharge was imposed or changed.
Ms. Carnot continued that Sec. 3 would define the appropriate use
of the E-911 surcharge funds so that the funds would not be
"mismanaged or misused". Both federal and other states'
requirements were considered in the development of this section.
Sec. 3(j) would require an agreement to be entered into when
another provider in lieu of the local municipality, provides the
service. Such an agreement would clarify how the funds would be
utilized and would allow for regional planning efforts between, for
example, a borough and its municipalities. The agreement should
also include the Alaska State Troopers were their service provided
in the area. The purpose of subsection (j) would be to help
communities coordinate planning on how to utilize "the money
wisely" and accommodate system growth.
Ms. Carnot stated that Sec. 4 would require multi-line
telecommunication systems, often referred to as Private Branch
Exchange (PBX) systems, to implement technology through which
emergency responders would be notified of the location of the
caller. However, concern was voiced regarding this requirement and
in response, rather than specifying a timeline in State Statute,
the language was included that would allow a municipality to
develop an ordinance and regulate the timeline.
11:32:15 AM
Senator Bunde conveyed that the federal Enhanced-911 requirements
"are costing our communities a lot of money". Absent the ability to
raise the E-911 surcharge amount, as would be provided by the
legislation, communities would be required to increase local
property taxes and other sources. It is also important to take into
consideration the increasing use by wireless phones of the 911-
service and require them to make "a larger contribution". It is "a
fairness issue". This would be likened to asking those who use
something to pay for it.
Co-Chair Wilken noted that the City of Fairbanks had written a
letter dated April 7, 2005 [copy not provided] regarding PBXs and
the fact that this Legislation might incur significant expense to
some businesses, such as hotels, that currently own PBX systems, as
some older versions are not up-gradable. To that point, he asked
whether his understanding of the situation was correct.
Ms. Carnot responded that language in Sec. 4, page four, lines five
and six of Version "R" would provide a municipality the option of
whether or not to require the implementation of such technology.
The requirement would be a local decision that would allow for
public comment and consideration.
Co-Chair Green noted that others had also raised this concern.
Efforts to accommodate it were made.
Co-Chair Wilken noted that a technical correction might be required
as the word "with" appears to be missing between "guide" and
"valid" in language in Sec. 4, page four, line nine.
Co-Chair Green suggested that rather than the word "with" being
inserted, a comma might suffice.
Co-Chair Green stated that the bill's drafter would review the
language.
11:36:00 AM
Co-Chair Wilken noted that a copy of the Version "R" committee
substitute had recently been provided to the Mayor of the City of
Fairbanks, and a response is expected. Continuing, he expressed
that the City "is very, very concerned about the $1.50 cap"
limitation. According to the City's calculations, a level ranging
between $2.50 to $3.50 would be required. Therefore, he requested
that consideration be given to allowing the local governing bodies
to determine the level that would be needed to support their
service.
Co-Chair Wilken asked whether "the issue about who controls what"
in regards to cities within boroughs had been rectified.
Co-Chair Green affirmed that that issue had been addressed in Sec.
3(j) on page three, beginning on line 27. That language specifies
that an "agreement must be reached between overlapping geography."
11:37:12 AM
Co-Chair Wilken asked for further clarification about how a
community vote on an E-911 issue would transpire in the case of a
city within a borough, in which the city operates the 911-system.
11:37:28 AM
Ms. Carnot responded that this is a two-part issue. Sec. 3(j) would
establish the agreement between the primary Public Safety Answering
Point (PSAP) and the secondary PSAP. She explained that the
surcharge funds collected by the local telephone company are
transferred to the designated primary responder. In the Mat-Su
area, for example, which emergency responder would respond to the
call would be determined by the type and location of the call.
Either the Alaska State Troopers or the municipality could respond.
Therefore, the language in Sec. 3(j) would develop the mechanism
through which those communities could work to form an agreement in
regards to how services would be provided in addition to how the E-
911 surcharge would be utilized.
Ms. Carnot stated that the people being served in the E-911 service
area would vote on the surcharge level issue. She was unsure
regarding which entity would be responsible for coordinating the
election.
11:39:09 AM
Co-Chair Green asked whether the City of Fairbanks was the
Fairbanks North Star Borough's primary PSAP.
Co-Chair Wilken understood that the City provides the E-911
service, as the Fairbanks North Star Borough is a second-class
borough and as such "does not have public safety powers".
Therefore, the City "shoulders" the expense of the service,
borough-wide. Financial assistance would be welcome as the City has
a three million dollar deficit in that regard.
Co-Chair Wilken noted however, that while further clarification of
the voting process would be sought, he would not object to the bill
moving forward.
11:40:07 AM
Co-Chair Green asked whether the language in Sec. 3(j) would apply
to the Fairbanks area, as she doubted that any of the area's 911-
funds were directed to any budget other than that of the City's
primary PSAP service budget.
Co-Chair Wilken understood that the City supported the Fairbanks'
E-911 service in its entirety. He worried that voters living
outside of the City but within the Borough might decide not "to
support moving that responsibility from the City to Borough-wide".
Uncertainty in regards to how this might pan out was the reason
that he had sought further advice from the Mayor of Fairbanks.
Co-Chair Green understood that "the entire universe of who is
served by the system" would pay. In other words, anyone whose
emergency calls transit through that system should support it.
Ms. Carnot stated that both Co-Chair Wilken and Co-Chair Green's
"understanding of the situation are correct".
11:42:29 AM
Ms. Carnot counseled that while "a sales pitch" would be required
to garner borough wide support of the bill and increasing the 911
surcharge, "selling the issue of bringing emergency 911 services to
people in your borough is a lot easier than what local communities
often have to sell in terms of increasing fees or taxes".
Co-Chair Wilken agreed, but noted that his concern centers on the
fact that, as his second-class borough does not have safety powers,
it would be unable "to tax for those powers in order to transfer
monies from the borough to the provider, which is the City of
Fairbanks".
Ms. Carnot conveyed the understanding that this situation would
fall under "what is defined as the Enhanced 911 System". She
referred the Committee to Sec. 2(a), page one line seven, as this
language would specify that "A municipality may, by resolution or
ordinance, elect to provide an enhanced 911 system …". This
language might address Co-Chair Wilken concern, as, by definition,
the enhanced-911 system would include the entire service area of
the borough beyond the borders of the municipality.
Co-Chair Wilken understood therefore that "Fairbanks may, by
resolution or ordinance, elect to provide enhanced 911 to the
entire borough".
Co-Chair Green clarified that in order for the service to be
provided, an agreement between the borough and the city must exist.
The terms of the agreement between the City of Fairbanks and the
North Star Borough could include such things as who would conduct
the election.
Ms. Carnot noted that current language in the Statute definition
section, AS 29.35.137, specifies that an enhanced 911-service area
"means the area within a municipality's jurisdiction that has been
designated to receive enhanced 911 services". This language would
allow whatever provisions are agreed upon by the City of Fairbanks
and the North Stat Borough to apply.
Co-Chair Wilken continued to voice concern regarding whether the
powers of the Legislature or the powers of the City could "bleed"
over to each other in regards to authority or the disbursement of
funds from the citizens of the Borough to the City. It should be
clarified as to whether the City could collect fees from users
outside of the City, and, could the Borough funnel money back to
the City. The concern continues about whether people in the Borough
would support a proposal to begin paying for 911 services, since
that is not currently the case. He would await input from the City
in this regard.
Co-Chair Green asked for confirmation that there is currently no
collection of 911 fees outside of the City of Fairbanks.
Co-Chair Wilken affirmed that to be correct.
Senator Bunde asked whether language in Sec. 3(i), page three,
lines one through four, would prohibit municipalities from using
the surcharge revenue to lease or purchase new facilities for its
911 call centers; the funds could only be utilized "to rejuvenate
or remodel existing structures".
Co-Chair Green opined that the language would not allow the funds
to be used to construct new facilities as the language specifies
that, "The surcharge revenue may not be used for constructing
buildings, leasing buildings, maintaining buildings, or renovating
buildings, except for the modification of an existing building to
the extent that is necessary to maintain the security and
environmental integrity of the public safety answering point and
equipment rooms".
Senator Bunde commented that this clarification should be on "the
record" as some might otherwise interpret enhanced 911 service to
allow such expansion.
Ms. Carnot noted that the funds could be used to modify an existing
building.
Senator Bunde acknowledged that modifications would be permissible.
Co-Chair Wilken conveyed to the Committee that a recent Fairbanks
Daily News Miner newspaper editorial [copy not provided] had
assisted in clarifying the question, as it attests that were the
bill to become law, "local governments" such as the Fairbanks North
Star Borough Assembly "would be allowed, after holding a public
hearing, to raise the E-911 surcharge to a maximum of $2.00, now
$1.50 per wireline and cell phones. In the Fairbanks Borough, the
extra money raised, about a million [dollars] would largely go the
City of Fairbanks since it is the primary E911 provider. The City,
in turn, would be able to reduce its property tax rate cause it's
no longer subsidizing…." He stated that the editorial addressed his
concern as it conveys "that money could be taken from the Borough
and move it to the City".
Co-Chair Green removed her objection to the adoption of the Version
"R" committee substitute.
There being no further objection, the Version "R" committee
substitute was ADOPTED as the working document.
Conceptual Amendment #1: This amendment inserts a new subsection
into Section 3 of the bill as follows.
"call taker" means a person employed in a primary or secondary
answering point whose duties include the initial answering of
911or enhanced 911 calls and routing the calls to the agency
or dispatch center responsible for dispatching appropriate
emergency services and a person in a primary or secondary
answering point whose duties include receiving a 911 or
enhanced 911 call either directly or routed from another
answering point and dispatching appropriate emergency services
in response to the call. The term "call taker" is synonymous
with the term "dispatcher" in that it is inclusive of the
functions of both answering the 911 or enhanced 911 calls and
dispatching emergency services in response to the call.
Co-Chair Green moved for the adoption of Amendment #1 and objected
for clarification.
Ms. Carnot explained that, during discussion on the bill, it was
determined that the term "call taker" should be defined in State
Statutes as its inclusion would allow for continued funding of that
position with the 911 surcharge funds. The term currently appears
in Sec. 3(i)(3) and Sec. 3(i) (4) of Version "R", page three, lines
18 and 21. She read the definition of call taker as depicted in the
amendment.
Co-Chair Wilken noted, for the record, that, the information
provided on an Alaska Municipal League (AML) handout titled "E-911
Dispatch Center Costs and Revenues Selected Alaska Cities", which
depicts current call centers' operating costs, the current E-911
revenues received, and the current revenue shortfalls being
experienced in Anchorage, Fairbanks, Kenai, Juneau, and Kodiak,
depicts that Anchorage and Fairbanks, for instance, are each
currently experiencing an approximate four million dollar
shortfall; Kenai is experiencing an approximate $1.8 million
shortfall; Juneau has an approximate $900,000 shortfall; and Kodiak
has an approximate $550,000 shortfall. When the $1.50 surcharge
rate being proposed is applied to the number of telephone lines in
each community, Anchorage would experience a surplus of
approximately $2.4 million dollars. However, Fairbanks' would
continue to have a deficit of approximately $2.4 million; Kenai
would have a deficit of approximately one million dollars; and
Juneau would have an approximate $100,000 deficit, and Kodiak would
have an approximate $350,000. These figures would explain the
reason there had previously been a cut-off at the 100,000-
population level.
Co-Chair Wilken stated that this should be a consideration, as this
legislation would not assist "my town at all; and that's why
they're so upset about" it. In addition to the fact that a $1.50
surcharge would be insufficient, the community of Fairbanks would
also incur the expense of an election. He empathized with the
community's "distress" regarding the bill.
11:53:46 AM
Co-Chair Wilken remarked that the forthcoming October 2005 local
election in Fairbanks would already include "contested,
acrimonious, and expensive" mayoral and city council elections.
Furthermore, since local governments are prohibited from spending
money to further ballot issues, the charge of garnering support for
the E-911 surcharge ballot issue would fall on local citizen
volunteers. While the 911 emergency system is available to any
caller, only a small percentage have used it and know the value of
it; therefore, convincing people to approve such a surcharge on
each phone line could be a difficult task. To that point, he voiced
the preference that rather than a community vote occurring, any
decision regarding the local 911 service, including the surcharge
level, should be a determination made by the local assembly. While
he appreciated the intent of the legislation, he voiced having
"grave reservations about it".
11:55:54 AM
Co-Chair Green reiterated that Amendment #1 is a conceptual
amendment. The bill drafter would review both the language in the
amendment and the language identified earlier by Co-Chair Wilken.
[NOTE: While Co-Chair Green did not formally remove her objection
to Conceptual Amendment #1, its removal was implied.]
Amendment #1 was ADOPTED without further objection.
Senator Bunde moved to report the bill, as amended, from Committee
with individual recommendations and accompanying fiscal notes.
There being no objection, CS SB 100(FIN) was REPORTED from
Committee with previous fiscal note #1, dated February 15, 2005
from the Department of Public Safety and previous fiscal note #2,
dated February 15, 2005 from the Department of Commerce, Community
and Economic Development.
AT EASE 11:56:59 AM / 11:57:58 AM
CS FOR SENATE BILL NO. 70(JUD)
"An Act relating to controlled substances regarding the crimes
of manslaughter and misconduct involving a controlled
substance; relating to listing certain anabolic steroids as
controlled substances; amending Rule 41, Alaska Rules of
Criminal Procedure; and providing for an effective date."
This was the first hearing for this bill in the Senate Finance
Committee.
This was the third hearing for this bill in the Senate Finance
Committee.
DEAN GUANELI, Chief Assistant Attorney General, Criminal Division,
Legal Services Section-Juneau, and Chief Assistant Attorney General
Office of Special Prosecutions & Appeals, Office of the Attorney
General, stated that this bill, which is referred to "as the
Governor's Methamphetamine bill, … makes a number of important
changes to Alaska Law to provide additional disincentives to people
who manufacture methamphetamine". The bill would also provide
additional protection to children in an effort to reduce their
exposure to the substance.
Mr. Guaneli stated that Section 1 of the bill provides findings
about the dangers of the manufacturing of methamphetamine (Meth).
The findings are directly related to provisions in Sec. 5 of the
bill that would require a cash only bail of $250,000 were a repeat
Meth offender caught manufacturing the substance.
11:59:52 AM
[NOTE: Co-Chair Wilken assumed chair of the meeting]
Co-Chair Wilken clarified that Mr. Guaneli's remarks were to
Version 24-GS1049\L of the bill.
Senator Bunde moved to adopt the Finance committee substitute,
Version 24-GS1049\L as the working document.
There being no objection, Version "L" was ADOPTED as the working
document.
Mr. Guaneli argued that the repeat Meth offender cash only bail
level was warranted as such a person would be aware of the drug's
danger.
Mr. Guaneli noted that Sec. 2 includes language that would subject
a person who manufactures or sells a drug in violation of the State
drug laws to someone who dies as a direct result of ingesting that
drug, to the State's manslaughter Statute. This would include such
things as drug overdoses from the use of such as heroin, Meth, and
cocaine and a "date rape" drug.
12:01:52 PM
Mr. Guaneli stated that language included in Sec. 3, page three,
beginning on line four is an attempt to address evolving techniques
of Meth manufacturing. State Crime Lab chemists have determined
that new techniques include such things as mixing the components in
an organic solution.
Mr. Guaneli stated that Sec. 4, beginning on page three, line
seven, was added by the Senate Health, Education and Social
Services Committee at the request of Senator Hollis French, to
address muscle enhancing "anabolic steroids", which like marijuana,
"are prohibited under federal law", but are not prohibited under
State law. It would be "appropriate" to prohibit such drugs under
State law, as "it is difficult to get the federal authorities to
prosecute cases involving small amounts of these drugs".
[NOTE: Co-Chair Green reassumed chair of the Committee.]
Mr. Guaneli pointed out that a technical correction regarding
language in Sec. 4(f), page three, line 20 of the bill, could be
considered as the language is unnecessary since State Statute
specifies that the word "includes" means "but is not limited to".
Co-Chair Green understood therefore that the term is redundant.
Mr. Guaneli suggested that consideration be provided to striking
the phrase ", but is not limited to," as its inclusion "could
create some difficulties for the Courts in interpretation…"
Conceptual Amendment #1: This amendment deletes the phase ", but is
not limited to," after the word "includes" in Sec. 4(f), page
three, line 20 of the bill.
Co-Chair Wilken moved to adopt Conceptual Amendment #1.
There being no objection, Conceptual Amendment #1 was ADOPTED.
Mr. Guaneli stated that Sec. 6 and Sec. 7 are "enhanced penalty
provisions" in regards to individuals who manufacture Meth in the
presence of or assistance by children. Provisions in Sec. 8 provide
definitions to further the enhanced penalty provisions.
Co-Chair Green noted that, in addition to endangering children by
exposing them to the manufacturing of Meth in a building, Sec. 8
would allow that endangerment to include vehicles.
12:06:44 PM
Mr. Guaneli concurred. He noted that because newer Meth production
techniques require minimal amounts of lab equipment, they are quite
portable. Meth labs have been found in motorhomes and in the back
of cars.
Mr. Guaneli stated that Sec. 9 and Sec. 10 were developed in
response to concerns raised during the Committee's April 13, 2005
hearing on the bill. These sections would require the Department of
Public Safety to maintain on its Internet website a complete
listing of properties in which illegal Meth labs had operated,
regardless of whether the site had been re-mediated or not. Real
estate agents and others desiring to purchase property could
consult this information for "full and complete information" about
a property.
Co-Chair Green asked for confirmation that the information would be
public information.
Mr. Guaneli understood that the information "would be available to
anyone".
Co-Chair Green recalled that this issue was the primary concern of
realtors who had testified.
Mr. Guaneli informed that Sec. 11 relates to rules that must be
amended in response to proposed bail provisions. The bill also
contains applicability and effective date provisions.
12:08:52 PM
Mr. Guaneli concluded that the work conducted during the Senate
committee process has resulted in an improved bill.
AT EASE 12:09:21 PM / 12:10:02 PM
Senator Stedman questioned the reason for the bill being
accompanied by zero fiscal notes, as he assumed that the bill could
result in more incarcerations.
Mr. Guaneli responded that whenever criminal statutes are enacted,
there is "the hope that there would be some deterrent affect".
However, it is difficult to determine the extent of the deterrent
in regards to Meth offenders, particularly those who are addicted.
Nonetheless, there is optimism that Meth production in the presence
of children would be deterred. Therefore, the number of people who
would be prosecuted for child endangerment should not be
significant. The additional penalties being proposed could result
in one or two additional years of imprisonment. The Department of
Corrections has anticipated that such cases would be limited.
Co-Chair Green ordered the bill HELD in Committee.
CS FOR SENATE BILL NO. 112(CRA)
"An Act imposing a tax on residents of regional educational
attendance areas and relating to permanent fund dividend
applications; and providing for an effective date."
12:12:48 PM
This was the second hearing for this bill in the Senate Finance
Committee.
Senator Bunde moved to adopt Version 24-LS0505\X as the working
document.
Co-Chair Green objected for explanation.
Senator Bund, the bill's sponsor, explained that the changes in the
Version "X" committee substitute would include the addition of
Legislation Intent language in Section 1, page one, beginning on
line seven, that would allow the Legislature to utilize the revenue
resulting from the tax imposed by the bill to fund regional
educational attendance areas (REAA). Language in Sec. 2(c), page
one, lines 13 and 14, would levy a $50 fee per request for
information; language in Sec. 4(a)(1) and Sec. 4(a)(2), page two,
lines 12 through 18, would specify that the REAA tax would be
levied on individuals over the age of twelve but under the age of
65 who reside in a REAA as of January 1 of the tax year or an
employee of an REAA during a tax year. A person who resides in an
REAA and also works for the REAA would only be required to pay the
tax once.
Senator Bunde stated that language in Sec. 4(c)(1) through Sec.
4(c)(3), page two, lines 25 through 31, would define who would be
exempt from the fee.
Senator Bunde continued that language in Sec.4(a), page three, line
two, specifies that the tax must be paid prior to April 1 of the
calendar year in which it is imposed. Language in Sec. 4(c)(1),
page three, line 23 specifies exemptions for those who might have
already paid the tax. In addition, the bill defines the terms
"family", "regional Attendance area", and "tax".
Conceptual Amendment #1: This amendment deletes the phrase "at any
time" from language in Sec. 4(a)(2)(B), page two, lines 17 and 18.
In addition, the following language is inserted following "tax
year" in Sec. 4(a)(2)(B) on page two, line 18.
for 10 consecutive days or a normal pay period, whichever is
less, or for more that 20 cumulative working days.
Senator Bunde moved to adopt Amendment #1.
Senator Bunde explained that this amendment defines what the term
employed means in relationship to this bill.
Senator Hoffman objected for further explanation. He apologized for
his and Senator Olson's absence during the initial explanation on
this bill, as they had been called to a meeting with Governor Frank
Murkowski. This is an important bill to both himself and Senator
Olson.
Senator Bunde explained that this language was being offered upon
the recommendation of Legislative Legal and Research Services, as
it would further clarify who would be considered as being employed
by an REAA. Specifically, it would apply to someone who held a
temporary job with an REAA but who might reside out of State.
Co-Chair Green removed her objection to the adoption of Version
"X".
Senator Hoffman asked that further discussion of the bill occur, as
this "major policy decision" would have "major impact" on both his
and Senator Olson's regions.
Senator Bunde restated his earlier explanation of the bill as well
as the Conceptual Amendment being offered.
12:20:35 PM
Senator Hoffman asked whether any consideration had been given to
military personnel who, because they live on military bases, "are
exempt from taxation". "They are not paying for their education
either."
Senator Bunde stated that military personnel who live near a
community that imposes a sales tax would pay such taxes. "Their
payment in lieu of taxes, of course, passes through to the local
school district there." Nonetheless he did not consider that a
local contribution. The State is prohibited from taxing federal
property. "No is the short answer."
Senator Hoffman noted that he has used that "exact reason" in
regards to Western Alaska "in which "well over 95-percent of land
is federal and the State of Alaska receives payment in lieu of
those taxes for all of those federal lands that are non-taxed". He
appreciated the fact that Senator Bunde recognized that fact and
has used that "same argument" in regards to this bill. "Under this
legislation, those people would be paying this tax plus the tax
that is being charged on those properties in lieu of taxes."
12:22:22 PM
Senator Bunde countered "that it swings both ways" as military
personnel who live near a military base in an urban Alaska area,
pay to support their local schools as well as the payment in lieu
of taxes money that passes through to the school district. He
"rejected any claim" that the latter should be recognized as a
local contribution for "it is simply federal money that passes
through".
Senator Hoffman argued therefore that were the land private
property rather than federal property, the land would be subject to
taxation; however, "by virtue that it isn't, that prohibits those
areas from even the possibility of being considered…"
Co-Chair Green recognized this as "a function of military service".
Many military personnel who live in local communities do support
local programs.
Senator Hoffman clarified that his argument is specific to federal
lands such as the Yukon Kuskokwim Delta National Wildlife Refuge,
which "are federal parks that are not available for taxation".
12:23:55 PM
Senator Bunde stated that "the argument is … a little disingenuous"
as a borough must be formed in order to impose taxes. There has no
interest shown in that regard. Thus, even if those lands were
private, it is uncertain whether a tax base would be provided for
the area's schools.
Co-Chair Green stated that the amendment would be readdressed
during the April 20th Committee meeting.
[NOTE: No action on the motion to adopt a committee substitute or
the amendment transpired during this hearing. Refer to the April
20, 2005 hearing in this regard.]
The bill was HELD in Committee.
ADJOURNMENT
Co-Chair Green adjourned the meeting at 12:24:27 PM
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