Legislature(1993 - 1994)

04/12/1993 09:20 AM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
                             MINUTES                                           
                    SENATE FINANCE COMMITTEE                                   
                         April 12, 1993                                        
                            9:20 a.m.                                          
  TAPES                                                                        
                                                                               
  SFC-93, #57, Side 1 (337-end)                                                
  SFC-93, #57, Side 1 (575-end)                                                
  SFC-93, #59, Side 1 (000-496)                                                
                                                                               
  CALL TO ORDER                                                                
                                                                               
  Senator Drue  Pearce,  Co-chair,  convened  the  meeting  at                 
  approximately 9:20 a.m.                                                      
                                                                               
  PRESENT                                                                      
                                                                               
  In addition  to Co-chair Pearce,  Senators Kelly,  Kerttula,                 
  Rieger, and Sharp were present.  Co-chair Frank arrived soon                 
  after  the meeting  began.   Senator  Jacko  arrived as  the                 
  meeting was in progress.                                                     
                                                                               
  ALSO  ATTENDING:    Senator  Robin  Taylor;   Senator  Randy                 
  Phillips;  Randy  Welker,  Legislative Auditor,  Legislative                 
  Audit  Division;   Shelby  Stastny,   Director,  Office   of                 
  Management and  Budget; Jack Fargnoli, Office  of Management                 
  and Budget; Gary Anderson, Office  of Management and Budget;                 
  Dugan   Petty,   Director,   General   Services,  Dept.   of                 
  Administration;  Mark   Hickey,  lobbyist  for   the  Alaska                 
  Railroad Corporation; David Skidmore, aide to Senator Frank;                 
  and aides  to committee  members  and other  members of  the                 
  legislature.                                                                 
                                                                               
  SUMMARY INFORMATION                                                          
                                                                               
  SB  76    -    CHARITABLE GAMING RESTRICTIONS                                
                                                                               
                 Scheduled, but not heard during the course of                 
                 this meeting.                                                 
                                                                               
                                                                               
  SB  88    -    CAPITAL PROJECT GRANTS                                        
                                                                               
                 Testimony  was  presented  by  Senator  Randy                 
                 Phillips  and  Robin Taylor,  Shelby Stastny,                 
                 and  Jack  Fargnoli.    Two  amendments  were                 
                 adopted.   The bill was subsequently  HELD in                 
                 committee.                                                    
                                                                               
  SB 128    -    LEGISLATIVE AUDITS                                            
                                                                               
                 Testimony  was  provided  by   Senator  Randy                 
                 Phillips,  Randy  Welker, and  Gary Anderson.                 
                 CSSB 128 (STA)  was subsequently REPORTED OUT                 
                                                                               
                                                                               
                 of    committee    without    recommendation,                 
                 accompanied by a zero fiscal note from Senate                 
                 State Affairs Committee for the Office of the                 
                 Governor.    [This  action  was  subsequently                 
                 rescinded.    See  meetings  of  4/13/93  and                 
                 4/14/93.]                                                     
                                                                               
  SB 129    -    POWERS OF CHIEF PROCUREMENT OFFICER                           
                                                                               
                 Testimony  was  presented  by  Senator  Randy                 
                 Phillips, Randy Welker, and Dugan Petty.  The                 
                 bill was subsequently HELD in committee.                      
                                                                               
  SB 148    -    ALASKA RAILROAD CORPORATION                                   
                                                                               
                 Testimony was presented by David Skidmore and                 
                 Mark Hickey.  CSSB 148 (Finance) ADOPTED as a                 
                 working document.   The bill was subsequently                 
                 HELD in committee.                                            
                                                                               
                                                                               
  SB  76 CHARITABLE GAMING RESTRICTIONS                                        
                                                                               
  Co-chair Pearce announced that  SB 76 would not be  heard at                 
  the present  meeting.  She  advised that  the committee  was                 
  seeking  opinions from both the Dept. of Law and Legislative                 
  Legal  Services  regarding sections  relating to  the Alaska                 
  Public Radio Network.                                                        
                                                                               
  (Co-chair Frank arrived at the meeting at this time.)                        
                                                                               
                                                                               
  SENATE BILL NO. 88                                                           
                                                                               
       An Act  relating  to grants  to  municipalities,  named                 
       recipients,     and     unincorporated     communities;                 
       establishing  capital  project matching  grant programs                 
       for  municipalities  and   unincorporated  communities;                 
       establishing a  local  share  requirement  for  capital                 
       project grants to municipalities, named recipients, and                 
       unincorporated  communities;  and   providing  for   an                 
       effective date.                                                         
                                                                               
  Co-chair Pearce  directed  that  SB 88  be  brought  on  for                 
  discussion,  noted   a  prior   committee  hearing   on  the                 
  legislation, and referenced proposed amendments.                             
                                                                               
  SENATOR ROBIN TAYLOR and SHELBY STASTNY, Director, Office of                 
  Management and  Budget,  came before  committee.    Co-chair                 
  Pearce directed attention to an  amendment by Senator Taylor                 
  and  asked  that  members  designate  it  Amendment  No.  2.                 
  Senator Taylor  explained that  instead of  merely utilizing                 
                                                                               
                                                                               
  the  population  base  and differentiating  on  a percentile                 
  basis what each community should  pay toward capital grants,                 
  the amendment factors  in actual  community ability to  pay.                 
  The Senator  explained that  it would  not be  proper for  a                 
  community such as  Wrangell, with  a mill levy  of $73.0  to                 
  $75.0, to be classed with Anchorage, which has a tax base of                 
  $10 million, and the North Slope Borough with $12.3 billion.                 
  Those  with  a  greater  tax  base  should  pay   a  greater                 
  percentage.                                                                  
  Senator Taylor next  referenced a  spread sheet attached  to                 
  Amendment No. 2,  saying it presents figures  for additional                 
  dollars driven into the formula as  a result of the proposed                 
  amendment.                                                                   
                                                                               
  When  queried  by  Co-chair  Pearce  for his  comments,  Mr.                 
  Stastny noted that  when the capital matching  grant program                 
  was originally  introduced by the administration,  two years                 
  ago, it included an "ability to  pay" concept.  That formula                 
  was  removed  from the  bill  prior to  introduction  in the                 
  current legislature.  The administration has no objection to                 
  the concept or the amendment.                                                
                                                                               
  Senator Kerttula MOVED for adoption of  Amendment No. 2.  No                 
  objection having been raised, Amendment No. 2 was ADOPTED.                   
                                                                               
  Co-chair Pearce next directed attention  to Amendment No. 1.                 
  She explained  that  it  results  from  correspondence  from                 
  Anchorage Mayor, Tom  Fink.   That correspondence speaks  to                 
  opposition  to increase  of the  match ratio  from 70/30  to                 
  50/50.  Senator Rieger MOVED  for adoption of Amendment  No.                 
  1.     Senator  Kelly   OBJECTED  and   inquired  concerning                 
  percentage changes.  Senator Kerttula noted that  population                 
  is not necessarily  a good factor  on which to base  grants.                 
  Ability to pay based on the tax  base is a better indicator.                 
  He then questioned whether communities aside from those with                 
  large tax bases could easily  accumulate matching funds, and                 
  he voiced support for the amendment.                                         
                                                                               
  Senator  Rieger  pointed  to  need  to extend  the  proposed                 
  amendment  beyond July  1, 1994, and  indicated need  for an                 
  amendment to Amendment  No. 1,  deleting most of  subsection                 
  (1) at  page 11, lines 1 and 2.   The only language from the                 
  subsection  to  be  retained  should  be  "the  local  share                 
  percentage is."  Co-chair Pearce  concurred.  Senator Rieger                 
  then MOVED for adoption  of the amendment  to  Amendment No.                 
  1.   Senator Kelly  again OBJECTED.   He  suggested that  if                 
  municipalities  are  to be  weaned  from state  dollars, the                 
  50/50 match is  a better  plan for the  state general  fund.                 
  Senator  Kelly  then  REMOVED  his  OBJECTION.   No  further                 
  objection having been raised, the amendment to Amendment No.                 
  1 was ADOPTED.   Co-chair  Frank noted that  passage of  the                 
  proposed bill would not prohibit the legislature from making                 
  designated grants.                                                           
                                                                               
                                                                               
  (Senator Jacko arrived at the meeting at this time.)                         
                                                                               
  Senator  Kelly stressed that  grant funding  would go  a lot                 
  further if the  match is 50/50  rather than 70/30.   Senator                 
  Rieger concurred  in comments  by Co-chair  Frank that  even                 
  with  the proposed matching grant program, designated grants                 
  would continue to be made.   He then voiced his belief  that                 
  the  higher  the local  match  requirement, the  greater the                 
  disparity between municipalities favored by the direct grant                 
  approach  and those  not favored  by appropriations  flowing                 
  through a mechanism similar to the proposed bill.  He voiced                 
  skepticism as to  how the program is  likely to work.   Some                 
  communities will  be funded  100%, while  others will  match                 
  70/30.  A 50/50 match would increase that disparity.                         
                                                                               
  Co-chair Pearce directed that the roll be called on adoption                 
  of Amendment No. 1:                                                          
                                                                               
       YEAS:     Kerttula, Rieger, Jacko, Frank, Pearce                        
       NAYS:     Sharp, Kelly                                                  
                                                                               
  The motion CARRIED  on a vote of 5 to 2, and Amendment No. 1                 
  was ADOPTED.                                                                 
                                                                               
  Co-chairman Pearce  called for additional  amendments.  None                 
  were offered.   She then directed that Amendments 1 and 2 be                 
  incorporated within a draft CSSB 88 (Finance).                               
                                                                               
  The Co-chair next referenced two fiscal notes from the Dept.                 
  of Community  and  Regional Affairs.    The first  seeks  an                 
  accounting clerk  III and a grant administrator  III as well                 
  as associated computer  equipment.   An additional $10.0  is                 
  sought, on the  second note, for  regional offices.  A  note                 
  from  the Dept.  of Administration requests  four additional                 
  positions   with   associated   travel,   contractual,   and                 
  equipment.   The  Co-chair expressed  concern  regarding the                 
  magnitude of the  fiscal notes.  She then questioned whether                 
  the grant  process within  the proposed  bill would  be that                 
  much more onerous than current capital grants.                               
                                                                               
  Shelby  Stastny again  came before committee  accompanied by                 
  JACK  FARGNOLI,  Office  of  Management  and  Budget.    Mr.                 
  Fargnoli   explained   that    meetings   with   Dept.    of                 
  Administration staff  indicate that  past budget  reductions                 
  have  left  the department  only  one  person  to deal  with                 
  municipal grants under Title 37.  There are no auditors, and                 
  accounting clerks serve a number  of sections.  The proposed                 
  bill  would impose  a new work  load on the  department.  In                 
  addition, it calls for extension of matching requirements to                 
  existing programs.   Individual accounts will have to be set                 
  up for all municipalities under  the matching grants portion                 
  of the bill, and   verifications and determinations  will be                 
  required  for match  criteria  under the  existing municipal                 
  grant  program.   That  creates need  for  an auditor.   The                 
                                                                               
                                                                               
  department does  not have  one.   An accounting clerk  would                 
  also be  needed to split  his or  her time  between the  two                 
  programs.                                                                    
                                                                               
  End, SFC-93, #57, Side 1                                                     
  Begin, SFC-93, #57, Side 2                                                   
                                                                               
  Mr. Fargnoli  attested to  understaffing at both  accounting                 
  and supervisory levels.                                                      
                                                                               
  Co-chair Pearce questioned need for  involvement of both the                 
  Dept. of Administration and Dept.  of Community and Regional                 
  Affairs.  Mr.  Fargnoli explained  that both department  are                 
  utilized under  the present program.  Efficiencies are to be                 
  gained by  having the  new capital  matching grants  program                 
  parallel the existing structure.  Mr. Stastny commented that                 
  one  of the programs functions as  a matching grants program                 
  under  municipal  assistance  while  the  other  issues from                 
  revenue sharing.   Senator Kerttula  suggested that the  two                 
  could be combined.                                                           
                                                                               
  In response to a question from Co-chair Pearce, Mr. Fargnoli                 
  explained   that  the  Dept.   of  Administration  would  be                 
  administering the new matching grants, created by SB 88, for                 
  municipalities as well as extension of matching requirements                 
  to  the existing  municipal  grant program.    The Dept.  of                 
  Community  and  Regional   Affairs  would  provide  parallel                 
  administration for unincorporated communities.                               
                                                                               
  Discussion  followed between the  Co-chair and  Mr. Fargnoli                 
  regarding existing staff at both  departments.  Mr. Fargnoli                 
  noted      considerable   difference   between   Dept.    of                 
  Administration   dealings    with   municipalities    having                 
  institutional governments and  interaction  of the  Dept. of                 
  Community   and   Regional   Affairs   with   unincorporated                 
  communities that do not have  access to personnel, financial                 
  resources  for  development  of  grant proposals,  financial                 
  planning,  economic  development,  etc.    Co-chair   Pearce                 
  suggested that,  with  that in  mind, one  would expect  the                 
  fiscal note from the Dept. of Community and Regional Affairs                 
  to  be larger  than that  from the Dept.  of Administration.                 
  However, the  reverse is  true.   Mr. Fargnoli  acknowledged                 
  that were the  programs starting  from scratch, the  request                 
  from the  Dept. of Community  and Regional Affairs  would be                 
  the  larger.  At  the present time,  Dept. of Administration                 
  staff is  maxed out  in terms  of what  it can  handle.   An                 
  integer increase in the number  of positions is thus needed.                 
                                                                               
                                                                               
  Co-chair  Pearce  queried  members regarding  action  on the                 
  fiscal  notes.    Senator Kelly  questioned  need  for staff                 
  increases at the  Dept. of Administration.   Co-chair Pearce                 
  requested that Senator Jacko and Co-chair Frank, chairmen of                 
  the respective  budget subcommittees,  review the  notes and                 
                                                                               
                                                                               
  report back  to committee  at the  next meeting.   She  then                 
  directed that  the bill  be HELD  in committee  pending that                 
  review and  preparation of  Senate Finance  Committee fiscal                 
  notes for the departments, if necessary.                                     
                                                                               
  Discussion followed between  Co-chair Frank and  Mr. Stastny                 
  concerning  the  flow  of funding  to  nonprofit  groups and                 
  percentage allowances for administrative costs.  Mr. Stastny                 
  noted that the 10% administrative allowance was incorporated                 
  within the bill by Senator Phillips when the legislation was                 
  before Senate Community  and Regional  Affairs.  The  intent                 
  was to prohibit municipalities from  charging more than 10%.                 
  Co-chair  Frank questioned whether an administrative fee was                 
  appropriate in situations  where a municipality merely  acts                 
  as  a pass  through from the  state to a  nonprofit or other                 
  grantee.                                                                     
                                                                               
  SENATOR RANDY PHILLIPS  came before  committee and cited  an                 
  example where municipal engineering and administrative costs                 
  on a highway project within  his district utilized $450.0 of                 
  the $1.1 million project.   Both Senator Kelly and  Co-chair                 
  Frank voiced need to establish the 10% administrative fee as                 
  the maximum rather than the rule.                                            
                                                                               
  Further   discussion   of    engineering/architectural   and                 
  administrative costs  followed.  Co-chair Frank  voiced need                 
  to  distinguish  between  pass-through situations  and  true                 
  administrative  services.   Co-chair  Pearce asked  that Co-                 
  chair Frank and staff work  on proposed amendments.  Senator                 
  Kelly  suggested that the  committee provide  guidelines but                 
  leave the ultimate decision  to administrators of individual                 
  grants.   Co-chair  Frank concurred  in the need  to provide                 
  more direction.  Co-chair Pearce  suggested that a letter of                 
  intent might be appropriate.                                                 
                                                                               
  Senator Kerttula  inquired about  savings that might  derive                 
  from combining the grant program  within a single department                 
  rather than the present division  between two agencies.  Mr.                 
  Stastny agreed that perhaps some  savings could be achieved.                 
  He questioned, however,  whether the Dept. of  Community and                 
  Regional   Affairs   has  authority   to   make  grants   to                 
  municipalities.                                                              
                                                                               
  Co-chair Frank asked how legislative designation portions of                 
  the  bill would  work.   Mr.  Stastny acknowledged  that the                 
  provisions  represent a change in  the current bill over the                 
  one introduced in  the past legislature.   He then explained                 
  that communities would be required to submit projects to the                 
  Office of  Management and  Budget for  inclusion within  the                 
  budget.   The legislature would  either approve and  fund or                 
  deny approval as it reviews and  acts on the capital budget.                 
  Senator Kelly asked if the administration would only include                 
  70/30 projects rather than 100% matches in the program.  Mr.                 
  Stastny said that is  how the capital budget had  evolved in                 
                                                                               
                                                                               
  the past.   The legislature then  adds direct grants in  the                 
  process  of its  budget review.   Water  and sewer  projects                 
  within the  Dept. of  Environmental Conservation  and school                 
  projects in the  Dept. of Education  would be requested  per                 
  the current process.                                                         
                                                                               
  Further discussion followed  between Co-chair Frank and  Mr.                 
  Stastny  concerning  inclusion  of  community  projects   in                 
  priority order.   Mr. Stastny  explained that legal  opinion                 
  indicates that the legislation cannot direct the Governor to                 
  fund projects in priority order.   The bill thus states that                 
  the  Governor  should  present them  by  priority  or submit                 
  information explaining  why they  are  not so  listed.   The                 
  Office of Management and Budget expects that they will be in                 
  priority order.                                                              
                                                                               
  Co-chair  Pearce noted  the newly  enacted requirement  that                 
  legislation  impacting  municipalities  carry   a  municipal                 
  fiscal  note.   The  note from  the  Dept. of  Community and                 
  Regional  Affairs  appears  to  be  a  better  fit  for  the                 
  appropriation bill rather than  SB 88.  She then  asked that                 
  the department  provide a  municipal fiscal note  indicating                 
  the  percentage  impact on  each  community rather  than the                 
  specific $65 million dollar amount  set forth on the present                 
  note.                                                                        
                                                                               
  Co-chair   Pearce  directed  that  the  meeting  be  briefly                 
  recessed prior to proceeding to discussion of SB 128.                        
                                                                               
                       RECESS - 10:00 A.M.                                     
                     RECONVENE - 10:05 A.M.                                    
                                                                               
                                                                               
  SENATE BILL NO. 128                                                          
                                                                               
       An Act relating to legislative audits.                                  
                                                                               
  Co-chair  Pearce  directed  that SB  128  be  brought before                 
  committee,  referenced  the Senate  State  Affairs committee                 
  substitute for the bill,  and noted the presence of  Senator                 
  Phillips, the Legislative Auditor, and staff from the Office                 
  of Management and Budget.                                                    
                                                                               
  SENATOR  RANDY  PHILLIPS again  came  before committee.   He                 
  explained that the bill was introduced at the request of the                 
  Legislative  Budget  and  Audit   Committee.    It  provides                 
  systematic follow-up procedures  for recommendations made by                 
  the Legislative  Auditor.   In  the past,  when audits  were                 
  conducted,  there  was no  formal  follow-up to  ensure that                 
  recommendations  for  accounting or  procedural improvements                 
  were effected.                                                               
                                                                               
  RANDY   WELKER,  Legislative   Auditor,  next   came  before                 
                                                                               
                                                                               
  committee.   He  explained  that  the  legislation  provides                 
  recognition that ultimate responsibility  for implementation                 
  of audit recommendations rests with  the administration.  To                 
  enhance implementation, a structured  follow-up processes is                 
  needed.  The  proposed bill would  effect that process.   It                 
  allows the Legislative Budget and  Audit Committee to select                 
  which items warrant follow-up.   It would then  become OMB's                 
  responsibility  to  undertake  follow-up  on  those   items,                 
  resolve differences of  opinion between  the agency and  the                 
  Legislative Audit  Division, and  report the  status of  the                 
  recommendations to LBA.                                                      
                                                                               
  Senator  Rieger noted language indicating that the committee                 
  could direct the Office of Management and Budget to continue                 
  to monitor implementation.  He then asked if the Legislative                 
  Budget and Audit  Committee actually  has that  power.   Mr.                 
  Welker explained  that some  audit recommendations  may take                 
  time to implement.   The foregoing language  recognizes that                 
  "not everything can be satisfied in a one-year time . . . ."                 
  The  Office of  Management and  Budget is  thus to  continue                 
  monitoring as the  recommendation is  implemented.   Senator                 
  Rieger noted that  direction from committee would  not carry                 
  the force of law.  Mr. Welker concurred.                                     
                                                                               
  At the request  of Co-chair  Pearce, Mr.  Welker provided  a                 
  step-by-step description of action under various sections of                 
  the bill, using recommendations from the recent audit of the                 
  Division of Elections as an example.                                         
                                                                               
  SHELBY  STASTNY again came  before committee  accompanied by                 
  GARY ANDERSON,  Director, Division  of Audit  and Management                 
  Services,  Office  of  Management  and  Budget,  came before                 
  committee.    Mr.  Anderson  said  that  the  bill  presents                 
  difficulties for OMB.   He explained that, on one  hand, the                 
  office is sympathetic to legislative  concerns.  The problem                 
  is that the  legislation requires  the Office of  Management                 
  and  Budget  to   perform  follow-up  functions.     OMB  is                 
  approximately one-third  the size  of the  Legislative Audit                 
  Division.  Major resources  would have to be devoted  to the                 
  effort.  The executive branch  already performs follow-up on                 
  audits conducted by  the administration.  Mr.  Anderson then                 
  suggested   that   Legislative   Audit   perform   follow-up                 
  procedures  for  its audits  as well.    He noted  that many                 
  audits are complex.  For OMB to follow up on recommendations                 
  made by  another branch  of government  would be  difficult.                 
  OMB staff would need access to Legislative Audit work papers                 
  and have to develop an  understanding of the recommendations                 
  to provide implementation oversight.   That is not the  most                 
  efficient or effective means  of follow up.  In  his closing                 
  comments,  Mr. Anderson  expressed OMB  willingness  to work                 
  with Legislative Audit on oversight.                                         
                                                                               
  Mr. Stastny concurred in  remarks by Mr. Anderson.   He said                 
  an  even  more  overriding  concern  involves the  issue  of                 
                                                                               
                                                                               
  separation of powers.   There is a reason for  separation of                 
  legislative functions from those of the administration.                      
                                                                               
  Senator Phillips said he  had not before been made  aware of                 
  OMB concerns.                                                                
                                                                               
  Co-chair Pearce called for additional questions or testimony                 
  relating to  the legislation.   She then queried  members on                 
  disposition  of the  bill.   Senator  Rieger MOVED,  for the                 
  purpose  of  discussion,   that  SB  128  (STA)   pass  from                 
  committee.   Co-chair Frank OBJECTED,  seeking clarification                 
  of  concerns  relating  to separation  of  powers.   Senator                 
  Phillips said that he foresaw no territorial domain problems                 
  occasioned  by the  bill.   He  noted  that the  legislature                 
  establishes  public  policy,  and  the  burden is  upon  the                 
  executive branch to execute that policy.                                     
                                                                               
  End, SFC-93, #57, Side 2                                                     
  Begin, SFC-93, #59, Side 1                                                   
                                                                               
  Co-chair Frank WITHDREW his OBJECTION.   CSSB 128 (STA)  was                 
  REPORTED OUT  of committee with a zero  Senate State Affairs                 
  Committee fiscal note  for the  Office of the  Governor/OMB.                 
  Co-chair  Pearce  and  Senators Jacko,  Rieger,  Sharp,  and                 
  Kerttula signed  the committee  report "no  rec."   Co-chair                 
  Frank signed "do pass."                                                      
                                                                               
  [NOTE - The foregoing action on CSSB 128 (STA) was rescinded                 
  4/13/93.  See committee minutes of 4/13/93 and 4/14/93]                      
                                                                               
                                                                               
  SENATE BILL NO. 129                                                          
                                                                               
       An  Act  relating  to  the  state's  chief  procurement                 
       officer.                                                                
                                                                               
  Co-chair  Pearce directed  that  SB 129  be  brought on  for                 
  discussion.    SENATOR  RANDY  PHILLIPS  again  came  before                 
  committee.  He explained that the legislation was introduced                 
  at  the  request   of  the  Legislative  Budget   and  Audit                 
  Committee.    It  responds  to   past  problems  surrounding                 
  issuance of an  $800.0 sole-source contract.   RANDY WELKER,                 
  Legislative  Auditor, concurred  in  comments regarding  the                 
  noted  sole-source contract, but  he advised that  it is not                 
  the  only example  of an  improperly entered  contract.   In                 
  examining the  root of the  problem, it was  determined that                 
  when   the  procurement  code  was  established,  the  chief                 
  procurement officer was envisioned as an autonomous position                 
  with  statutory  protection.    The   position  was  to  act                 
  independently  of  agencies  doing  the  contracting in  the                 
  approval  or  denial of  contracts.   That position  has not                 
  functioned as envisioned.                                                    
                                                                               
                                                                               
  The proposed  bill provides  more autonomy  by changing  the                 
  position  to a  six-year  term to  ensure  overlap from  one                 
  administration to  another.   It further  provides statutory                 
  salary   protection   to   deter   an  administration   from                 
  retaliating  against  the  procurement  officer  by   salary                 
  manipulation.                                                                
                                                                               
  For sole-source  contracts, the chief procurement officer is                 
  required  to independently examine  the facts  and determine                 
  whether the procurement is eligible for sole-source.  At the                 
  present  time,   requests  for  sole-source   contracts  are                 
  reviewed by the procurement officer  and approved based only                 
  on  information   provided  by   the   agency  seeking   the                 
  procurement.                                                                 
                                                                               
  In response to an inquiry from  Senator Kerttula, Mr. Welker                 
  said that, per  the procurement code, the  chief procurement                 
  officer can only be removed  for cause.  Since cause is  not                 
  necessarily defined, that aspect remains in question.                        
                                                                               
  DUGAN PETTY, Director,  Division of General Services,  Dept.                 
  of Administration,  came before  committee, voicing  support                 
  for the bill.  He said the department believes the bill will                 
  improve state procurement.  Several sections seek to improve                 
  efficiencies and standardize the  treatment of procurements.                 
  The   department   supports   those  streamlining   efforts.                 
  Increased  effort   and  review   required   of  the   chief                 
  procurement officer are  offset by increased  accountability                 
  and enhanced integrity of the process.                                       
                                                                               
  Mr.  Petty  directed  attention  to  Sec. 5  and  registered                 
  concern regarding emergency procurements.  He cited  current                 
  statutory  provisions  and  noted   that  revisions  in  the                 
  proposed bill  would remove  an  agency procurement  officer                 
  from making  that determination and  vest it totally  in the                 
  chief procurement officer.  It  allows the chief procurement                 
  officer to delegate that duty  only when he or she  does not                 
  have  sufficient time  to make  such a  determination.   Mr.                 
  Petty  voiced  his  understanding  that  the  department may                 
  interpret Sec. 5 broadly enough to allow it to encompass not                 
  only the chief procurement officer's written  determination,                 
  but the process of gathering and  submitting facts.  If that                 
  could not  be done  within a  72-hour period,  the power  of                 
  determination would be delegated, in  advance, to the agency                 
  that  might  incur  the  emergency.    Mr.  Petty  said  the                 
  department  would have  no objection  to Section  5,  if the                 
  foregoing  represents  an  acceptable   interpretation.  Mr.                 
  Welker subsequently concurred  in Mr. Petty's interpretation                 
  of  Section  5 and  voiced  hope that  the  department would                 
  develop regulations further defining procedures.                             
                                                                               
  Senator Rieger directed attention of  Section 9 and inquired                 
  concerning provisions exempting contracts between the  Dept.                 
  of  Law  and  contract  attorneys  from  provisions  of  the                 
                                                                               
                                                                               
  procurement  code.     Mr.  Petty  said  that   a  statewide                 
  procurement audit  recommended that selection  and contracts                 
  for  special prosecutors  be exempted  from the  procurement                 
  process.   Issues surrounding these  arrangements are  often                 
  confidential.   A  public procurement  process negates  that                 
  confidentiality.                                                             
                                                                               
  Discussion  followed between  Senator Rieger  and  Mr. Petty                 
  regarding  cost-reimbursement contracts.    Mr. Petty  noted                 
  that   a   variety  of   cost-reimbursement   contracts  are                 
  legitimate, effective  contract tools.   The  administration                 
  feels agencies should have  the latitude to use the  form of                 
  contract that most  effectively meets  needs.  The  proposed                 
  change  eliminates  need for  advance  determination  that a                 
  cost-reimbursement  contract  would  be the  most  efficient                 
  means of contracting.                                                        
                                                                               
  Co-chair Pearce called for additional questions or testimony                 
  on the bill.  None were  forthcoming.  Co-chair Frank stated                 
  need to  offer an amendment  relating to the  leasing budget                 
  within  the  Dept.   of  Administration.     He   referenced                 
  department complaints that  the division  does not have  the                 
  ability to renegotiate existing leases.  That portion of the                 
  procurement system fails to operate  properly.  He explained                 
  that he had been  working with both the department  and bill                 
  drafters to develop language that would allow the department                 
  to  renegotiate  with  an  existing  lessor.    The  initial                 
  reaction  from the department has  been that a savings would                 
  occur.  Co-chair Frank asked that  the proposed bill be HELD                 
  in committee pending development of  that language.  Senator                 
  Phillips advised that  he had no  problem with inclusion  of                 
  that effort  within the bill.   Senator Kerttula  asked that                 
  renegotiation provisions also apply to the legislature.                      
                                                                               
                                                                               
  SENATE BILL NO. 148                                                          
                                                                               
       An Act relating to the Alaska Railroad Corporation; and                 
       providing for an effective date.                                        
                                                                               
  Co-chair  Pearce directed  that  SB 148  be  brought on  for                 
  discussion and  referenced a  draft CSSB  148 (Finance)  (8-                 
  LS0583\X, Utermohle  4/12/93).   Co-chair  Frank  MOVED  for                 
  adoption of CSSB  148 (Finance) as  a working document.   No                 
  objection  having  been  raised,  CSSB  148  (Finance)   was                 
  ADOPTED.                                                                     
                                                                               
  DAVID  SKIDMORE,  aide   to  Senator   Frank,  came   before                 
  committee.   He explained  that the  adopted Senate  Finance                 
  Committee   version  makes  seven   changes  in  the  Senate                 
  Transportation version:                                                      
                                                                               
       1.   Deletes provisions relating to  municipal property                 
                                                                               
                                                                               
            taxation.                                                          
                                                                               
       2.   Combines   both   qualifications    for   railroad                 
  experience          into one  director.  One  member of  the                 
                      board   must   have  either   ten  years                 
                      railroad management  experience or  have                 
                      been  an  executive director  of  a U.S.                 
                      railroad.                                                
                                                                               
       3.   Creates  a   requirement  for   a  director   that                 
  represents the           current executive management of the                 
                           Alaska Railroad.                                    
                                                                               
       4.   Provides that the next opening  on the board shall                 
  be                                                                           
            filled by a director who  has the outside railroad                 
            experience called for in No. 2, above.                             
                                                                               
       5.   Specifies  that  meetings   of  the  board   where                 
  official       corporate  action  is to  be  taken shall  be                 
                 teleconferenced.                                              
                                                                               
       6.   Clarifies  the  definition  of  "nontransportation                 
  activity."          The  new  definition  excludes  activity                 
                      occurring  before  or subsequent  to the                 
                      transportation  of  people  or  personal                 
                      property by the railroad.                                
                                                                               
       7.   Provides for  participation in  the regional  land                 
  fill at        Nenana.                                                       
                                                                               
  Co-chair Pearce pointed to  the fact that up until  the time                 
  Mr. Turpin  left the railroad  and Mr. Hatfield  became CEO,                 
  the  railroad  had  a  board  member with  outside  railroad                 
  experience.   It  was  not expected  that the  director with                 
  outside  experience  would also  end  up as  chief executive                 
  officer of the railroad.                                                     
                                                                               
  Co-chair Pearce  further spoke  to an  inequity in  original                 
  railroad  law in that  labor has a  seat on  the board while                 
  management does not.   Mr. Hatfield is presently the  CEO, a                 
  board member, and the outside  expert.  Co-chair Pearce said                 
  she had no  problem giving management  a seat on the  board,                 
  but she said that that representative should not also be the                 
  outside expert.  The proposed bill  provides a seat for both                 
  management  and  a  director with  outside  expertise.   The                 
  reality  of  that is  that  an  existing board  member  (Mr.                 
  Lindsey or Mr. Lounsbury) will have  to leave the board this                 
  fall  and  be  replaced  with  a  new  member  with  outside                 
  experience.                                                                  
                                                                               
  Senator Kerttula  voiced need for legislation  providing for                 
  legislative confirmation of board members.                                   
                                                                               
                                                                               
  Mr. Skidmore explained that the  railroad reviewed the draft                 
  Senate Finance version  of the  bill and expressed  approval                 
  with   the    exception   of    the   new    definition   of                 
  "nontransportation activity."   Railroad concern relates  to                 
  the following subsections within Sec. 9:                                     
                                                                               
            (B) an activity occurring before, or subsequent to                 
  the transportation  of people  or personal  property by  the                 
  railroad; or                                                                 
                                                                               
            (C) an activity not                                                
                                                                               
                 (iii) conducted by  the railroad on  the date                 
  of                                                                           
            transfer to the state.                                             
                                                                               
  The  corporation  is  concerned  that  instances  may  arise                 
  involving  an activity conducted by the railroad on the date                 
  of transfer which  also occurred  before, or subsequent  to,                 
  the transportation  of people  or personal  property.   That                 
  activity would conflict with new bill language.                              
                                                                               
  At the  request of Co-chair Frank, MARK HICKEY, lobbyist for                 
  the Alaska Railroad Corporation, came before committee.  Co-                 
  chair Frank asked what  activities conducted at the  time of                 
  transfer might be prohibited by subsection (B), above.   Mr.                 
  Hickey pointed to  the freight  house and drayage  operation                 
  the railroad  has historically  conducted as  an example  of                 
  conflict between  language in subsections  (B) and (C).   He                 
  further noted  that  railroad warehousing  of freight  could                 
  also conflict.                                                               
                                                                               
  Co-chair Frank noted intent to curtail extension of railroad                 
  activities beyond those related to  transportation.  He then                 
  asked  if the  railroad  was involved  in  hotel or  lodging                 
  operations prior to transfer to the  state.  Mr. Hickey said                 
  that  railroad  operation of  the  Healy Hotel  predates the                 
  transfer.                                                                    
                                                                               
  Mr. Hickey next commented on definitions provided to a  work                 
  session of the Senate Transportation Committee.  The drafter                 
  at that time, did not include  language relating to a value-                 
  added  component.   Mr.  Hickey  reiterated  that  different                 
  interpretations of the  foregoing language could occur.   He                 
  suggested that he be allowed to work with staff to structure                 
  the language to better define  legislative intent.  Co-chair                 
  Pearce directed that  SB 148 be  HELD in committee for  that                 
  purpose.                                                                     
                                                                               
  ANNOUNCEMENT                                                                 
                                                                               
  Co-chair Pearce noted  that SB  45 (MISC.  LAWS RELATING  TO                 
  MINORS),  held   from  Saturday's  meeting,   would  be   on                 
  tomorrow's schedule.                                                         
                                                                               
                                                                               
  ADJOURNMENT                                                                  
                                                                               
  The meeting was adjourned at approximately 11:15 a.m.                        
                                                                               

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