Legislature(1999 - 2000)

03/27/2000 09:07 AM FIN

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

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