Legislature(2001 - 2002)

05/02/2002 09:11 AM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                     SENATE FINANCE COMMITTEE                                                                                 
                           May 02, 2002                                                                                       
                              9:11 AM                                                                                         
SFC-02 # 85, Side A                                                                                                             
SFC 02 # 85, Side B                                                                                                             
CALL TO ORDER                                                                                                               
Co-Chair Pete  Kelly convened the meeting at approximately  9:11 AM.                                                            
Senator Dave Donley, Co-Chair                                                                                                   
Senator Pete Kelly, Co-Chair                                                                                                    
Senator Jerry Ward, Vice Chair                                                                                                  
Senator Lyda Green                                                                                                              
Senator Gary Wilken                                                                                                             
Senator Donald Olson                                                                                                            
Senator Lyman Hoffman                                                                                                           
Senator Loren Leman                                                                                                             
Also   Attending:   REBECCA  NANCE   GAMEZ,   Deputy  Commissioner,                                                           
Department  of Labor  and  Workforce  Development;  RONALD E.  HULL,                                                            
Director, Division  of Employment Security, Department  of Labor and                                                            
Workforce Development;  PAT DAVIDSON, Legislative  Auditor, Division                                                            
of Legislative  Audit; MICHAEL SHIFFER, Program Coordinator,  Alaska                                                            
Workforce  Investment  Office,  Department  of Labor  and  Workforce                                                            
Attending via Teleconference:  From Anchorage: LINDA HULBERT, Alaska                                                          
Human Resource Investment  Council; EDEN LARSON, Associated Builders                                                            
and  Contractors  of  Alaska;  MARY  E.  SHIELDS,  Anchorage/Mat-Su                                                             
Workforce  Investment   Board;  MANO  FREY,  Alaska   AFL-CIO;  MIKE                                                            
ANDREWS, Director, Alaska Work Partnerships Incorporated                                                                        
SUMMARY INFORMATION                                                                                                         
SB 252-EMPLOYMENT AND TRAINING PROGRAM/BOARD                                                                                    
The  Committee heard  testimony  from the  Department  of Labor  and                                                            
Workforce Development,  the Division of Legislative  Audit, and took                                                            
public  testimony. Three  amendments  were considered  and two  were                                                            
adopted. The bill was held in Committee.                                                                                        
HB 451-MUNICIPAL BOND REIMBURSEMENT                                                                                             
Scheduled but not heard.                                                                                                        
     CS FOR SENATE BILL NO. 252(L&C)                                                                                            
     "An Act renaming  the Alaska Human Resource Investment  Council                                                            
     as the  Alaska Workforce Investment  Board and relating  to its                                                            
     membership;  relating  to  repayment  on promissory  notes  for                                                            
     work-related  items paid for  by grant programs; extending  the                                                            
     termination date of  the state training and employment program;                                                            
     relating  to employment and training activities;  and providing                                                            
     for an effective date."                                                                                                    
This  was the first  hearing  for this  bill in  the Senate  Finance                                                            
REBECCA NANCE  GAMEZ, Deputy Commissioner,  Department of  Labor and                                                            
Workforce Development  informed the  Committee that since  1989, the                                                            
State  Training and  Employment Program  (STEP)  has trained  13,000                                                            
Alaskans,  helped develop  new jobs through  workforce development,                                                             
and assisted in reducing unemployment insurance claims.                                                                         
Ms. Gamez  stated that  communities all over  Alaska have  benefited                                                            
from the STEP  program. She informed the Committee  that STEP awards                                                            
training grants  on a competitive basis to various  entities as well                                                            
as awarding training grants  to individuals. She contended that STEP                                                            
is a highly successful  program with 85.9 percent of the individuals                                                            
who completed  the  program in  the year  2000 obtaining  work.  She                                                            
added  that training  program participants  might  also qualify  for                                                            
increased earnings due to their acquisition of new skills.                                                                      
Ms.  Gamez  noted  that  the  Department   of  Labor  and  Workforce                                                            
Development views  this legislation as containing  both improvements                                                            
to, and problems  for, the STEP program.  She stated the  Department                                                            
agrees  with  the language  addressing  controlling  administrative                                                             
costs  of STEP as  it would  provide performance  incentives;  would                                                            
reduce   complex   program    calculations   therefore    increasing                                                            
efficiency;   would  provide   for  accountability   of   additional                                                            
reporting costs; and would establish a baseline for evaluations.                                                                
Ms.  Gamez voiced  however,  that  the Department  would  prefer  an                                                            
administrative   cost  cap   of  20  percent   of  the  prior   year                                                            
expenditures  instead of  the proposed  15 percent.  She  elaborated                                                            
that a 20 percent cap would  provide adequate administrative funding                                                            
for sub-grantees,  would allow the Department to provide  incentives                                                            
for sub-grantees, and would  be aligned with cost definitions in the                                                            
recently enacted  Workforce Investment  Act therefore providing  for                                                            
further efficiencies.                                                                                                           
Ms.  Gamez  continued  that  the  Department  supports  a  four-year                                                            
reauthorization  of STEP  instead  of the proposed  two-year  sunset                                                            
authorization.  She noted  that the  Division  of Legislative  Audit                                                            
report [copy on file],  dated March 6, 2002, also recommends a four-                                                            
year  reauthorization.  She conveyed  that the  four-year  timeframe                                                            
would provide  efficiency by enabling  staff to develop the  program                                                            
rather than being required  to defend the program. She warned that a                                                            
two-year reauthorization  would reduce program alignment  with other                                                            
workforce development programs in the State.                                                                                    
Ms. Gamez stated the Department  would prefer improved participation                                                            
in the  program. She noted  that training  programs that are  longer                                                            
than a year  produce a higher return  on earnings than shorter-term                                                             
Ms.   Gamez  asked   the   Committee   to  consider   removing   the                                                            
reimbursement  language for support  services from the bill  because                                                            
it would not be cost effective  for the Department to administer the                                                            
loan  program and  would also  erode  the relationship  between  the                                                            
program's participants  and their caseworkers. She suggested instead                                                            
that  program  participants  seek  funding  support  elsewhere.  She                                                            
stated the Department currently  expends between $35,000 and $40,000                                                            
annually  in support services  for tools,  safety equipment  and the                                                            
like, and estimates  are that developing  a tracking and  collection                                                            
system would be more expensive.                                                                                                 
Senator Ward referenced  the letter dated May 2, 2002,  from Michael                                                            
Samson, President  of Samson Electric  and member of the  Associated                                                            
Builders  and Contractors  Legislative  Affairs  Committee [copy  on                                                            
file]  that accuses  the STEP  program  of favoring  the funding  of                                                            
union  training  programs  over  non-union  training  programs  even                                                            
though both  entities pay an unemployment  tax to fund the  program.                                                            
AT EASE 9:18 AM / 9:23 AM                                                                                                       
Senator  Ward  continued  that  both union  and  nonunion  money  is                                                            
contributed  to fund the STEP program  and that either entity  could                                                            
apply  for the  STEP funding;  however,  he understood  that  unions                                                            
receive  more of the  funding because  they  have more aggressively                                                             
pursued it.  He contended  that Mr. Samson's  letter is contrary  to                                                            
this  assumption  as it  implies  that non-union  people  are  being                                                            
denied access to the fund.                                                                                                      
RONALD  E.   HULL,  Director,  Division   of  Employment   Security,                                                            
Department   of  Labor  and  Workforce   Development  informed   the                                                            
Committee that  STEP is funded from a small percentage  of the total                                                            
unemployment  tax collected  from people employed  in the State.  He                                                            
stressed that STEP grant  funding is not determined by union or non-                                                            
union status.                                                                                                                   
Senator  Ward  restated  that both  union  and  non-union  employees                                                            
contribute to the STEP plan through their employer.                                                                             
Mr.  Hull explained  that  an employer  collects  the  tax from  the                                                            
employee and remits the tax to the State.                                                                                       
Mr. Hull  informed the  Committee  that funding  might be denied  to                                                            
non-union programs  in the event of a conflict with  the non-compete                                                            
clause as defined  in State statute. He furthered  that unions might                                                            
also be  better organized  in writing  and applying  for STEP  grant                                                            
funding; however, he stressed  that STEP grants are allotted to both                                                            
union and non-union entities.                                                                                                   
Senator  Ward asked  if the information  in Mr.  Samson's letter  is                                                            
Mr. Hull explained that  grant applications are received in response                                                            
to the  Department's  request for  proposals  (RFP) announcing  that                                                            
grant money  is available. He shared  that applicant grant  requests                                                            
might range  between $300,000 and  $5 million; however, there  might                                                            
be  only  $3  million  available  in  the  program.  He  stated  the                                                            
Department  undertakes a  process to determine  "which projects  are                                                            
the best."  He believed that the grant  referred to in Mr.  Samson's                                                            
letter was  denied due to the non-compete  clause in State  statute.                                                            
Senator Ward asked  if some projects are denied because  funding has                                                            
been allocated to other grants.                                                                                                 
Mr. Hull  affirmed this  occurs as  the STEP program  has a  limited                                                            
amount  of money  available  for grants.  He  detailed  some of  the                                                            
monetary amounts requested by various grant applicants.                                                                         
Senator Ward  asked if there  is a flaw in  the way the STEP  grants                                                            
are distributed.                                                                                                                
Mr. Hull  stressed  there is  "no problem"  with  the program  award                                                            
process  and that  the  "the STEP  program has  never  been used  to                                                            
impede or promote organized  labor." He continued that in some rural                                                            
areas of the State  where union training programs  are offered, non-                                                            
union individuals  often attend without  any obligation to  join the                                                            
Senator Wilken remarked  that the Exhibit 10 Chart on page 27 of the                                                            
audit  report  illustrates  "the  problem."  He  stated  Exhibit  10                                                            
portrays  that  STEP expenditures  for  private  non-union  training                                                            
decreased  $200,000  while  the  expenditures   for  union  training                                                            
"increased dramatically"  between the years 1997 and 2001. He stated                                                            
this information supports  Mr. Samson's contention that the increase                                                            
in expenditures  for union backed  programs referred to as  "jointly                                                            
administered  apprenticeship programs  is squeezing out the  private                                                            
training group." Senator  Wilken stressed this situation needs to be                                                            
addressed before further action is taken on this bill.                                                                          
Ms.  Gamez referred  the  Committee  to a  Department  of Labor  and                                                            
Workforce  Development letter  included in  the audit report,  dated                                                            
April 24,  2002 [copy  on file]  addressed to  Senator Ben  Stevens,                                                            
Chair of the Labor  and Commerce Committee, which  explains how STEP                                                            
grant awards  are determined.  She read a  portion of the letter  as                                                            
     The  distribution of  STEP awards across  vendor categories  is                                                            
     consistent  with  the  type  of  workforce  readiness  training                                                            
     identified  by the  Alaska  Human Resource  Investment  Council                                                            
     (AHRIC).   STEP   provides   industry-specific   and   job-link                                                            
     classroom  training, often less  than one year in duration  and                                                            
     offered  by  a  wide variety  of  training  vendors.  The  more                                                            
     narrowly   defined   vendor   categories  simply   have   fewer                                                            
     represented,  and as  such, have fewer  awards relative  to the                                                            
     funding. The difference  between the categories does not change                                                            
     dramatically  until  FY01 when  the Municipality  of  Anchorage                                                            
     renewed previous awards  to Union vendors. The Balance of State                                                            
     (all  of Alaska except  for the Municipality  of Anchorage  and                                                            
     the  Mat-Su  Borough) released  an  RFP that  was aggressively                                                             
     responded  to by Union training  providers. Over FY97  to FY01,                                                            
     113 grants were awarded.  Of those, 52 were awarded to union or                                                            
     labor  related organizations.  Successful  proposals  addressed                                                            
     market  conditions,  provided training  through  either a  job-                                                            
     linked classroom  or industry-specific training,  and submitted                                                            
     a  budget  that   met  the  limited  available  administrative                                                             
Ms. Gamez informed  the Committee that the Department's  letter also                                                            
includes a  chart labeled Exhibit  A that presents a summary  of the                                                            
STEP training  grants awarded between 1997 through  2000. She stated                                                            
that non-union  grants totaled $3,323,025  and union grants  totaled                                                            
$1,207,675 for total awards of $4,530,700.                                                                                      
Senator Wilken asked why  the Department's Exhibit A summary differs                                                            
from the union  and non-union award summary reflected  in Exhibit 10                                                            
of the audit.                                                                                                                   
PAT DAVIDSON,  Legislative Auditor,  Division of Legislative  Audit,                                                            
informed the  Committee that the Department  of Labor and  Workforce                                                            
Development  figures   did  not  incorporate  the  Municipality   of                                                            
Anchorage vendor grantees.                                                                                                      
Ms. Davidson continued  that further discrepancy is  the result of a                                                            
categorization  difference, and exampled that the  Division of Audit                                                            
has  identified The  Center  for Employment  Education  vender as  a                                                            
union because  it is affiliated with  the Teamsters Union  although,                                                            
the Department does not recognize it as such.                                                                                   
Senator Wilken opined that  the Audit's Exhibit 10 is more inclusive                                                            
than the Department's Exhibit A.                                                                                                
Ms. Davidson concurred,  and noted that Appendix C on page 57 of the                                                            
audit report  identifies  the various training  vendors and  whether                                                            
the Division categorized them as private, public, or union.                                                                     
AT EASE 9:37 AM/ 9:40 AM                                                                                                        
MICHAEL SHIFFER,  Program Coordinator,  Alaska Workforce  Investment                                                            
Office,  Department of Labor  and Workforce  Development stated  his                                                            
office administers  the State  Training and  Employment program  and                                                            
confirmed that  the Department recognizes the Center  for Employment                                                            
Education as a  non-profit entity even though it was  established by                                                            
the Teamsters  Union.  He explained  that the Center  operates  as a                                                            
non-profit  independent  entity;   whereas,  the  training  programs                                                            
identified by  the Department as union are directly  operated by the                                                            
labor organizations.                                                                                                            
Co-Chair    Kelly   voiced   support    for   the   union/non-union                                                             
determinations as specified in the audit.                                                                                       
Mr. Shiffer  voiced disagreement with  the auditor's classification                                                             
of the Center as operated by a union.                                                                                           
Co-Chair Kelly  opined that most people  would recognize  the Center                                                            
as a Teamster organization.                                                                                                     
Ms.  Gamez  expressed  that  the  auditors  report  took  months  to                                                            
compile;  however, the  Department had  a relatively  short time  to                                                            
review it.                                                                                                                      
Co-Chair  Kelly  announced   his support   for  using  the  findings                                                            
presented in  the audit, but acknowledged  the Department's  efforts                                                            
and competency in addressing issues the audit raised.                                                                           
Senator Wilken  voiced his concern that non-union  workers are being                                                            
"squeezed out" of training  program opportunities. He referenced the                                                            
Associated  Builders and  Contractors' (ABC)  position paper  titled                                                            
"Equal  Access  to  Training  in Alaska"  [copy  on  file]  that  is                                                            
included with  Mr. Samson's letter.  The paper, he stated,  contends                                                            
that the  ABC has applied  for modest funding  for programs  for the                                                            
past three  years, but "lost  points" during  the review process  of                                                            
the requests  because one  of the criteria  for the point system  is                                                            
that the  program should  have the  support of  organized labor.  He                                                            
stressed  that  because  the  ABC would  not  receive  support  from                                                            
organized labor  for its programs,  the criteria is biased.  Senator                                                            
Wilken  informed the  Committee that  Mr. Samson's  letter  suggests                                                            
that  to  address  this concern,  "the  non-compete  clause"  in  AS                                                            
23.15.652(a)(2) should  be eliminated to avoid placing, "a non-union                                                            
program in second position  just because they do not have support of                                                            
organized labor."                                                                                                               
Mr. Hull responded  that this discussion "is getting  bogged down in                                                            
the  details." He  stated  that whether  the  audit  numbers or  the                                                            
Department's  numbers are used, the  fact is that less than  half of                                                            
the funding was allotted  to organized labor. He stated that funding                                                            
for  training  programs  is  also  available   from  "a  variety  of                                                            
different   avenues"   including  such   entities   as  the   Denali                                                            
Commission, and  he asserted that the problem is not  as significant                                                            
"as people  are  led to  believe." He  noted that  the Department's                                                             
staff provides grant-writing assistance to non-union entities.                                                                  
Senator Wilken  reiterated that it  appears the bill "automatically                                                             
puts  a  request  for a  non-union  training  program  in  a  second                                                            
position" because the language  in Section 16, subsection (2) states                                                            
a training entity is eligible  for the grant request if it "does not                                                            
replace  or  compete   in  any  way  with  a  jointly  administered                                                             
apprenticeship program."                                                                                                        
Mr. Hull responded, "that is correct, it does."                                                                                 
Senator Wilken opined,  "at the very start, a non-union effort takes                                                            
second position  to a union  effort." He  asked whether a  non-union                                                            
program  request would  receive points  in the review  process  if a                                                            
union organization voiced support of the program.                                                                               
Mr.  Hull   responded,  "it's   in  statute,   so  it  wouldn't   be                                                            
Senator  Wilken asked  how the deletion  of this  language from  the                                                            
bill, as suggested  by the ABC in Mr. Samson's letter,  would affect                                                            
the program.                                                                                                                    
Mr.  Hull replied  that  as  long as  the  grants for  the  training                                                            
programs are awarded competitively,  the deletion of the language in                                                            
Section  16(2) would  not  have any  effect.  He stated  that  union                                                            
programs  "are generally  nationally  certified  training  programs"                                                            
which makes the review of the program easier on the Department.                                                                 
Co-Chair Kelly  asked whether the review process awards  points to a                                                            
request containing a nationally certified program.                                                                              
Mr. Hull responded  that the State  does not require programs  to be                                                            
nationally certified;  however, this issue is a consideration  under                                                            
the federal Workforce Investment Act (WIA).                                                                                     
Co-Chair Kelly  inquired again whether  national accreditation  is a                                                            
factor in the scoring process for a training program request.                                                                   
Ms. Gamez  informed  the Committee  that  the WIA  replaced the  Job                                                            
Training  Partnership Act,  and noted  that this  bill's Section  42                                                            
incorporates  the provisions of the  Act into the bill under  U.S.C.                                                            
2801 - 2945.                                                                                                                    
Mr. Shiffer informed  the Committee that WIA compels  State agencies                                                            
providing job-training  services through  the WIA funding  source to                                                            
identify qualified  and approved training providers.  He stated that                                                            
one of  the elements  of  this is  the encouragement  of  nationally                                                            
recognized skills standards.                                                                                                    
Co-Chair Kelly concluded  that, as a result of WIA stipulations, the                                                            
Department could  award points in its review of a  grant request for                                                            
programs that are nationally accredited.                                                                                        
Co-Chair Kelly  stated being nationally accredited  would give union                                                            
grant requests a "leg up;"  however, he noted WIA provisions have no                                                            
impact  on the how  the Department  administers  the review  process                                                            
concerning  Section   16(2)  that  Senator  Wilken  has   identified                                                            
regarding the non-compete language.                                                                                             
Mr. Shiffer stated this is correct.                                                                                             
Senator  Wilken contented  that the  deciding factor  in awarding  a                                                            
training grant  should be the quality of the program,  the facility,                                                            
the  program's  history,  and  the  methodology.  He  stressed  that                                                            
whether  the  program  is  union   or non-union   should  not  be  a                                                            
Senator Wilken  supported removal  of the language in Section  16(2)                                                            
from the  bill if  it would result  in "taking  the union/non-union                                                             
issue out of the equation."                                                                                                     
Co-Chair Kelly concurred.                                                                                                       
Ms. Davidson suggested  the Committee remove the language in Section                                                            
16(2) pertaining  to jointly  administered  programs and retain  the                                                            
language referring to federal  government training programs or other                                                            
existing  training programs,  as STEP  should ideally  be a  funding                                                            
source of "a training of last resort."                                                                                          
AT EASE 9:52 AM/ 10:01 AM                                                                                                       
Amendment   #3:  This   amendment  deletes   "jointly  administered                                                             
apprenticeship  program" in Section 16, subsection  (2). The amended                                                            
language reads as follows.                                                                                                      
     (2) its activities do not replace or compete in any way with a                                                             
     federally approved or any other existing training programs.                                                                
Senator Wilken moved for adoption of Amendment #3.                                                                              
Co-Chair Donley objected.                                                                                                       
Senator Wilken offered  a motion to amend Amendment #3. He requested                                                            
the  words  "apprenticeship  program"  be retained  in  Section  16,                                                            
subsection (2). The language would therefore read as follows.                                                                   
     (2) its activities do not replace or compete in any way with a                                                             
     federally approved apprenticeship program or any other                                                                     
     existing training programs.                                                                                                
Senator  Wilken  explained  that  deletion  of  the  words  "jointly                                                            
administered" would remove  the preference for union programs in the                                                            
bill, and "would  not affect how the STEP monies are  distributed to                                                            
training programs in Alaska."                                                                                                   
Co-Chair  Donley objected  to  the amendment  to  the amendment.  He                                                            
voiced  approval  of  "the idea  of  management  and  labor  working                                                            
together in these kind of training programs."                                                                                   
A roll call was taken on the motion to amend the amendment.                                                                     
IN  FAVOR:  Senator Green,  Senator  Leman,  Senator  Ward,  Senator                                                            
Wilken, Co-Chair Kelly                                                                                                          
OPPOSED: Senator Hoffman, Senator Olson, Co-Chair Donley                                                                        
ABSENT: Senator Austerman                                                                                                       
The motion to amend the amendment PASSED (5-3-1)                                                                                
The amendment was AMENDED.                                                                                                      
A roll call was taken on  the motion to adopt the amended amendment.                                                            
IN  FAVOR: Senator  Leman,  Senator  Ward, Senator  Wilken,  Senator                                                            
Green, Co-Chair Kelly                                                                                                           
OPPOSED: Senator Hoffman, Senator Olson, Co-Chair Donley                                                                        
ABSENT: Senator Austerman                                                                                                       
The motion PASSED (5-3-1)                                                                                                       
Amendment #3 was ADOPTED as amended.                                                                                            
Amendment  #1: This amendment  changes the  limit on administrative                                                             
expenses from  15 percent of the program expenses  of the prior year                                                            
to 20 percent of the program expenses of the prior year.                                                                        
Senator Hoffman  moved for  adoption of Amendment  #1 and  requested                                                            
the Department to comment on the amendment.                                                                                     
Co-Chair Kelly objected for discussion.                                                                                         
Mr. Hull  informed the  Committee that the  Department supports  the                                                            
amendment,  as it  would afford  the  Department  an opportunity  to                                                            
stabilize  costs,  account  for  additional   expenses  incurred  by                                                            
reporting  requirements in  the bill, and  fund some programs  which                                                            
could  not  provide  their  services   at  the  15  percent  cap  on                                                            
administrative level.                                                                                                           
Ms.  Davidson stated  the  audit revealed  that the  Department  was                                                            
interpreting and administering  the 15 percent cap on administrative                                                            
expenses as  15 percent of the overall  grant instead of  15 percent                                                            
of the  program's  expenses. She  informed the  Committee the  audit                                                            
further  revealed that  some  awarded grants  were  not being  fully                                                            
expended; therefore,  the grantees were collecting  more than the 15                                                            
percent of the expenditures.                                                                                                    
Ms. Davidson  expressed  that the focus  of the  audit was "to  tie"                                                            
this  percentage to  actual expenses  not  the total  amount of  the                                                            
Senator   Wilken  asked   Ms.  Davidson  to   further  explain   the                                                            
information  on  page 23  of the  audit  report, under  the  section                                                            
titled "Cost of  Administering STEP," that indicates  administrative                                                            
costs of the  program from FY97 through  FY01 range from  21 percent                                                            
to 24 percent.  He stated  these numbers  indicate that the  program                                                            
has been out of compliance  with the current 15 percent limit of the                                                            
law pertaining to program administrative costs.                                                                                 
Ms. Davidson  responded  that  there has  been a  difference in  the                                                            
"nature of  applying the  percentage, as there  was a difference  of                                                            
opinion  between  the Department  and  the Division  of Legislative                                                             
Audit in the  understanding of whether  the limit was on  the amount                                                            
appropriated  or  actually  spent."  She explained  that  the  audit                                                            
reflects the Division  of Legislative Audit's interpretation  of the                                                            
Ms. Davidson clarified  that this bill clearly defines the intent of                                                            
the  percentage  as  15 percent  of  prior  year  expenditures.  She                                                            
continued that  changing the percentage to 20 of expenditures  would                                                            
allow the Department  to operate at approximately  the same level at                                                            
which they have been operating.                                                                                                 
Ms.  Gamez  contended  there  is  "a  conflict   in  State  statute"                                                            
regarding the interpretation  of administrative costs. She explained                                                            
that  the  chart on  page  156  of the  audit  report  reflects  the                                                            
discrepancies that result  from this conflict as it depicts both the                                                            
percentages  of  administrative  costs  based  on  the Department's                                                             
interpretation of the intent  of the statute as well as the Division                                                            
of Legislative Audit's  interpretation. She explained that the audit                                                            
viewed data gathering as  an administrative cost of the STEP program                                                            
whereas the  Department views  data gathering  as a program  expense                                                            
not an administrative  expense because  it is a federal requirement                                                             
for  the unemployment  insurance  trust  fund  from which  the  STEP                                                            
program is funded.                                                                                                              
Senator  Leman  asked  the  level  of  expenses   incurred  by  data                                                            
Ms.  Gamez  stated  the  chart  on page  156  of  the  audit  report                                                            
indicates the  Department's administrative expenses  as being in the                                                            
13 to 14  percent range  for FY99 through  FY01. She furthered  that                                                            
the inclusion  of the costs  for data gathering  would increase  the                                                            
numbers   to   approximately   20  percent.   She   reiterated   the                                                            
Department's  position  that data  gathering  is a  program  expense                                                            
because  the STEP program  would not  be possible  without the  data                                                            
Senator Green inquired  if the required data is used exclusively for                                                            
this program.                                                                                                                   
Ms.  Gamez  affirmed that  the  compilation  of  data, specifically                                                             
unemployment records, is  necessary as it is used to measure program                                                            
performance  and to  determine the  percentage  of the unemployment                                                             
program funding to be diverted into the STEP program.                                                                           
Senator Olson  asked if increasing  the amount  of the STEP  program                                                            
funding  allowed   for  administrative  functions   as  proposed  in                                                            
Amendment  #1  would  subsequently  reduce  the  amount  of  funding                                                            
available for training programs.                                                                                                
Co-Chair Donley responded  that current administrative costs already                                                            
exceed the percentage specified in Amendment #1.                                                                                
Ms.  Gamez stated  that  the  Department  supports the  language  in                                                            
Amendment  #1  which  would  increase  the  administrative   program                                                            
allowances from the current  15 percent to "not to exceed 20 percent                                                            
of the  prior program year  expenditures."  She continued that  this                                                            
new  level would  be  still  be lower  than  needed to  support  the                                                            
program  if the  Department's  interpretation  of the  statute  were                                                            
continued;  however,  the Department  supports  Amendment  #1 as  it                                                            
would  provide   an  opportunity   to  reach  a  consensus   on  the                                                            
interpretation of the language.                                                                                                 
SFC 02 # 85, Side B 10:15 AM                                                                                                    
Ms.  Gamez  informed  the  Committee  that  some  of  the  costs  of                                                            
administering  the program would be "passed on" to  providers of the                                                            
training services to offset "any significant decrease in funds."                                                                
Ms.  Davidson clarified  that  the auditors  view  the STEP  program                                                            
reporting requirement to  be an administrative expense despite being                                                            
considered  "critical"  to the program,  as those  expenses are  not                                                            
funding  or actual training  and "are not  considered non-essential                                                             
costs." She furthered  that the Division supports  the language that                                                            
bases the percent of administrative  costs on the prior year's total                                                            
STEP  program  funding,  rather  than  a  percentage  based  on  the                                                            
program's actual  expenses, as it  is difficult to determine  actual                                                            
costs of a program until the end of the year.                                                                                   
Ms.  Gamez  referred  the  Committee  to  the Department's   written                                                            
response  on the issue of  administrative costs  on page 156  of the                                                            
audit  report.  She  stressed  that  the  Department   supports  its                                                            
position  on the interpretation  of the law  as being in  compliance                                                            
with the law.                                                                                                                   
Senator  Leman  asked  for  clarification  as  to  the Department's                                                             
reference in  the aforementioned response  regarding "FY  99 statute                                                            
and FY 99 law."                                                                                                                 
Ms.  Gamez  responded that  SB  344,  enacted  in 1999,  included  a                                                            
provision   allowing   some  flexibility   in   the  definition   of                                                            
administrative costs.                                                                                                           
Senator Wilken voiced that  the amendment would increase the allowed                                                            
administrative  costs to 20 percent; which would provide  sufficient                                                            
funding to cover the expense  of collecting data required by federal                                                            
Mr.  Hull  responded   that  the  Department  has  determined   that                                                            
increasing  the allowable administrative  costs of the STEP  program                                                            
to 20 percent  as outlined in Amendment  #1 would actually  decrease                                                            
the amount  the Department  would  receive to  cover administrative                                                             
costs, as that  percentage would be calculated based  on a different                                                            
set of criteria than the  Department has been using. He informed the                                                            
Committee  that  the  Department  has  never  counted  the  cost  of                                                            
administering the collection  of the tax supporting the STEP program                                                            
as an administrative  cost, but rather  has considered it  a program                                                            
Co-Chair Kelly WITHDREW his objection to Amendment #1.                                                                          
There being no further objection, Amendment # 1 was ADOPTED.                                                                    
Amendment  #2: This amendment  would extend  the sunset date  of the                                                            
STEP program from two years to four years.                                                                                      
Senator Hoffman moved for the adoption of Amendment #2.                                                                         
Ms.  Davidson explained  that  the proposed  four-year  sunset  date                                                            
would allow  the STEP program  the timeframe  necessary for  program                                                            
reevaluation.  She  additionally  noted  that this  timeframe  would                                                            
allow  the STEP  program  to  monitor proposed  changes  in  federal                                                            
training programs and the  Alaska Vocational Technical Center (AVTC)                                                            
and to evaluate its role in those programs.                                                                                     
Senator Leman  commented that the Senate Labor & Commerce  Committee                                                            
supports  a  two-year  sunset  date  primarily   to  ensure  program                                                            
Senator Leman voiced objection to Amendment #2.                                                                                 
Senator Hoffman  WITHDREW his motion  to adopt Amendment  #2 without                                                            
Senator Wilken asked if  there is an established "scoring" procedure                                                            
for STEP  grant proposals,  and if there is,  are the findings  made                                                            
Mr. Hull replied that there is an established procedure.                                                                        
Senator Wilken  asked the  amount of funding  the Denali  Commission                                                            
has made available for training through the STEP program.                                                                       
Mr. Shiffer commented that  the State has received $2.8 million from                                                            
the Denali  Commission training fund.  He noted that the  funding is                                                            
commonly  used to  support  Denali Commission  projects  as well  as                                                            
activities  or  projects related  to  rural  development,  primarily                                                            
infrastructure development.                                                                                                     
Senator Wilken  asked if these training  programs are evaluated  for                                                            
their effectiveness.                                                                                                            
Mr. Shiffer replied  that quarterly and annual reports  are supplied                                                            
to  the  Denali  Commission  that  include   the  number  of  people                                                            
attending  the training programs  and any  job placements  resulting                                                            
from the training.                                                                                                              
Senator  Wilken requested  the Department  to provide the  Committee                                                            
with copies of those reports.                                                                                                   
Senator Wilken  asked whether the seven recommendations  outlined on                                                            
page 29 of the Audit Report are addressed in this bill.                                                                         
Ms. Davidson  responded that  all of the  recommendations are  being                                                            
addressed  either  at the  Departmental  level  or  the Legislative                                                             
level,  with the exception  of  the recommendation  relating to  the                                                            
unexpended  STEP fund balance. She  stated this concern arises  from                                                            
the fact that workers have  had monies withheld from their wages for                                                            
contribution  to the STEP  fund; however, if  those monies  have not                                                            
been expended  then  no training  benefits have  been provided.  She                                                            
informed  the   Committee  that  the   Legislative  Audit   Division                                                            
recommendation is that  the unexpended STEP fund balance be returned                                                            
to the Unemployment Insurance (UI) fund.                                                                                        
LINDA HULBERT,  Volunteer, Alaska Human Resource Investment  Council                                                            
(AHRIC)  testified via  teleconference  from Anchorage  to urge  the                                                            
Committee to  support changing the  name of the AHRIC to  the Alaska                                                            
Workforce Board  to more clearly define  the role of the  board. She                                                            
supported the  increase to 20 percent  for administrative  expenses,                                                            
and strongly urged  the Committee to grant permanent  status for the                                                            
STEP program  with a minimum  of a four-year  extension as  two-year                                                            
extensions   undermine  the  program's   efficiencies  as   well  as                                                            
opportunities and service  to individuals. She additionally voiced a                                                            
lack of  support for having  employees reimburse  the State  for the                                                            
costs of their participation  in training programs, as this would be                                                            
complex and  not be cost effective.  She urged support for  all STEP                                                            
funding  to  be  allocated  initially  to  the Employment   Security                                                            
Division instead  of being dispersed  directly to various  Workforce                                                            
Investment  Boards, as this  would allow  for better accountability                                                             
and statewide disbursement.                                                                                                     
EDEN   LARSON,   Executive   Director,   Associated   Builders   and                                                            
Contractors of Alaska,  Inc. (ABC) testified via teleconference from                                                            
Anchorage and thanked the  Committee for adopting Amendment #3 as it                                                            
addresses ABC's  concerns. She stated that ABC would  continue their                                                            
effort to expand  and improve training in the construction  industry                                                            
to the non-union sector.                                                                                                        
MARY SHIELDS,  Chair, Anchorage/Mat-Su  Workforce  Investment  Board                                                            
(WIB), testified  via teleconference  from  Anchorage and urged  the                                                            
Committee to remove the  sunset clause included in this bill, as the                                                            
STEP program,  which is entirely user  supported, provides  a needed                                                            
service to people in the  construction industry by offering training                                                            
that enables  individuals  to obtain sustainable  wages. She  stated                                                            
the WIB  would accept  a minimum  four-year extension,  as it  would                                                            
make  the program  more efficient  by  allowing for  more  long-term                                                            
planning  and  implementation  of  programs,  instead  of  routinely                                                            
"having to defend  itself". She questioned the reasoning  behind the                                                            
language  in the  bill regarding  the loan  program  and asked  that                                                            
further consideration  be given to  this. She thanked the  Committee                                                            
for changing the administrative cap to 20 percent.                                                                              
MANO FREY,  Business Manager,  Anchorage Laborers  Union Local  341;                                                            
President,  Alaska AFL-CIO;  and Denali  Commissioner testified  via                                                            
teleconference  from  Anchorage  to voice  "strong  support for  the                                                            
reauthorization  of STEP  as it  has been invaluable."  He  asserted                                                            
that the  STEP program  funding has "greatly  accelerated"  training                                                            
opportunities  in both union and non-union members  and has provided                                                            
for  the expansion  of  effective training  opportunities  in  rural                                                            
areas of the State.                                                                                                             
Mr.  Frey opined  that the  Senate  Labor and  Commerce Committee's                                                             
recommendation  to extend the STEP  program for two years  was based                                                            
on "misinformation."  He  summarized  that STEP "is  the number  one                                                            
training program  in Alaska" and has assisted in the  development of                                                            
an "amazing" number of new jobs.                                                                                                
Mr.  Frey   explained   his  perspective   of   the  term   "jointly                                                            
administered"   to  the   Committee  and   questioned  whether   the                                                            
elimination  of that language  has any affect.  He stated that  STEP                                                            
grants   enhance   budgets,   provide   for   additional    training                                                            
opportunities  to Alaskans, and assist  workers in finding  jobs. He                                                            
reiterated  that  the workers  "in  the field",  not  management  or                                                            
unions, provide  the bulk  of the funding  of the STEP program,  and                                                            
stated  that the  construction  industry  in  Alaska "is  in  growth                                                            
mode,"  unlike  the  fishing  and  timber  industries  that  are  in                                                            
MIKE  ANDREWS,  Director,  Alaska  Work Partnerships  Incorporated,                                                             
testified  via teleconference  from Anchorage  to voice his  support                                                            
for changing the  Alaska Workforce Investment Council's  name to the                                                            
Alaska Workforce  Board. He reminded  the Committee that  the Senate                                                            
Labor and  Commerce Committee  recommends a  report be developed  to                                                            
analyze how jointly  administered training programs  work. He voiced                                                            
support  for the four-year  reauthorization  for STEP, and  affirmed                                                            
that STEP is a "great investment" for the State of Alaska.                                                                      
Co-Chair Kelly ordered the bill HELD in Committee.                                                                              
Co-Chair Pete Kelly adjourned the meeting at 10:57 AM.                                                                          

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