Legislature(1993 - 1994)
01/28/1994 09:15 AM Senate FIN
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* first hearing in first committee of referral
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+ teleconferenced
= bill was previously heard/scheduled
MINUTES
SENATE FINANCE COMMITTEE
January 28, 1994
9:15 a.m.
TAPES
SFC-94, #8, Side 2 (574-090)
CALL TO ORDER
Co-chair Drue Pearce convened the meeting at approximately
9:15 a.m.
PRESENT
All committee members (Co-chairs Pearce and Frank and
Senators Jacko, Kelly, Kerttula, and Sharp) were present
with the exception of Senator Rieger who arrived soon after
the meeting began.
ALSO ATTENDING: Senator Randy Phillips; Randy Welker,
Legislative Auditor; Nancy Slagle, Director of Budget
Review, Office of Management and Budget; Mike Greany,
Director, Legislative Finance Division; and aides to
committee members and other members of the legislature.
SUMMARY INFORMATION
SB 243 - FOUR DAM POOL TRANSFER FUND
The bill was HELD in committee pending an overview
of the operating budget for the Dept. of Community
and Regional Affairs.
SB 246 - REIMBURSABLE SERVICE AGREEMENTS
Discussion was had with Nancy Slagle, Randy
Welker, and Mike Greany. CSSB 246 (Finance) was
REPORTED OUT of committee with a "do
pass" recommendation, a new title, and a
zero fiscal note from the
Governor/Office of Management and
Budget.
SB 247 - STATE LEASES & LEASE-PURCHASE FINANCING
Discussion was had with Randy Welker. A draft
CSSB 247 (2d Fin), "O" version was adopted. The
bill was then HELD in committee for development of
more restrictive title language and possible
amendment regarding standard leases.
SB 243 FOUR DAM POOL TRANSFER FUND
Co-chair Drue Pearce advised of a request from Senator Sharp
that SB 243 be scheduled for hearing following the overview
of the Dept. of Community and Regional Affairs budget. The
bill was thus HELD in committee for later discussion.
SB 246 REIMBURSABLE SERVICE AGREEMENTS
Co-chair Pearce directed that SB 246 be brought on for
discussion. NANCY SLAGLE, Director of Budget Review, Office
of Management and Budget, came before committee to present
an amendment. Senator Randy Phillips sought concurrence in
the amendment from the Legislative Auditor and Director of
Legislative Finance. Mrs. Slagle explained that the first
provision of the amendment removes redundant language
prohibiting use of RSAs to merely transfer money between
appropriations. That prohibition is covered in the previous
sentence of the legislation.
(Senator Rieger arrived at this time.)
The second change within the amendment eliminates subsection
(2) wording requiring that the agency that provides the
service have authority, by law, to do so. The change would
provide flexibility in areas where an agency provides
certain expertise but may not have specific statutory
authority.
Mrs. Slagle said that the remainder of the amendment simply
provides a better flow of bill language. She then directed
attention to subsection (2)(A) of the amendment and noted
need to correct a typographical error by replacing "of" with
"to."
RANDY WELKER, Legislative Auditor, came before committee in
response to questions from Senator Kerttula. Mr. Welker
explained that the bill attempts to curtail past RSA abuses
highlighted by an audit of the Dept. of Health and Social
Services. Statutory clarification is needed concerning
allowable uses of reimbursable service agreements. An RSA
should only provide reimbursement for a service. The bill
attempts to cut off potential transfer of funds between
appropriations under the guise of an RSA. There is
presently no statutory language that addresses these
agreements. The proposed bill would "put some . . .
direction in statute."
Responding to an earlier question from Senator Phillips, Mr.
Welker said that amendment language proposed by OMB poses no
significant problem. Legal authority language proposed for
removal is an inherent requirement for use of an RSA.
MIKE GREANY, Director, Legislative Finance Division,
concurred in comments by Mr. Welker that the proposed
amendment would present no problem. Mr. Greany next noted
that when the bill was previously before committee,
questions were raised concerning legislative ability to
continue to make necessary transfers within the annual
budget document. Subsequent review has not evidenced
problems in that area.
Senator Rieger commented regarding subsection (2)(B)
language relating to cost allocation methods and asked if it
provides a loophole. Mr. Welker acknowledged the concern,
but questioned whether there was any way to totally preclude
intentional circumvention. It will be incumbent upon OMB to
critically review proposed cost allocation plans to ensure
that they have a rational basis in cost. Bill language
identifies and places responsibility for approval of the
plan with OMB.
Senator Frank MOVED for adoption of amendment no. 1. No
objection having been raised, amendment no. 1 was ADOPTED.
Co-chair Pearce noted that the title of the legislation
appears to be broad. Senator Rieger concurred in need to
limit the title to reimbursable service agreements. Senator
Kelly MOVED to tighten and clarify the title. No objection
having been raised, amendment no. 2, to restrict the title,
was ADOPTED.
Co-chair Frank MOVED that CSSB 246 (Fin), incorporating
amendment no. 1 and the conceptual title change of amendment
no. 2, pass from committee with individual recommendations
and the accompanying zero fiscal note. No objection having
been raised, CSSB 246 (Fin) was REPORTED OUT of committee
with a unanimous "do pass" recommendation, new title, (An
Act permitting the use of reimbursable service agreements
and other agreements between state agencies to finance the
provision of services if the agency that requires the
service has the authority to obtain or provide the service
and has an appropriation that may be used for that purpose
and if the agency that provides the service bills the agency
administering the funds available for that service based on
the actual cost to provide the service or a cost allocation
method approved by the office of management and budget) and
zero fiscal note from the Office of Management and Budget.
SB 247 STATE LEASES & LEASE-PURCHASE FINANCING
Co-chair Pearce directed that SB 247 be brought on for
discussion and further directed attention to a draft
committee substitute (8-LS1447\O, Chenoweth, 1/27/94). Co-
chair Frank explained that the bill was introduced by the
Legislative Budget and Audit Committee to require that the
judicial branch bring lease-purchase arrangements before the
legislature for approval. Statutes presently provide the
court system the opportunity to enter lease-purchases
without legislative approval if annual debt service is less
than $1 million.
The Co-chairman noted that the bill was previously heard and
reported out of committee before it was learned that it
"deauthorized the authorization to lease-purchase a new
court facility in Fairbanks." That project meets the intent
of the bill since the facility was previously approved by
the legislature. It should not be unapproved at this time.
Co-chair Pearce noted that the present draft incorporates
earlier technical amendments made by committee at page 6,
line 14, and page 7, line 7, were acquisition was tied to
"real property."
Senator Kelly asked how the bill would apply to the
University's purchase of an off-campus office building.
RANDY WELKER, Legislative Auditor, again came before
committee. He explained that if the University has an
appropriation and legal authority to pay cash for a
building, the subject bill would not apply. It applies only
to financing agreements that require an annual appropriation
for debt service. Co-chair Pearce voiced her understanding
that it would affect the University if a lease-purchase
arrangement was entered for the building. Mr. Welker
concurred.
Senator Kerttula voiced concern over lease costs associated
with rental of office space such as the Frontier Building in
Anchorage. He attested to need for legislative oversight of
standard lease arrangements that obligate the state to
sizable annual payments. Senator Phillips suggested that
since he and Senator Frank sit on the subcommittee
overseeing the leasing budget within the Dept. of
Administration, that the issue be reviewed within the
context of that budget. Co-chair Frank concurred, noting
that if the state is leasing a facility long-term, it is
preferable to eventually own it. Leasing comprises a $32
million item in the Dept. of Administration budget. Senator
Kerttula suggested that leases for which the annual cost is
over $500.0 and the term is longer than three years should
be brought before the legislature for approval. He then
voiced his belief that the proposed bill might encourage
long-term leasing over lease-purchase.
Discussion followed regarding automobile leasing. Senator
Phillips asked that Senator Kelly submit a formal, written
request for audit review.
Co-chair Pearce called for objections to adoption of the "O"
version of CSSB 247 (2d Fin). No objection having been
raised, CSSB 247 (2d Fin) was ADOPTED.
Discussion followed regarding impact of the bill on the
recent purchase of the Court Plaza Building in Juneau and
the Anchorage Times Building in Anchorage. Randy Welker
advised that it would not impact the Court Plaza. Purchase
of the Times Building is presently a fluid process. The
transaction has not yet closed. It is, however, more likely
than not to be concluded before the effective date of the
proposed bill. Co-chair Frank explained that it was not the
Legislative Budget and Audit Committee's intent to deny the
purchase. Further discussion of the Times Building
transaction followed.
Co-chair Frank noted need to tighten the title of CSSB 247
(2d Fin) to include wording limiting lease-purchase
arrangements and requiring legislative approval. He then
MOVED for adoption of a conceptual amendment to tighten
title language. No objection having been raised, the
amendment was ADOPTED.
Senator Rieger noted that the bill speaks to both lease-
purchase financing and standard leases. He then suggested
that, in light of concerns raised by Senator Kerttula,
provisions pertaining to standard leases, at page 5, be
strengthened prior to transport of the bill to the floor.
Senator Kelly asked why language set forth in the letter of
intent was not incorporated within the bill. Co-chair Frank
explained that while it was felt it would be more
appropriate for DOTPF rather then DNR to hold title, manage,
operate and maintain state facilities, the intent was to
provide some flexibility and not fix that requirement in
statute. DOA currently oversees standard leases and thus
has an interest in the process as well.
Co-chair Frank MOVED that CSSB 247 (2d Fin) pass from
committee with individual recommendations. He then advised
that he would have no problem holding the bill in committee
for possible amendment of language relating to standard
leases. Senator Rieger voiced need to address lease
payments that are disproportionate to the value of the
building. Senator Phillips said he would take on the
project over the weekend and return to committee on Monday.
Co-chair Frank then WITHDREW his motion for passage, and
CSSB 247 (2d Fin) was HELD in committee.
ADJOURNMENT
Co-chair Pearce directed that the meeting be recessed
pending arrival of the Commissioner of the Dept. of
Community and Regional Affairs. Commissioner Blatchford was
precluded from returning to Juneau on this date. The
meeting was, in effect, adjourned at approximately 9:55 a.m.
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