Legislature(1999 - 2000)
10/28/1999 09:08 AM Senate PRI
| Audio | Topic |
|---|
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
COMMISSION ON PRIVATIZATION AND DELIVERY OF GOVERNMENT SERVICES
Anchorage, Alaska
October 28, 1999
9:08 a.m.
COMMISSION MEMBERS PRESENT
Representative John Cowdery, Co-Chair
Senator Al Adams
Commissioner Bill Allen
Commissioner Tom Fink
Commissioner Kathryn Thomas
Commissioner George Wuerch
Commissioner Emil Notti
Commissioner Michael Harper
COMMISSION MEMBERS ABSENT
Senator Jerry Ward, Co-Chair
Representative Tom Brice
Commissioner Don Valesko
DEPARTMENT OF REVENUE SUBCOMMITTEE MEMBERS PRESENT
Mary Ann Pease, Chair
Leisa Roberts
Leonard Steinberg
John Main
Dana Owen - Department of Revenue Liaison (via teleconference)
COMMISSION AGENDA
Department of Revenue Subcommittee Draft Report
PREVIOUS ACTION
See Privatization Commission minutes dated 7/20/99, 8/16/99 and
9/20/99.
ACTION NARRATIVE
TAPE 99-7, SIDE A
CO-CHAIR COWDERY called the Commission on Privatization and
Delivery of Government Services meeting to order at 9:08 a.m.
Members present at the call to order were Representative Cowdery
and Senator Adams and Commissioners Allen, Fink, Harper, Notti,
Thomas and Wuerch.
CO-CHAIR COWDERY noted the approval of minutes would be delayed
until Mr. Pignalberi's return from the Legislative Ethics Committee
meeting which he is attending to verify that no Commissioner has a
conflict of interest in his or her participation on the Commission.
CO-CHAIR COWDERY introduced a new Commission member, Emil Notti.
COMMISSIONER NOTTI informed Commission members that he was raised
on the Yukon and trained as an electronics engineer. He brings
experience to the Commission as a person who has been on both the
government and private sector sides of the workforce. He served as
the Commissioner of the Department of Community and Regional
Affairs and as a board member of Cook Inlet Region Incorporated,
and he has been serving as a board member of a bank for 26 years.
Number 055
CO-CHAIR COWDERY asked Mary Ann Pease, Chair of the Department of
Revenue Subcommittee, to present the subcommittee's draft report.
MARY ANN PEASE introduced Department of Revenue Subcommittee
members Leonard Steinberg, Leisa Roberts and John Main, and made
the following comments. The Department of Revenue Subcommittee had
some very dedicated members and, although not all could be present
today, they unanimously supported the draft report. At the
subcommittee's first meeting, members looked at government
functions that could be transferred to the private sector via
contract, transferred to other levels of government, and/or
consolidated to make efficiency changes. The draft reports prepared
on the Child Support Enforcement Division (CSED), the Alcohol
Beverage Control (ABC) Board, the Income and Excise Audit Division,
the Oil and Gas Audit Division, the Treasury Division, the
Permanent Fund Division, the Alaska Municipal Bond Bank Authority,
the Alaska Permanent Fund Corporation, the Alaska Housing Finance
Corporation (AHFC), the Alaska Mental Health Trust Authority, and
the State Pension Investment Board are contained in Commissioner's
packets. Subcommittee members were unable to do an exhaustive
audit on any of the divisions with the limited time and
participation available and therefore concentrated on certain areas
that are identified in the draft report. Members reviewed all
divisions but focused their recommendations on CSED and the ABC
Board. Subcommittee members believe that before any of their
recommendations on privatization can be carried out, a detailed
audit should be done with a primary emphasis placed on the areas
brought forward in the subcommittee's report.
MS. PEASE asked Leisa Roberts to present the subcommittee's
findings on CSED to Commission members.
CO-CHAIR COWDERY noted it is his intention to extend the sunset
date of the Commission on Privatization of Government Services
during the next legislative session for the purpose of continuing
the work the subcommittees have started. He acknowledged that he
is aware that the subcommittees could not get their hands around
everything they wanted to look at in the given time frame.
MS. PEASE commented that Ms. Roberts put many hours into her review
of CSED and has become an expert in this field. She urged
Commissioners to direct any questions about that agency to Ms.
Roberts.
LEISA ROBERTS introduced herself to Commissioners and informed them
that she is representing ARCO on the subcommittee. She made the
following remarks about her review of CSED. CSED is a very large
organization that has undergone many changes in the recent past,
the most notable change being the implementation of a system of
staff retraining. Of CSED's 47,000 cases, 37,000 cases have orders
in which the child support obligor has been established, and 27,000
of the cases with orders are in arrears. CSED has no clear
definition of cases in arrears and its arrearage accounts are not
aged in the way typical accounts are. Because of the magnitude of
the caseload and the difficulty reviewing the agency, she looked at
sections within CSED that might benefit from privatization. Those
areas are the investigations section, the locate section, and any
area that does not provide direct case work.
MS. ROBERTS commented that in order to get a complete understanding
of CSED's operations, a thorough business process review should be
undertaken. She stated that one area that stood out is that some
employee tasks could be done more efficiently if mechanized.
CO-CHAIR COWDERY asked Ms. Roberts to expand on that statement.
MS. ROBERTS indicated that the data for new hire information
received from employers around the state is manually keyed in to a
computer program by CSED employees. The same information is
reported to other divisions and could easily be mapped out of those
divisions' systems and uploaded to CSED so that potential matches
could be identified. Second, other data is extracted from the
mainframe system and entered onto an excel spreadsheet by CSED
employees. A very inexpensive computer program is available that
can download the data from the mainframe system onto an excel
spreadsheet. She noted that CSED has put forth some effort to
reduce its manual data input. For example, a small number of
payments are now received via electronic funds transfer. CSED could
encourage more payers to use that system and also implement a
system in which recipients receive payments via electronic
transfer, thus eliminating check printing and file sorting and
updating. If some of the inefficiencies are more thoroughly
investigated, checked for compliance with laws and regulations and
corrected, better client service is likely to result.
While doing her review of CSED, MS. ROBERTS said that she found a
general feeling of discontent among people involved in the process.
MS. ROBERTS pointed out that modifications of cases are backlogged
to the point that a payer might be required to make more child
support payments after a child turns 18 because the backlog
prevented review of the modification while the child was a minor,
a scenario that agitates payers. In a good many cases, paternity
has not yet been established. CSED's immense caseload requires as
many employees as possible to work the active cases but CSED must
figure out what to do with the cases in arrears and privatization
might be the answer. CSED did solicit proposals for collection of
some cases in arrears, however restructuring the proposal might
attract more bidders from the private sector. She added that the
state might get more "bang for the buck" if some of the services
provided to CSED by other government agencies, such as legal
services, are provided by the private sector.
MS. ROBERTS acknowledged that she did not have time to thoroughly
review the implications of some of the recommendations but she
believes that basic business process changes would make CSED a lot
more efficient.
Number 212
COMMISSIONER WUERCH commended Ms. Roberts on her excellent report
and asked, regarding interagency assistance, whether the divisions
have a general overlay of costs for the services they provide,
regardless of the amount of assistance each provides, or whether
they charge on a per-task basis.
MS. ROBERTS explained that legal services are billed in a manner
similar to that of a law firm, however the divisions work closely
together so that they "staff up" and determine how many attorneys
will be needed for the caseload. To change that number, an
attorney has to be reassigned to another division or agency, which
does not allow for the flexibility available in the private sector.
COMMISSIONER WUERCH asked about the number of CSED cases.
MS. ROBERTS replied that of the 37,000 child support orders, 27,000
are in arrears. The total number of cases is 47,000, however
10,000 of those do not have orders established as of yet, and that
could be a matter of establishing paternity or locating the non-
custodial parent.
COMMISSIONER ALLEN asked Ms. Roberts to expand on the arrearage and
collections situation.
MS. ROBERTS explained that CSED does not age its accounts,
therefore a case in arrears is defined as anything past due over
one day. She suggested that the first action that should be taken
before considering outsourcing any of the collection function is to
establish criteria with which to consider cases in arrears.
Typically, private industry ages accounts by 30, 60, and 90 days.
Accounts delinquent for more than 90 days receive the most
attention. She noted the amount of outstanding child support
payments equals about $561 million. Much of that amount is
uncollectible because the amounts are based on forced orders, in
other words some orders are not reasonable considering the payers'
income. CSED has no method to clearly identify the cases that are
uncollectible, nor can it identify those accounts that are
seriously in arrears. She recommended that CSED determine what can
be collected and that it prioritize collection of cases in arrears.
She pointed out that in cases in which the custodial parent is a
public assistance recipient and child support payments are
collected, CSED is reimbursed by the federal government and it
receives a special incentive as well.
COMMISSIONER ALLEN asked at what point judicial remedies kick in,
and whether there is a point of time when the collection should be
outsourced.
MS. ROBERTS replied that she was unable to establish that based on
the fact that she has no idea of the number of cases in that
category. CSED has about 221 employees plus some temporary
employees, and just managing the ongoing cases, catching up, and
changing some of the business processes would probably keep every
employee very busy. She guessed that any account in arrears beyond
90 days should be outsourced.
COMMISSIONER ALLEN asked how efficient CSED is in garnishment and
attaching, in particular permanent fund dividend checks.
MS. ROBERTS said she did not have adequate time to compare
potential collections to the amount that CSED actually collected,
specifically permanent fund dividends, but CSED appears to do
relatively well in the area of garnishment when the payer is active
in the system.
Number 287
SENATOR ADAMS noted that Ms. Roberts recommended that a cost-
benefit analysis be performed on CSED and asked if she was
suggesting that the cost-benefit analysis be outsourced.
MS. ROBERTS answered that CSED is working very hard to implement
processes and systems to improve its performance, but she wonders
if the agency is capable of determining when implementation of a
new process is guaranteed to be of benefit versus when it is trying
a good idea to see if it works.
SENATOR ADAMS asked Ms. Roberts if she looked at restructuring
settlements. He noted that the interest on some of the arrearage
accounts can amount to $10,000 and the arrearage might be due to
health or employment problems. He questioned whether Ms. Roberts
looked at the possibility of reaching settlements with obligors
before an account is outsourced for collection.
MS. ROBERTS said she did not but thinks that is a great idea. She
suspected that a comprehensive review would identify those areas
and isolate such cases.
COMMISSIONER THOMAS questioned whether figures are available to
determine the amount spent to collect child support payments in
cases that are current versus cases in arrears.
MS. ROBERTS thought she could come up with those figures but said
she had trouble determining what should be included in that figure
in terms of staff costs, for example whether paternity
determination and investigations should be included. When she took
a first look at it on a per dollar collected basis, the State of
Alaska falls within the mid-range nationwide.
CO-CHAIR COWDERY asked other subcommittee members to comment if
they wished to do so at any time.
COMMISSIONER WUERCH asked whether Ms. Roberts was able to do any
bench marking against other states on a cost per case basis.
MS. ROBERTS replied that she only did bench marking against cost
per dollar collected and, again, Alaska fell in the mid-range. She
pointed out that many states have incorporated private industry
into their CSED processes.
COMMISSIONER WUERCH asked if Ms. Roberts could recall the cost per
dollar collected.
MS. ROBERTS did not recall but said it is in the report.
CO-CHAIR COWDERY asked the number of states that have privatized
some of their CSED functions.
MS. ROBERTS indicated that data from 1995 shows that at least 20
states privatized one or more of their child support services
statewide; 18 states privatized services at the local office level;
and another study reported that 21 contracts were awarded for full
service child support operations.
Number 346
SENATOR ADAMS asked if any of those states reverted to using
government agencies again to provide the service.
MS. ROBERTS said that she cannot answer that question with
assurance, but she heard that a few states have had negative
experiences with privatizing services.
MR. JOHN MAIN, the representative of the Alaska Public Employees
Association and the chief investigator of CSED, noted that several
states have withdrawn from their contracts with private entities,
especially in the area of locate. He added that the IRS announced
at a conference he attended the previous week that it will start
withdrawing information from those states that have privatized CSED
functions that use IRS information. The IRS is particularly
concerned about 1099 information because of the confidentiality
issue.
COMMISSIONER THOMAS noted that as an employer, she was just hit
with the federal mandate regarding the new hire notification
requirement. She asked how the government can justify mandating
businesses to provide new hire information immediately while the
IRS is backing away.
MR. MAIN replied that the IRS is an entity unto itself and makes
its own rules. He added that the Office of Child Support
Enforcement in Washington, D.C. is challenging some of those rules,
including the IRS rule about non-cooperation with private
businesses. He suspects the IRS will come out ahead, however,
because it controls the information. He noted that his section
uses the new hire data and that employers are given 20 days to
submit to CSED the names of new hires and re-hires. That gives
CSED five days to check its system to determine if the person is in
the system and to set up a garnishment process. That information
is then sent to Washington, D.C. where it is checked for arrearage
in other states. Alaska then receives the information about
payments due in other states.
MR. MAIN said one reason the federal government mandated the new
hire information is that the labor department collects quarterly
wage information but it was taking too long to disburse that
information to effectively help the CSED collections process.
Congress then passed a law requiring employers to notify their
state CSED office within a month when a person is employed, so that
CSED can garnish wages immediately. Some states have contracted
out with private contractors to do the new hire reporting, others
use their state departments of labor. The State of Alaska decided
that CSED should conduct the program in-house because Department of
Labor notification would have cost an additional $1 million.
Number 412
MARCO PIGNALBERI, Commission staff, asked Mr. Main to write a memo
to the Commission regarding the late-breaking information about the
IRS ruling so that the Commission can research that change before
it gives its recommendations to the Legislature. He asked which of
the discrete steps in the CSED process the 1099 problem affects.
MR. MAIN replied that it affects almost every section except the
case maintenance team. The locate section has access to 1099
information, as does the caseworker, but all 1099 files must be
kept in cabinets with IRS-approved locks. The IRS is very
concerned about access to its confidential information.
MR. PIGNALBERI asked if the federal office that oversees the
distribution of funds to the states is challenging the IRS on the
new policy.
MR. MAIN said it is challenging some aspects of that ruling. The
IRS has said that if a private contractor currently has access to
1099 information, the state cannot renew the contract when it
expires. If the state has no contract, it advises against going in
that direction. He offered to write a memo of explanation to
Commission members.
MS. PEASE asked Leonard Steinberg to talk about the Income and
Excise Audit Division and the Oil and Gas Audit Division.
Number 445
LEONARD STEINBERG, Department of Revenue Subcommittee member, noted
that he would first like to respond to a question asked by Senator
Adams about who should do a cost benefit analysis of CSED. After
discussing the issue, the subcommittee thought it would be
beneficial to use an outside agency with experience in
privatization and consolidation to do the analysis because such
expertise and insight could benefit CSED's program.
MR. STEINBERG explained that the Department of Revenue Subcommittee
met several times and that 10 to 12 individuals participated on a
regular basis. The different agencies within the Department of
Revenue were divided up among subcommittee members to review and
investigate with an eye toward privatization, consolidation, and
opportunities for cost saving efficiencies. Each individual
prepared a written report on his or her agency, and the draft
reports were discussed among the entire subcommittee and members of
the public. The subcommittee adopted the recommendations supported
by a majority of its members; many of the recommendations received
unanimous support. Those recommendations then became the body of
the draft report presented to the Commission. The consensus of the
subcommittee was that the highest areas of opportunity for
efficiency improvements within the Department of Revenue are with
CSED and the ABC Board.
Regarding the Oil and Gas Audit Division and the Income and Excise
Audit Division, MR. STEINBERG said that during his review, he
learned that the two divisions plan to merge into one agency in the
Spring of 2000. Some efficiencies will be gained by that merger.
Some functions of both divisions are currently being outsourced,
however the subcommittee recommended that the divisions explore
further opportunities to outsource. For the most part, the
subcommittee feels that the two divisions are on the right track.
He noted that the Administration and division directors were very
cooperative in this process.
COMMISSIONER FINK stated that the Subcommittee's mission statement
does not include the investigation of government functions that
should be eliminated, which was part of the Commission's enabling
legislation. Also, the Subcommittee's report recommends that AHFC
be looked into. He noted that AHFC is a big ticket item while the
other recommendations are small ticket items. He maintained that
if the state got out of the secondary mortgage business, it could
accrue $1 billion, and that it is a service that most states do not
provide. He asked if the subcommittee discussed that concept at
all.
MS. PEASE replied that the subcommittee did discuss that specific
subject and realized it is a key area that could be eliminated,
however it did not have the resources nor the expertise to review
AHFC in depth. The subcommittee member with that expertise who was
assigned to that area was unfortunately unable to do the work. The
subcommittee's report instead says that it recognizes that it
lacked the resources to do a full audit of AHFC but it wholly
believes that is the one function that could be eliminated or
changed substantially.
COMMISSIONER FINK asked if there was any particular reason why the
elimination of government functions was not listed in the
subcommittee's mission statement.
MS. PEASE replied that the omission was an oversight and that it
should have been included because the subcommittee certainly did
address the subject.
MR. PIGNALBERI pointed out that the report is a draft and that the
subcommittee will make any changes it feels are appropriate to the
final.
COMMISSIONER THOMAS indicated that oil and gas functions are
carried out in other departments. She asked whether the
subcommittee looked at any cross-department functions.
MR. STEINBERG said the subcommittee did not look at the oil and gas
functions within the Departments of Law and Natural Resources
except that the Oil and Gas Audit Division performs royalty audits
for the Department of Natural Resources.
Number 538
CO-CHAIR COWDERY commented that during the House floor debate on
the Commission's enabling legislation, many legislators felt that
the time line to achieve the Commission's task was too short. For
that reason, he initially asked subcommittees to focus on what they
could get their hands around with their limited resources and time.
He expects a further review of certain agency functions to take
place, possibly next year.
MS. PEASE stated that John Main was able to bring his expertise to
the review of the ABC Board and she noted the subcommittee
unanimously supported Mr. Main's recommendations. She asked Mr.
Main to discuss the details of his report with the Commission.
MR. MAIN made the following comments about the ABC Board. One
thing that stood out when he began his review of the ABC Board is
that the board has a very limited function. He has spoken with ABC
Board investigators over a period of years, and he believes the ABC
Board's functions could be expanded to govern the regulation of
tobacco use and gaming, two functions currently housed under two
other divisions. At present, two investigators focus on gaming
violations, and three or four investigators focus on alcohol
violations, while no investigators focus on tobacco violations.
The state contracts with a few police departments to enforce
tobacco regulations and laws.
MR. PIGNALBERI noted that one page had inadvertently been omitted
from the ABC Board section of the draft report and that a corrected
version had been distributed to Commissioners.
Number 570
SENATOR ADAMS commented that when functions are merged within one
agency, that agency often becomes less efficient in carrying out
each individual function. He noted that the Legislature has not
provided enough funds to the ABC Board so that its investigators
can handle their own duties around the state now.
MR. MAIN maintained that he believes the combining of functions
will improve efficiency because the investigators will be able to
look into all three types of violations when they travel to areas
throughout Alaska. He agreed with Senator Adams in that the number
of ABC Board investigators needs to be increased and that some of
the laws governing the ABC Board need to be changed. He pointed
out that the ABC Board estimates it needs 10 investigators to
adequately cover the entire state. At the present time, three
people work in the tobacco prevention program, one solely contracts
out the enforcement aspect.
TAPE 99-7, SIDE B
SENATOR ADAMS asked who would prioritize the cases on alcohol,
gaming, or tobacco violations for the 10 investigators. He noted
that gaming violations are very difficult to investigate.
MR. MAIN replied that it would be up to the ABC Board to determine,
but at the same time, most investigators have law enforcement
backgrounds as well as economic crime backgrounds. He believes any
new hires should have a background in both, because investigators
will need a knowledge of how violators of the gaming regulations
operate. He believes the investigators, if given the enforcement
ability to look at all three areas, would do so with diligence.
MR. PIGNALBERI called Commissioners' attention to the conclusion
paragraph on page 6 of the draft report which offers an alternative
solution that would vest the ABC Board with the statutory authority
to do the enforcement without actually combining the agencies.
MS. PEASE pointed out the subcommittee's first choice is to combine
the functions but, if that is not possible, the subcommittee's
second choice is to modify Title 4 to allow the ABC Board to
enforce tobacco and gaming laws under contract.
Number 556
SENATOR ADAMS asked if, out of all of the recommendations for the
Department of Revenue, only one statutory change is recommended and
that is to Title 4.
MS. PEASE said that is correct.
COMMISSIONER FINK asked whether Mr. Main determined a dollar amount
that might be saved from combining the three functions.
MR. MAIN replied that he did not, although he looked at the current
cost of enforcement for tobacco violations. The federal government
pays the state to contract out for that enforcement, and police
officers are paid about $60 per hour under those contracts.
MR. PIGNALBERI asked if that is federal pass-through money.
MR. MAIN said it is.
AN UNIDENTIFIED COMMISSIONER asked what strings are attached to
that federal money.
MR. MAIN explained that the contractors have to ensure that they
are in compliance with the number of visits they make to
establishments and the number of violations they find.
MR. PIGNALBERI asked whether the federal dollars could be used for
simultaneous enforcement of alcohol or gaming violations.
MR. MAIN replied that he believes the state could have offered the
enforcement dollars to any state agency with such authority, but
instead the state offered it to the various police departments.
CO-CHAIR COWDERY asked Elmer Lindstrom to comment on the tobacco
prevention program.
Number 540
MR. ELMER LINDSTROM, Special Assistant to the Department of Health
and Social Services (DHSS), informed Commission members that he has
not had a chance to review the recommendation related to the ABC
Board. Mr. Lindstrom commented that the Division of Public Health
in the DHSS receives about $300,000 per year from the Food and Drug
Administration to enforce tobacco violations, which DHSS has passed
through to local police agencies. He is unsure whether the ABC
Board is aware of what DHSS is doing in this area. He pointed out
that tobacco enforcement activity is not centered around liquor
stores or bars because its focus is on preventing youth from
purchasing tobacco products, an activity that centers around
grocery stores. He noted that he is not aware of all of the
constraints on those federal funds, however they are significant.
Although DHSS is very aware of the need for more ABC Board
investigators for enforcement of alcohol violations, he asked
Commissioners to look at this recommendation very closely. DHSS's
tobacco control team is a public health program of which law
enforcement is only one element. The program also looks at a host
of prevention activities put together by the Center for Disease
Control. DHSS would be reluctant to carve up that comprehensive
tobacco control program.
MR. PIGNALBERI asked Mr. Lindstrom to provide the Commission with
a written response to the ABC Board recommendation.
MR. LINDSTROM agreed to do so.
COMMISSIONER HARPER asked if the total budget is about $600,000.
MR. MAIN replied that the ABC Board has $600,000.
COMMISSIONER HARPER asked if the $300,000 in contract money would
be added.
MR. MAIN said yes, plus the amount of funds allocated to the gaming
section for its investigations. He noted that he does not have
that figure but that section has only three investigators.
COMMISSIONER HARPER said he is struck by Commissioner's Fink
concern about AHFC's involvement in the secondary mortgage market
and that the $600,000 and $300,000 is probably the equivalent of
three to five homes that AHFC has secondary mortgages on. He
suggested that Commissioners take some time to speak to the AHFC
chairman about why the state does not save $1 million from AHFC.
CO-CHAIR COWDERY agreed that further discussion about AHFC is
important.
MS. PEASE stated that the subcommittee is aware that AHFC is a huge
area that needs to be investigated at a much more thorough level
than the subcommittee was able to do. The subcommittee did not
mean to short AHFC, however it is an enormous organization, and
the subcommittee member dedicated to do that report was unable to
do so. Ms. Pease maintained that the subcommittee would be more
than happy to review AHFC if the time line was extended but it
believes a professional audit would be well warranted.
COMMISSIONER WUERCH thanked Ms. Pease and subcommittee members for
all of the hours they put into this project. He said as a
postscript to Commissioner Harper's comment about the importance of
looking at some of the big dollar issues, he believes that rather
than focusing on a detailed audit, the fundamental question of
which state services should be provided in an era of declining
revenues needs to be addressed. Although it would be nice to
continue to provide all of the services the state has offered over
the last 20 years, it may not be able to afford to do so anymore.
He asked Commissioners to think about some of the bigger policy
issues in addition to the detailed reports before the Commission
adjourns in December.
MR. PIGNALBERI indicated that the Commission could ask the
subcommittee to do a further review of AHFC or the Commission could
create a subcommittee of Commissioners to review that agency.
COMMISSIONER FINK stated that he intends to pursue this issue
before the Commission adjourns and that he agrees with Commissioner
Wuerch that this issue is a policy question. He maintained that he
was in the Legislature when AHFC was created and that it was
appropriate at the time because Alaska had very poor secondary
markets and was being mistreated by the "outside." He maintained
that is no longer the case as an adequate private sector market now
exists. He indicated that AHFC has $3 to $4 billion in net assets,
and it pays out about $106 million per year. By liquidating the
mortgages or letting them run out over a period of ten years, $3 or
$4 billion dollars would be freed up. He repeated that the
continuation of AHFC is a policy question. Rather than conducting
an audit, he suggested getting a copy of AHFC's balance sheet. He
believes the quarrelsome area of this issue for the Commission will
be the advisability of getting out and whether an adequate private
sector secondary mortgage market exists. He suggested that because
the Commission's work is supposed to be completed by the end of
December, the topic be discussed by the full Commission.
MR. PIGNALBERI asked Commissioners if they want to extend an
invitation to AHFC to have a full discussion at the next Commission
meeting.
COMMISSIONER HARPER thought the Commission should look at AHFC's
balance sheet and revenue statements. He also suggested getting
more information from the financial sector on the secondary
mortgage market.
COMMISSIONER NOTTI commented that Alaska used to be the borrower,
but conditions have changed, and Alaska is now exporting cash all
over the country therefore it may be a good time for review.
COMMISSIONER WUERCH agreed that it would be useful to get financial
statements from AHFC because it sounds as though AHFC's yield is
about three percent. If the Legislature could take that same $3 or
$4 billion and invest it in the CBR fund or Permanent Fund and get
six to seven percent, the revenue stream would double.
COMMISSIONER THOMAS suggested that since Ms. Pease offered to
review AHFC, the Commission should ask the subcommittee to take a
look at it and report back.
MS. PEASE agreed the subcommittee would be happy to do that. She
noted the subcommittee might reconvene as a smaller group but
members would be focussing solely on AHFC and could review the
financial statements of AHFC and look at the impact to the state of
reallocating that money.
COMMISSIONER HARPER asked that the subcommittee recommend whether
AHFC is a necessary government function or whether the private
sector could offer those services. He repeated that he does not
believe an audit is necessary.
MS. PEASE commented that speaking to local bankers would be
helpful.
CO-CHAIR COWDERY acknowledged the Commission would like the
subcommittee to review the policy question.
Number 408
MR. PIGNALBERI stated, for the record, that the Department of
Revenue Subcommittee will do an additional report on AHFC.
COMMISSIONER HARPER suggested writing a letter to Mr. Cuddy and Mr.
Rasmussen informing them that the Commission is looking at ways of
streamlining and saving money by doing away with AHFC.
COMMISSIONER HARPER noted that he was limiting his remarks to the
secondary mortgage market because he does not want to get involved
with the ASHA aspect.
MS. PEASE asked Commissioner Fink to contact Jerry Anderson and ask
him to lend his expertise to the Subcommittee in this venture.
CO-CHAIR COWDERY noted his appreciation for the thoroughness and
professionalism of subcommittee members and thanked them on behalf
of the Legislature.
MS. PEASE asked about the time line for reporting back to the
Commission.
MR. PIGNALBERI asked for the report before the November 18
Commission meeting.
Regarding approval of the minutes from the previous meeting, MR.
PIGNALBERI noted two corrections, and Commissioner Wuerch noted the
correct spelling of his name.
SENATOR ADAMS moved that the September 20, 1999 minutes be approved
with the noted corrections. There being no objection, the motion
carried.
MR. PIGNALBERI announced that the subcommittees on the Departments
of Corrections, Law, Labor, Environmental Conservation, and Courts
will present their draft reports to the Commission at the November
4th meeting.
CO-CHAIR COWDERY informed Commissioners that the Commission will be
very active in the next few weeks listening to the subcommittee
recommendations and preparing a final report for the Legislature.
MR. PIGNALBERI thanked Dana Owen from the Department of Revenue for
his cooperation and asked him to submit comments on the
subcommittee's draft report to the Commission before the next
meeting. He suggested that the Commission consider accepting the
draft report, or parts of it, at the next meeting after it receives
the department's comments. He asked Mr. Owen if he is aware of the
department's position on the two major recommendations concerning
the CSED privatization proposal and the consolidation of the
investigative functions within the ABC Board.
MR. OWEN replied that in general, the Department of Revenue does
not object to any of the recommendations if they are focused on
studying the matters further. CSED is an extremely complex and
technical matter and some areas deserve to be looked at,
particularly the business processes. He warned that everyone be
very cautious about unintended consequences when studying CSED
because of problems like changes in IRS policies. He thought that
overall the Department of Revenue will be neutral on the
recommendations and that there will be no surprises.
CO-CHAIR COWDERY commented that, for the most part, the staff from
the Administration have been very cooperative and he expressed
appreciation for that cooperation.
Number 315
SENATOR ADAMS asked that the agencies' responses be included with
the presentation of the subcommittee reports, and that once a
report is accepted by the Commission, the recommendations be
provided to Commissioners on one sheet of paper. He also expressed
hope that the Commission does not lose sight of the Legislature's
intent when it passed the Commission's enabling legislation. He
said it will be Anchorage, not the rural areas, that take the brunt
of the cuts in services that may result from privatization.
With no further business to come before the Commission, CO-CHAIR
COWDERY adjourned the meeting at 10:20 a.m. until November 4.
| Document Name | Date/Time | Subjects |
|---|