Legislature(1999 - 2000)
11/10/1999 09:07 AM Senate PRI
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* 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
November 10, 1999
9:07 a.m.
COMMISSION MEMBERS PRESENT
Senator Jerry Ward, Co-Chair
Representative Tom Brice
Commissioner Bill Allen
Commissioner Tom Fink
Commissioner Michael Harper
Commissioner Kathryn Thomas
Commissioner Don Valesko
Commissioner George Wuerch
COMMISSION MEMBERS ABSENT
Representative John Cowdery, Co-Chair
Senator Al Adams
Commissioner Emil Notti
COMMISSION AGENDA
Presentation of subcommittee reports for the:
Alaska State Legislature
Alaska Court System
Alaska Department of Administration
PREVIOUS ACTION
See Commission on Privatization minutes dated 7/20/99, 8/16/99,
9/20/99, 10/28/99 and 11/4/98.
WITNESS REGISTER
Court System Subcommittee Members:
Ms. "B" Jarvi
Ms. Shirley Willford
Ms. Colleen Van Hatten
Mr. Al Tamagni
Mr. Doug Wooliver (Court System Representative)
Department of Administration Subcommittee Members:
Mr. Joe Henri
Ms. Andree McLeod
Deputy Commissioner Alison Elgee (Department of Administration
Representative)
Legislature Subcommittee Members:
Mr. Kip Knudson
Ms. Pam Varni (Legislative Affairs Agency Representative)
ACTION NARRATIVE
TAPE 99-11, SIDE A
COMMISSIONER THOMAS called the Commission on Privatization and
Delivery of Government Services to order at 9:07 a.m. Present at
the call to order were Commissioners Fink, Harper, Thomas, Valesko,
and Wuerch; Senator Ward; and Marco Pignalberi, Commission
Director.
COMMISSIONER WUERCH moved to approve the minutes from the 10/28/99
and 11/4/99 meetings.
MR. MARCO PIGNALBERI, Commission Director and staff to Co-Chair
Cowdery, informed Commission members that he has not yet reviewed
the minutes from the November 4 meeting.
COMMISSIONER WUERCH amended his motion to approve the minutes from
the 10/28/99 meeting and asked that the minutes from the 11/4/99
meeting be approved at the next meeting. There being no objection,
the motion carried.
MR. PIGNALBERI informed Commissioners that DEC staff has requested
one more week to finalize their comments to the DEC subcommittee
report presented to the Commission the previous week.
COMMISSIONER THOMAS asked whether comments on subcommittee
recommendations have been received from Department of Labor staff.
MR. PIGNALBERI said that Dwight Perkins of the Department of Labor
has asked for another week to complete his review of the
recommendations, as he is on travel status.
COMMISSIONER THOMAS announced that the Department of Community and
Economic Development Subcommittee formed a working group to review
the Alaska Railroad Corporation (ARRC). Members of the working
group are Linda Leary, Kathryn Thomas, Jean Foreman, Jim Sanders,
and Lee Wareham. That subcommittee also formed a working group,
headed by Lee Wareham, to look at privatizing components of the
Alaska Energy Authority.
COMMISSIONER THOMAS asked Bertha Jarvi, Co-Chair of the Court
System Subcommittee, to present the subcommittee's report.
Commissioner Thomas also noted that Representative Brice was on-
line from Fairbanks.
[MS. JARVI testified via teleconference from Fairbanks.]
MS. "B" JARVI, Co-Chair of the Alaska Court System Subcommittee,
informed Commissioners that Co-Chair Joyce Harris was unable to
attend today's meeting due to work commitments. She informed
Commissioners that Ms. Harris did a lot of the work to tie the
report together and finalize it.
MS. JARVI stated that the Court System Subcommittee has been very
active. Members met with court officials and amongst themselves
and discussed at length privatizing many of the Court System's
functions and increasing the efficiency of delivery of its
services. The subcommittee looked at all facets of the Court
System including its budget, technology, recording systems, and
hearing-assisted devices. The hearing assisted devices are a big
issue in Fairbanks because the acoustics in the Fairbanks courtroom
are very poor. The subcommittee also looked at privatizing
security, interpretive services, building design, and all other
functions.
MS. JARVI made the following comments about the subcommittee's
recommendations. The subcommittee recommends that the Court System
disclose more information about how its operating budget
expenditures relate to the activities and services it performs.
The Court System's operating budget is very difficult for the
average person to understand and although more detailed budget
information is available, one must ask for it.
Determining how recovered fees lessen the impact of the total cost
of the Court System is very difficult to do. The subcommittee
believes the Court System should keep, and periodically update, a
record of all equipment leases versus purchases.
The subcommittee feels the Court System should refrain from hiring
additional personnel in order to maintain its current level of
services because some services could be privatized and the Court
System appears to have a surplus of employees.
The subcommittee reviewed fees charged by the Court. Filing and
usage fees have not been increased since 1991. Members also found
that the fines and assessments levied by the Courts should be
periodically reviewed.
The subcommittee believes an updated computer system would increase
the efficiency of the Court System with fewer personnel and it
would improve communications. The subcommittee spent a lot of time
reviewing the computer system and believes that its replacement is
an absolute must and that installation and maintenance of a new
system by the private sector should be considered. A new system
should reduce man hours, transaction time and costs, and the cash
investment return should be sufficient to offset the cost of the
program.
The subcommittee would like the Legislature to review the judicial
retirement system and add another tier to it. Currently, benefits
to employees in that system exceed 17 percent of salary, in
relation to other employees whose benefits equal about eight
percent.
The Appellate and Superior Courts need to reduce the backlog of
cases in a more timely manner, meet the national standard, and
provide better service to the public. The subcommittee believes
those changes can be accomplished while maintaining integrity and
quality.
MS. JARVI continued. After speaking with judges and court
officials, the subcommittee believes the legislature should more
actively support the use of alternative dispute resolution
mechanisms. Alternative dispute resolution has not been widely
accepted due to a lack of established minimum qualifications for
mediators and arbitrators. The subcommittee recommends that the
legislature support and encourage court connected mediation and
utilization of private alternative dispute resolutions, and that a
task force be appointed to establish minimum qualifications for
certification of mediators and arbitrators.
Regarding fee collection, the Court System Subcommittee found that
no standardized procedure for the collection of statutorily
mandated fees for court appointed legal representation for the
indigent is in place. The problem is made worse by the fact that
more than one agency is charged with the appointment and collection
responsibility and the collection process varies among agencies.
A significant portion of the fees for court appointed
representation is incurred by attorneys under contract with the
Office of Public Advocacy (OPA). Their attorneys often serve in
probate court, and provide criminal defense and guardian ad litem
services. Many times they are appointed to represent respondents
only during specific litigation but if the fee cap for their
services has not been met, they may continue in a case for several
years. The fees are paid by the state agency, regardless of the
ability of the individual to pay for services. Court appointments
for attorney representation for indigents are often made with
little or no investigation into the actual indigence of the
individual. No evaluation process to re-evaluate the original
finding of indigence is in place, nor is a mechanism established to
revert to a client-pay system. The present system to collect
mandated fees is dependent on reporting by the agencies, not just
the Court System, so no standardized reporting or collection of
fees is in place at that level.
The subcommittee recommends that each state agency responsible for
collection of fees or reimbursement should make a report to the
legislature regarding the amount of fines and fees collected and
the amount outstanding. The legislature should consider
privatizing the collection of unpaid court assessed fees throughout
all state agencies. The subcommittee also recommends that the
Court System do a true finding of indigence before appointing
attorneys at public expense, and that findings of indigence be re-
evaluated and confirmed. In addition, all court-appointed
attorneys should be required to submit billings for their services
to the client or his/her conservator for payment. The Court System
should establish standards to allow for the termination of a Court
appointed attorney when publicly-funded representation has served
its purpose.
The subcommittee's fourth recommendation pertains to the reporting
of statutes which are difficult and/or costly to implement, or in
direct conflict with other statutes. Court System officials are
uncomfortable with the current reporting system of such statutes.
A mechanism should be designed so that judicial officers can submit
anonymous report forms. In addition, the Court System should
prepare a written report for the public and the legislature
identifying statutes that conflict with others, statutes that are
impossible to achieve or too expensive to implement, and statutes
that are outmoded. The subcommittee believes all forms should be
made available for public review for a period of at least one year.
The subcommittee had extensive discussions on pro se litigation, an
area reviewed by Mr. Rollins who could not be present. The
subcommittee felt the Court System should continue to explore the
development of a pro se litigant center patterned after one being
looked at in Anchorage. The court administrator should continue to
ensure equal access for pro se litigants and the alternative
resolution process. That could be achieved, to a great extent, if
the Court System made available a pro se litigation clerk and
literature.
The subcommittee also felt the statute that prohibits small
corporations from representing themselves in a court action, except
as otherwise excluded, should be rewritten to be more specific
about the exclusion. If pro se litigation is available to
individuals and all corporations, the subcommittee suggests
amending the statute to exclude all corporations operating under
the service provisions of AS 13.26 as well as the statute governing
the filing of petitions for mental health and alcohol commitment.
At this time, no agency, hospital or clinic can represent its own
petitions in court. The definition of a small corporation needs to
be defined, as well as which small corporations can get a waiver to
have an authorized corporate officer represent the corporation pro
se.
The subcommittee believes the replacement of the Court System's
outdated computer system needs to be addressed. The hardware and
software that service the existing system are no longer available.
The current system operates as a discrete and separate system, and
it is not a true database; the statewide network is incapable of
handling the data for an integrated computer system. A fully
integrated system, including infrastructure, hardware, and digital
recording ability will cost between $2.5 to $3 million. With the
funding, a new system should be operational within a six-month
period for all major courts, and within a two-year period the
outlying, smaller courts could be integrated. Fewer staff hours
would be spent handling court files and mailing costs would
decrease substantially if court staff could access a statewide
database. To maintain such a system would cost about five percent
of its total value on an annual basis.
The subcommittee recommends that the Court System publish a request
for information from the private sector to satisfy the Court
System's computer needs and submit the solicitation to the
legislature to request the necessary funds.
The child custody investigator is a court employee whose original
role was to provide services for indigent families. The Court
System changed the role of that position to one who provided
services to all families, regardless of income. A Supreme Court
order had to be issued to require the Fairbanks' Court to use that
position to provide services to indigent families only. The Court
System strongly supports retaining this employee due to what it
believes is a lack of expertise in the private sector. The
subcommittee disagrees and believes that service could be
privatized because there is no shortage of trained individuals in
the private sector who could provide the service.
The collection of victim restitution is frequently ignored by the
Court System. The Court System gave many reasons, one that became
obvious was that nobody knows whose job it is to help victims get
the restitution they are entitled to. The subcommittee recommends
that the legislature privatize that function. The Department of
Corrections (DOC) should encourage the signing of restitution
agreements between offenders and victims and DOC should make an
annual written report to the legislature regarding the amount of
restitution owed and collected.
The subcommittee decided to include the recommendations of
Legislative Audit Digest 02-4577-99 in its report because that
audit does impact the Court System.
MR. PIGNALBERI informed Commission members that he served as a
member of the subcommittee on the Court System. He acknowledged
the names of the Fairbanks contingent of the subcommittee who did
the lion's share of the work: "B" Jarvi, Joyce Harris, Chuck
Rollins, Colleen Van Hatten, and Shirley Willford, and commended
participants for their work. He noted that Commissioners Brice and
Allen who are also from Fairbanks should be aware of their good
work.
COMMISSIONER WUERCH thanked Ms. Jarvi and other subcommittee
members for their comprehensive report. He noted the biggest
dollar cost, other than employee benefits, will be replacing the
computer system. He pointed out that the subcommittee's report
states that the Court System uses a UNIX-based operating system for
two-thirds of its case management for which terminals are no longer
produced, and that one-third of the court locations use Pentium PCs
with Windows. He asked whether the subcommittee looked at the
availability of private enterprises that could install new
equipment, provide the software and training, and maintain the
system for an annual fee, rather than purchasing a system.
MS. JARVI replied that Recommendation 6 states that the Court
System should publish a request for information from the private
sector and solicit cost analyses or bids to satisfy the Court
System's computer needs. Those proposals should be reviewed and
then submitted to the legislature for an appropriation. The
subcommittee believes the private sector could better provide and
maintain an upgraded computer system. It also believes that by
privatizing the Court System's computer system, it will be kept in
a state of updated technology more readily than if a one-time
appropriation is made to the Court System to purchase a new system.
COMMISSIONER WUERCH thanked Ms. Jarvi for clarifying the
subcommittee's recommendation.
COMMISSIONER VALESKO asked if the subcommittee looked at the
current method the Court System is using to maintain its computer
system.
MS. JARVI said that the computer system is part of the capital
outlay for each Court, which is why the systems are so different.
The subcommittee is advocating statewide standardization. The
computer system in Fairbanks is a "hodgepodge" collection of
computers, as is the Court System's computer system throughout the
state.
COMMISSIONER VALESKO asked whether the current system is provided
and maintained by the private sector.
MS. JARVI asked Shirley Willford to answer that question.
MS. SHIRLEY WILLFORD, subcommittee member, informed Commissioners
that she found that different repair people are called in each
location. She does not believe the Court System has in-house
repair people. The Court System also leases equipment. She
repeated that the computer system in the Fairbanks' Court is a
"hodgepodge" of equipment and that some of the computers are so old
she does not know how the employees function with them. She noted
that the Court System desperately needs a system that is integrated
with the Department of Public Safety and the Department of
Corrections because their work ties in closely with the Court
System.
COMMISSIONER THOMAS noted that Doug Wooliver, a representative from
the Court System, was present.
COMMISSIONER VALESKO agreed that the Court System's computer system
needs to be upgraded, but he expressed concern that the cost of
maintenance by the private sector runs between $120 and $150 per
hour. In addition, an in-house person hired to fix equipment will
know that particular system. He asked whether the subcommittee
looked into that aspect of maintenance.
MS. WILLFORD said the subcommittee originally suggested a lease
system with a maintenance agreement so that the company that
installs the system will be responsible for its maintenance.
COMMISSIONER WUERCH pointed out that the state has had success in
leasing equipment such as copying machines in which the state
leases the equipment on a long term basis and the company that
leases the equipment maintains it.
Number 445
COMMISSIONER HARPER asked about the Court System's response to that
recommendation.
DOUG WOOLIVER, Administrative Attorney for the Court System,
introduced himself and informed Commission members that he attended
all subcommittee meetings. He noted the Deputy Director of the
Court System gave a presentation to the subcommittee about the
status of the Court System's computerization effort. The Court
System is in the middle of a long process of upgrading and
integrating its computer system. It has looked at leasing versus
purchasing and has found many drawbacks to leasing. To outsource
an integrated system would cost far more than the legislature has
ever appropriated to the Court System for computers. At present,
adequate technology does not exist to provide a wide area network
to integrate all of the agencies' systems, including DOC and the
Department of Public Safety. The Court System is dependent on
capital appropriations to make improvements. It has a statewide
integrated plan but it is an expensive operation. He noted that
leasing gets more expensive when secure information is involved as
firewalls need to be built into the system.
COMMISSIONER VALESKO asked if the existing system was purchased
from, and is being maintained, by the private sector.
MR. WOOLIVER answered that all computers are purchased from the
private sector and that all software is provided through contracts
with providers. He was not sure about individual maintenance on
computers but offered to get that information for the Commission.
COMMISSIONER VALESKO asked if the Court System has in-house
computer technicians to work on the hardware.
MR. WOOLIVER said it does.
COMMISSIONER FINK asked whether any subcommittee members are
associated with the Court System.
MS. JARVI said that she is a professional guardian conservator and
she works within the court, however she is not a court employee.
MR. PIGNALBERI added that one member is a court reporter.
MS. JARVI noted that member is not a court employee.
COMMISSIONER THOMAS asked, regarding the recommendation pertaining
to victim restitution, at what point DOC would take charge of that
duty.
MS. COLLEEN VAN HATTEN explained that when a judge orders
restitution, its payment is often made a condition of probation.
Probation is under the jurisdiction of DOC. The problem lies in
the fact that caseloads are so heavy for probation officers they
cannot monitor the collection of restitution. Sometimes the
offender's permanent fund dividend is garnished, but otherwise
collection is ignored.
COMMISSIONER VALESKO asked, regarding Recommendation 1, whether the
subcommittee looked into recruitment problems that might occur if
a new tier with reduced benefits is added to the retirement system.
COMMISSIONER THOMAS informed Ms. Jarvi that Al Tamagni, a
subcommittee member, was present in Anchorage.
MR. AL TAMAGNI, a subcommittee member, explained that he looked at
the standard for retirement and benefits in the private sector
which is about five to six percent lower.
COMMISSIONER VALESKO asked if Mr. Tamagni compared the wages with
the private sector.
MR. TAMAGNI said he considered the employees to be on the same
level as trade people.
COMMISSIONER WUERCH asked if the subcommittee compared the judicial
retirement system with PERS.
MR. TAMAGNI explained that PERS benefits for court employees equal
about eight percent of wages while PERS benefits for judges equal
about 17 percent.
COMMISSIONER THOMAS thanked Ms. Jarvi and subcommittee members for
their work.
NUMBER 554
MR. PIGNALBERI asked Mr. Wooliver when the Court System's response
to the recommendations would be available.
MR. WOOLIVER said the Court System's response would be ready the
following week.
MR. PIGNALBERI thanked Mr. Wooliver for the Court System's
outstanding cooperation with the subcommittee.
MS. JARVI also expressed appreciation for subcommittee members'
efforts and noted that all members acted professionally. She also
thanked Mr. Wooliver for his cooperation.
MR. WOOLIVER also noted that no acrimony was experienced among
subcommittee members and that he found it a pleasure to work with
them.
TAPE 99-11, SIDE B
COMMISSIONER THOMAS asked Joe Henri, Chairman of the Subcommittee
on the Department of Administration (DOA), to present the
subcommittee's report to the Commission. She noted that Alison
Elgee, Deputy Commissioner of the Department of Administration
(DOA), was participating via teleconference from Juneau.
Number 574
MR. JOE HENRI, Chairman of the Subcommittee on the Department of
Administration, introduced Andree McLeod, a subcommittee member.
He noted the subcommittee was a hard working group but it did not
review every facet of DOA. DOA is now the third largest department
with 1,300 employees, as opposed to about 280 when he was the DOA
Commissioner from 1971 to 1974. DOA has taken on many more
functions since that time.
MR. HENRI directed Commissioners' attention to the subcommittee's
recommendations beginning on page 1 of the report. In its review,
the subcommittee was struck by the large number of functions within
DOA that are already privatized. Much of the work in the Division
of Retirement and Benefits is contracted out to private companies.
Because that work requires specialized expertise, it lends itself
well to privatization. He noted the question of whether
privatization is always in the best interest of Alaska's economy
has to be looked at carefully. In general, privatization would
appear to work better where there is a lot of competition in the
private sector, however if the state privatizes with the only
company who provides the service, chances are that costs will
increase. He cautioned that a company may offer a low introductory
price, however when the contract renewal period comes about, that
company may raise its rate substantially if it is the only company
available to do the work. He noted the University of Alaska
experienced such a situation about five years ago. The University
ceased to get coal for its power plant by train because a company
offered to truck the coal in at a much lower cost. The railroad
tracks were removed and this year, when the contract was up for
renewal, the trucking company increased its price monstrously, and
the University had no alternative but to renew the contract. He
repeated that when looking at privatization, the state needs to
look down the line at the consequences five to ten years from now.
MR. HENRI discussed the 12 collective bargaining units of the state
which all address contracting work outside of the state workforce.
In general, those contracts allow union employees to submit a
proposal in the case of privatization.
COMMISSIONER FINK noted that the subcommittee pointed out the
problem with the collective bargaining contracts and the Davis-
Bacon provision, but it did not make any recommendations.
MR. HENRI said the subcommittee highlighted those conditions
because they will be obstacles to privatization. The Davis-Bacon
wage rule means the cost of contracting out for labor will be
higher.
COMMISSIONER FINK asked if the subcommittee recommended that the
legislature consider changing the statutes relating to the part of
the contracts pertaining to the Davis-Bacon wage rule.
MR. HENRI said the subcommittee did not make an explicit
recommendation but it pointed out the situation as one that will
adversely affect privatization.
MR. HENRI repeated that the subcommittee did not review all of the
functions performed by DOA, it picked a few items that the
volunteer group had some insight into. He noted that
Recommendation A on page 3 suggests returning DOA to the kind of an
agency it was at the time of statehood. The statehood committee,
in the two years before statehood, contracted with a group of
experts on state government from New Jersey. DOA was set up to be
the right hand of the Governor in administrating the functions of
the state.
COMMISSIONER THOMAS asked if the subcommittee recommended a mission
statement.
MR. HENRI said it did not but that would be the logical next step.
COMMISSIONER FINK asked for clarification of Recommendation A.
MR. HENRI replied that if DOA focussed on acting as staff, it would
be able to concentrate on efficiency. For that reason, the
subcommittee recommended an internal audit be conducted to examine
what each employee is doing. The efficiency would not result from
getting rid of programs but would result from the ability of staff
to concentrate more. When former Governor Keith Miller was in
office, the legislature enacted program budgeting. At that time,
the Office of Management and Budget was originally named as such so
that it would exercise managerial influence. That idea seems to be
obscure now.
COMMISSIONER FINK asked if DOA took any position on the idea of
stripping the agency out.
MR. HENRI replied that DOA staff like the way the agency is right
now.
MR. HENRI referred to Recommendation B on page 3, and explained
that the subcommittee originally felt that the Office of Public
Advocacy (OPA) should assign attorneys to cases, however the idea
of providing free defense banished with the DeLisio case. It would
be much more expensive for the state to contract out the work of
the public defender. The federal court requires that any defendant
accused of a felony is entitled to a free public defense, and the
state court ruled likewise for defendants charged with
misdemeanors, which is what prompted the need for the OPA. The
subcommittee was unable to find any way around the courts' rulings,
however the cost to the state of providing that service is about
$10 million.
MR. HENRI noted that Recommendation C pertains to Pioneer Homes.
The subcommittee recommends that the legislature take a serious
look at privatizing the Pioneer Homes but the subcommittee did not
have enough definitive facts to determine whether privatization
would be cost efficient. The subcommittee thought that an outfit
that is in that business would be more competent to run the homes.
Although Deputy Commissioner Elgee has argued that DOA staff who
run Pioneer Homes are very competent, he does not believe that
argument washes. Ms. Elgee also argued that DOA is able to run the
Pioneer Homes less expensively than the private sector, but Mr.
Henri believes that point is also disputable. He noted that the
Pioneer Home Advisory Board is very active in looking out for the
interests of clients. The population of the Pioneer Homes' clients
has changed over the years; 85 percent of current residents have
either dementia or Alzheimer's Disease.
COMMISSIONER THOMAS asked why Alaska opted out of Medicaid coverage
for clients with Alzheimer's Disease.
MR. HENRI did not know, but stated that Alabama and Alaska are the
only two states that do not have Medicaid coverage for residents
with Alzheimer's Disease.
DEPUTY COMMISSIONER ELGEE replied that Alaska never opted into that
coverage. Alzheimer's Disease is one condition that the states can
elect to cover but they have to take a proactive action to do so.
COMMISSIONER FINK asked why DOA did not opt in.
DEPUTY COMMISSIONER ELGEE said the senior population in Alaska has
been very small up until recently so it has not been an issue from
the coverage perspective. If Alaska opts into Alzheimer's coverage
today, it would opt into coverage for people suffering that
condition regardless of placement. Therefore, residents of Pioneer
Homes and clients who receive home and community based care
services would also benefit. DOA estimates that between 2,000 and
3,000 Alaskans suffer from Alzheimer's Disease at this time.
COMMISSIONER FINK asked if the fact that 85 percent of the
population of Pioneer Homes suffer from Alzheimer's Disease is
accidental or by selection.
DEPUTY COMMISSIONER ELGEE replied that about 80 percent of clients
suffer from some degree of dementia, and the average age of clients
is 87. The ratio of people suffering dementia after the age of 85
is over 50 percent, therefore the 80 percent rate is to be
expected. DOA has also expanded the availability of home and
community based care for people who need extra assistance. DOA is
finding that people want to remain in their own homes and
communities as long as possible therefore people are not asking for
admission to the Pioneer Homes until about the age of 82. In
general, the people applying for admission to the Pioneer Homes
have already exhausted the community resources.
COMMISSIONER FINK asked if the Pioneer Homes have a wait list.
DEPUTY COMMISSIONER ELGEE replied that DOA has both an active and
inactive waiting list. Approximately 150 people are on the active
waiting list at any given point in time and approximately 2500 are
on the inactive waiting list.
MR. HENRI commented that when he was the Commissioner of DOA 25
years ago, the cost to stay at a Pioneer Home was about $280 per
month. That amount was nominal as the state heavily subsidized the
program. The cost to clients now is about $2,000 per month and
costs continue to rise. He thought the legislature should have
budget analysts look at privatizing that program.
MR. HENRI explained that Recommendation D pertains to the
purchasing function of DOA, a function which is quite complex.
Appendix D contains some of the contradictions in the purchasing
statutes. Central purchasing was designed to get the best quality
products at the lowest price. Appendix D, part 2, details the
reasons why the current system does not allow the state to get the
best quality products for the lowest price. The statutes are not
conducive to efficiency, but they do benefit small businesses in
Alaska. The subcommittee learned that the central purchasing
office is not informed of purchases costing less than $100,000,
even though 85 percent of the state's purchases fall in that
category. That division does not have as much influence over
purchasing activity as it should so it is trying to adjust its
procedures to get that information. He advised that there may be
a cost associated with the change in procedures. The subcommittee
is recommending that the procedural changes be made.
COMMISSIONER FINK asked if the subcommittee can give the dollar
value of the amount that could be saved if the purchasing policies
are changed.
MR. HENRI said he could not give the dollar amount.
COMMISSIONER FINK asked if Mr. Henri had a feel of whether or not
the amount saved would be minimal.
MR. HENRI said he does not think it would be minimal and that it
may involve the need for more purchasing agents.
COMMISSIONER FINK asked Ms. Elgee to address the question.
DEPUTY COMMISSIONER ELGEE stated vendor preferences vary depending
on the goods being purchased. Alaska vendors receive a five
percent preference but additional preferences are given to minority
firms and for special products, such as wood and agricultural
products. She noted that the preferences are a huge public policy
issue that were established in an attempt to support Alaskan firms.
Number 300
MR. HENRI commented that the subcommittee is recommending that the
state sell the telephone system that it owns and allow the private
sector to handle that service in the future. One factor that will
need to be reviewed is how the rural areas will get service. He
noted the subcommittee's report contains a copy of Commissioner
Poe's presentation to the subcommittee (Appendix E) on this topic.
DOA is in the process of requesting proposals for the state
telephone system. Commissioner Poe intends that the successful
bidder continue to provide services to those areas that are not
economically beneficial.
COMMISSIONER THOMAS questioned whether the subcommittee gave any
thought to the way DOA proposes to contract out the state telephone
system. She noted, as a contractor, she is aware of the importance
of how job specifications are written. If the specifications are
not written to achieve the department's goal, the project is doomed
to fail. She stated that she sees the proposal as a very expensive
one because of the way the state wants to remain involved. She
asked whether the subcommittee accepted Commissioner Poe's power
point proposal without question.
MR. HENRI remarked that the subcommittee neither accepted nor
objected that proposal; they merely included it in the report to
show the activity occurring at this time.
COMMISSIONER THOMAS questioned whether the subcommittee looked at
what the result of that proposal may be.
MR. HENRI said the subcommittee did not critique the proposal. He
noted that the subcommittee's ideas are contained in the first part
of Appendix E.
COMMISSIONER THOMAS asked if the subcommittee determined that the
state should remain involved in the telephone system as DOA plans
to do.
MR. HENRI directed Commissioners to the first part of Appendix E
which contains the subcommittee's concerns about privatization of
the telephone system. Those concerns are that service be maintained
to less profitable bush areas, privacy, responsiveness to emergency
situations, labor union contractual obligations, and the financial
stability of the new vendor.
COMMISSIONER WUERCH remarked that the telecommunications industry
is changing very rapidly and that Alaska could lead the nation in
new directions. He noted that the inter-agency billing rate for
intrastate calls is about 25 cents per minute. He asked whether
Commissioner Poe discussed getting that rate as low as the
individual consumer rate.
MR. HENRI said that point was brought up, however the subcommittee
did not take a stand on it. If the entire state system is
privatized, the bidders will have to submit a rate.
COMMISSIONER WUERCH pointed out that he learned as an Anchorage
Assembly member that the three largest municipally owned phone
companies in the United States are located in Ketchikan, Anchorage
and Fairbanks. Anchorage and Fairbanks have since privatized their
systems. He felt the state has been a "sleeper" in this area
because the public does not understand that the state runs its own
independent communications business. He applauded the
subcommittee's efforts to put a spotlight on that issue. He asked
Commissioners to consider this issue because he believes it has
far-reaching impacts. He expressed concern that the Court System
does not have sufficient band widths to each courthouse.
MR. HENRI agreed that wide band widths are not available in many
remote places. He added that the same problem exists for the
distance learning program of the University of Alaska because many
small towns do not have the technological capacity to receive.
COMMISSIONER WUERCH noted that courthouses are not situated in the
smallest towns.
COMMISSIONER VALESKO said the State of Alaska is the only operator
of a microwave line of sight facility between the mainland and
Kodiak Island. He pointed out that the private sector is coming
into some areas, however the state had to get into the business
because no one else was providing a microwave system.
MR. HENRI remarked that the state got involved in many things
because no private company was available or willing to do the work.
COMMISSIONER THOMAS acknowledged that Mike Abbott from the
Governor's Office was present.
MR. HENRI explained that Item F on page 4 pertains to information
services. The subcommittee suggests outsourcing, but not getting
rid of entirely, the function because the state has some highly
skilled people. Outsourcing some of this work will allow DOA to
keep its payroll down.
MR. HENRI stated that Recommendation G was a fascinating idea, but
the subcommittee cannot give the Commission concrete suggestions.
The state payroll, accounts payable, and retirement and benefits
operation is huge, and if the state were to privatize that
operation to a firm in Alaska, and induce the firm to take on other
functions, it could provide an economic boost in Alaska. The
subcommittee was not able to research whether such a change is
feasible.
COMMISSIONER VALESKO commented that he began working as a state
employee in 1964. Prior to 1974, when collective bargaining began,
state payroll functions were at best a "hit or miss" operation.
Seasonal employees were paid once per month, and employees had a
two week waiting period, therefore an employee did not receive the
first paycheck for six weeks. If the payroll division made a
mistake, the employee had to wait another month. With the onset of
collective bargaining, penalty pay provisions were included in a
lot of contracts. Those first provisions had no time limits. An
employee could collect $5000 in penalty pay for receiving a
paycheck that was short $200. He expressed concern that any new
system pay employees on time because errors could cost the state a
lot of money.
MR. HENRI noted the state paid over $20 million for its present
accounting system.
TAPE 99-12, SIDE A
MR. HENRI discussed a major company that changed over to a new
warehouse and delivery computer program and more or less ruined
itself this year.
MR. HENRI discussed privatizing the state mail distribution system
and acknowledged DOA's question regarding where the profits would
occur from converting that system. He referred the Commission to
Appendix H and stated that if the items in Appendix H are
accomplished, the state's postage bill could be reduced by
approximately one-third. He indicated the need to modernize the
mail room functions which could save $1 million per year.
DEPUTY COMMISSIONER ELGEE commented that DOA has no way to refute
Mr. Henri's potential savings amount. However, DOA's major
mailings, such as the longevity bonus and payroll checks, are
already sorted by zip code by the computer that issues those
checks. To the extent that savings are anticipated due to the
assumption that DOA doesn't currently sort bulk mailings by zip
code, that assumption is incorrect.
MR. HENRI said that the recommendations are not definitive.
MR. PIGNALBERI noted that he sat in on the meetings at which this
issue was discussed. He commented that he was impressed with the
expertise that a couple of the subcommittee members had on this
issue. He emphasized that the key point is that private companies
exist that want this kind of business.
MR. HENRI referred the Commission to page 5, Appendix I, regarding
state travel. The subcommittee only submitted the memorandum from
Marsha Hubbard, Director of the Division of General Services,
Department of Administration, which describes DOA's attempts to
save money on travel. The subcommittee did not have any
significant recommendation. He surmised that the best way to save
in this area would be for fewer employees to travel.
COMMISSIONER WUERCH asked whether the subcommittee inquired into
the number of airplanes the state owns.
MR. HENRI answered that the subcommittee didn't look into that,
although the Department of Fish & Game does have "Grumman Goose"
airplanes. Mr. Henri did not believe those planes are available to
general state employees. The subcommittee only discussed travel
between Juneau, Anchorage, and Fairbanks. He reiterated that the
subcommittee could only recommend that fewer people be allowed to
travel and that conference calls and video conferencing be used
more often.
COMMISSIONER FINK asked Mr. Henri if he felt that DOA would welcome
offers of privatization or whether the department is not looking
for such offers. Commissioner Fink noted, from his experience with
the Municipality of Anchorage, he believes that those companies
that feel they can offer savings would make proposals if the state
was open to such.
MR. HENRI reiterated that Commissioner Poe has opted to privatize
the phone system but he doesn't believe the bureaucracy is geared
toward privatization.
COMMISSIONER FINK asked whether part of the Commission's report
should say that all departments should make it clear that they are
receptive to offers of privatization without the loss of
efficiency.
MR. HENRI responded that such language might be worthwhile. He
said that a state official charged with a function is usually
concerned about getting the job done, not whether the function is
privatized.
COMMISSIONER FINK commented that this Commission is charged with
finding the most cost-efficient ways to perform the job. He
believes it is appropriate to place the burden on the private
sector to prove it can perform the job efficiently at a lower cost.
MR. HENRI said that he believes if a private sector contractor came
in with a proposal, the state could issue a request for proposal
(RFP).
MS. McLEOD referred the Commission to Appendix I, which contains
DOA's response. The second to last paragraph reads:
Since such a high percentage of our airfare expenses are
incurred on the Juneau-Anchorage route, and since Alaska
Airlines is the only carrier servicing that route, our
options for cost savings are limited. We have considered
the idea of contracting for chartered flights, but have
decided that the detrimental effects of removing our
volume from the commercial throughput in Southeast Alaska
would harm the citizens and communities that depend on
regularly scheduled jet service in the state.
MS. MCLEOD commented that it seems the state is subsidizing Alaska
Airlines. She informed the Commission that someone in the finance
section of DOA came up with a cost of $12 to $14 million. She did
not know whether that is the exact cost because much of the travel
costs are couched in the accounting system due to the manner in
which the financial coding is set up. She pointed out that Alaska
Airlines does not enter into negotiations with the state because
the state does not know exactly how much it spends on airfare.
MR. HENRI informed the Commission that a few subcommittee members
wanted to eliminate the Labor Relations Office, however the vast
majority of the subcommittee did not support that idea. He noted
that Mr. Liston, a subcommittee member, charged that Mr. Henri
didn't want to eliminate this particular office because he created
it. Mr. Henri denied Mr. Liston's charge. Mr. Henri believes this
office is necessary to interpret labor contracts and perform labor
negotiations. The subcommittee, however, recommends that this
office be more responsive.
COMMISSIONER VALESKO commented that if the Labor Relations Office
is eliminated, no one will be there when disputes arise as there
are inconsistencies between the various state departments. He
indicated that this office is helpful in creating consistency with
regard to interpretations of collective bargaining. Commissioner
Valesko said that he would recommend giving the office division
status with a director in order to perform more efficiently.
Commissioner Valesko continued by saying without this office, those
in Labor would have an advantage. He commented, "There is also
quite a bit to be said for good labor relations, consistent labor
relations. That takes place over a matter of years rather than
just coming in and making jumps to changes." He explained that
when major changes occur in labor relations, litigation increases,
as do costs.
MR. HENRI stated, "Productivity of the state workforce ... always
something to be desired." He requested that Ms. McLeod discuss
this area which pertains to state employees.
MS. McLEOD informed the Commission that she has a very rudimentary
knowledge of the state accounting system since she has worked as an
accounting clerk since 1985, which is when the new accounting
system began. During that time, the departments were given leeway
to use the accounting system as they saw fit, which lead to
nonstandard use of the system. Ms. McLeod stated that the use of
the accounting system needs to be standardized. With regard to the
productivity of state employees, she believes the best way to
increase productivity is to have everyone fill out time sheets.
Then, through the accounting structure, the time spent by each
employee on each task could be identified. Ms. McLeod recommended
that a cost accounting system be established to identify all costs
associated with tasks performed by state employees. She explained
that each program and project has code numbers, therefore filling
out a time sheet using those codes would make it easy to identify
the cost of each task. She noted that an equipment component is
contained in the coding system. Ms. McLeod pointed out that the
state accounting system is only about 14 years old and is fairly
innovative. Standardization across departments could create a tool
to determine the state's costs for providing a service and compare
it to the private sector's cost. This structure is available and
will not cost the state any money to implement. Such a system
would merely require all the finance officers to meet and determine
how to use this accounting structure.
COMMISSIONER VALESKO asked if the subcommittee reviewed state
employee training and the legislative system of funding state
positions. He has noticed in DOT/PF over the years that the
positions that are getting cut are lower level entry positions.
For example, when a crew of equipment operators is told to
eliminate positions, that crew eliminates the lowest level. The
crew cannot afford to eliminate higher level operators which
require talent and expertise with the equipment. He expressed
concern that younger people are receiving less experience and
training to move up the system. Training programs are not allowed.
Furthermore, the less technical jobs are now being performed by
higher wage employees. This sort of situation perpetuates itself.
COMMISSIONER THOMAS asked if Commissioner Valesko had any
suggestions.
COMMISSIONER VALESKO suggested that the Commission review the
legislative process of recommending "across the line" cuts. He
suggested that review of services occur to determine whether the
service is desired or not. He stressed that the departments should
be able to perform necessary jobs. Furthermore, the legislature
should allow training. For example, Alyeska is concerned with its
pipeline maintenance because that workforce is aging and no new
employees are being hired. He noted that Alyeska is also concerned
with a training budget.
MR. PIGNALBERI noted that the legislature no longer makes PCN
(position control number) cuts. He explained that the
Administration decides which positions have to be cut.
COMMISSIONER WUERCH agreed with Commissioner Valesko that most
often the individuals who deliver the real service are cut. He
commented that it is troubling that the Administration has not been
looking at support staff in the last few years. DEC has curtailed
inspections of waste water and water systems throughout the state.
Although the department retains researchers, staff analysts, and
public relations people, those employees that deliver the service
to the public are eliminated.
COMMISSIONER VALESKO agreed with Mr. Pignalberi that the
legislature does not cut PCNs, but it does "across the line" cuts
leaving the managers to decide which positions will be eliminated.
Often, the lowest level person is cut. Commissioner Valesko
stressed that the legislature did recommend and push for cuts
eliminating maintenance stations and road maintenance.
COMMISSIONER THOMAS repeated her question to Commissioner Valesko
asking for his recommendations to the Commission on this matter.
COMMISSIONER VALESKO asked if the subcommittee, in its review of
productivity, had reviewed any training needs.
MR. HENRI responded that the state does do training, but he did not
know how much or what is being done with regard to Commissioner
Valesko's concern. He referred to paragraph (l) on page 5, which
speaks to the idea of partnering with license issuing agencies.
One of the subcommittee members, Gerri Wakefield, is a private
partner with DMV; she performs duties outside of normal office
hours. That partnership seems to work well. Mr. Henri noted that
Ms. Wakefield is ill, and therefore her report should be
forthcoming. He informed the Commission that another subcommittee
member, Dale Nelson, an engineer, had an idea of how to partner
with architects, engineers, and licensees. He indicated that
partnering is a way to reduce pressure on state workforces. The
subcommittee recommends that the state review that possibility
seriously.
COMMISSIONER VALESKO thanked the subcommittee for doing an
excellent job in the limited time frame. He commended the
subcommittee for not automatically presuming that everything could
be done more cheaply if privatized.
COMMISSIONER THOMAS thanked the subcommittee. She requested that
the subcommittee provide the commission with a one page cover sheet
of recommendations. Commissioner Thomas announced that the
Commission would take an at-ease for ten minutes. When the
Commission reconvened, Commissioner Thomas called for the report
from the Legislative Subcommittee.
KIP KNUDSON, Chair of the Legislative Subcommittee, said that the
legislature already seems to be privatized in that the citizens
contract with legislators to go to Juneau, therefore, the actual
business of lawmaking is already contracted. Mr. Knudson turned to
the subcommittee's report and explained that it is divided into
three sections: a process to analyze privatization of services in
the legislature; programs that are obvious starting points for the
process; and services in the legislature that can be made more
efficient in the short term. Mr. Knudson stated that the public
and the legislature should be able to understand the legislature's
budget; yet nearly every subcommittee member could not understand
the current format of that budget, even former House Finance
Chairman Mark Hanley. The subcommittee recommends that the budget
document be divided into service components. Once that budget
document is created and the cost per service is apparent, a request
for proposals can occur. All services should be put out to bid
regularly.
MR. KNUDSON stated that an immediate and easy money saver would be
to shorten the legislative session by 30 days, which would save at
least $1.4 million in per diem and personnel costs alone. Also
moving the legislative session would save some money. Mr. Knudson
said that contrary to the Executive Director's memorandum, the
legislature would not need a statute change to meet for less than
120 days. With regard to moving the session, he pointed out that
the Constitution states that the capital is located in Juneau and
that legislative sessions are to be held in the capitol.
Therefore, a statute change would be necessary for the legislature
to convene in a different location.
COMMISSIONER THOMAS noted that Pam Varni, Executive Director,
Legislative Affairs Agency, and Mike Robbins, Alaska State
Employees Association and American Federal, State, County and
Municipal Employees, are present in Juneau and available to speak
via teleconference.
COMMISSIONER VALESKO referred to Mr. Knudson's comment that the
legislature is already privatized because the citizens elect
legislators and thus are in a contract with the public. He asked
why legislators are eligible for the Public Employee Retirement
System (PERS) and whether legislators are private or public
employees.
MR. KNUDSON clarified that was a "tongue in cheek" statement. If
the public is unsatisfied with legislators' PERS eligibility, the
public could elect different candidates who could repeal the
legislation that allows legislators to participate in PERS. Mr.
Knudson informed the committee that the subcommittee determined
that every function associated with the legislature, except voting
on legislation, could be privatized.
COMMISSIONER VALESKO addressed the recommendation to move the
session to Anchorage and asked if the subcommittee considered the
cost required to transport state officials and staff to Anchorage
for legislative meetings.
MR. KNUDSON said that cost was discussed. The general feeling was
that it would be an even trade. Many of the officials who testify
during session travel to Juneau from other parts of the state. He
acknowledged that a more careful analysis could be performed, but
the end result may be a "wash."
COMMISSIONER HARPER inquired as to the notion of having legislative
sessions every other year, as do other states.
MR. KNUDSON answered that the subcommittee did not discuss that
idea in detail. He estimated that about $15 million would be saved
if session was held every other year. The subcommittee discussed
biannual budgeting in which an operating budget would be done one
year and a capital budget the next year. Mr. Knudson said the
expensive part is gathering everyone in Juneau and hiring the extra
staff for the session.
PAM VARNI, Executive Director, Legislative Affairs Agency, agreed
that there would be a cost savings on per diem but she noted the
report makes no mention of where the legislature would be housed
elsewhere. Currently, the Capitol building in Juneau is fully paid
for. One would need to consider the cost of leasing space for the
House and Senate chambers.
COMMISSIONER THOMAS thanked the subcommittee and requested that the
subcommittee provide its recommendations in a bullet points format.
COMMISSIONER FINK informed the Commission that he and Commissioner
Valesko would not be able to attend the November 18, 1999 meeting.
COMMISSIONER FINK expressed the need to poll members with regard to
whether they can attend the meetings. He suggested that more could
be accomplished if the Commission met several days a week.
COMMISSIONER VALESKO recognized the difficulty in scheduling
meetings for 11 people, especially near holidays. He said he could
foresee the same attendance problems with daily meetings for a
week. Commissioner Valesko commented that those who are not
present during the recommendation stage are likely to have more
questions later and lengthen the decision stage of the full
Commission.
TAPE 99-12, SIDE B
COMMISSIONER HARPER pointed out that the commission is mandated to
provide a report by January 1 and that polling members could be
helpful. He expressed concern that only four members were present
today. The subcommittees have put in many hours and it is a shame
that six or seven Commissioners are not present. He said that he
should be able to attend most of the meetings.
COMMISSIONER VALESKO understood that the Commission will hear
subcommittee reports through November 30, 1999, and complete its
report on December 13, 1999.
MR. PIGNALBERI reviewed the meeting schedule through November which
he believes should allow the Commission to hear all subcommittee
reports. He expressed concern that the Commission wait until
December 13 to start the deliberation process. Mr. Pignalberi
explained that December 13, 1999 is the date that staff plans to
have the final report completed. He suggested that some meetings
be scheduled during the first two weeks of December.
COMMISSIONER THOMAS expressed concern about the lack of meetings
between November 30, 1999, and December 13, 1999 and agreed that
Commissioner Fink's suggestion to meet several days in a row in
December is in order. She indicated that the Commission may want
to sit down and generate thoughts beyond those in the subcommittee
reports. As acting chair, Commissioner Thomas said she would
formulate a letter to the Commission regarding the schedule.
MR. PIGNALBERI said that staff would poll Commission members about
meeting during the first two weeks of December. He pointed out
that the Commission has three more meetings scheduled to hear from
about ten more subcommittees, although some of those reports will
be very short.
COMMISSIONER THOMAS suggested the meeting dates of December 1, 7,
8, 13, and 14. She stated that she could outline a letter to send
to Commissioners explaining how this new schedule was arrived at.
MR. PIGNALBERI commented that staff could probably use one day
after the last subcommittee report in order to get recommendations
together.
COMMISSIONER THOMAS stated that individual Commissioners have
indicated that they have ideas about how they want to finish this
up, therefore the Commission would not need the materials.
COMMISSIONER FINK asked that Commissioner Thomas' letter ask that
Commissioners indicate what dates they can and cannot attend.
COMMISSIONER THOMAS expressed the need to let Commissioners know
they are really needed.
There being no further business before the commission, the
Commission on Privatization and Delivery of Government Services
adjourned at 11:52 a.m.
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