HOUSE TRANSPORTATION STANDING COMMITTEE February 8, 1994 5:00 p.m. MEMBERS PRESENT Representative Richard Foster, Chair Representative Gary Davis, Vice-Chair Representative Eldon Mulder Representative Al Vezey Representative Bill Hudson Representative Jerry Mackie Representative Curt Menard MEMBERS ABSENT None OTHER LEGISLATORS PRESENT Representative Terry Martin COMMITTEE CALENDAR HCR 26: Declaring 1994 the year of Vancouver. MOVED OUT OF COMMITTEE HB 46: "An Act relating to frequent traveler credit for state-paid travel." HEARD AND HELD OVER Alaska Marine Highway System Overview WITNESS REGISTER REPRESENTATIVE BILL HUDSON Alaska State Legislature Room 108, State Capitol Juneau, Alaska 99811 465-3744 Position Statement: Sponsor of HCR 26 REPRESENTATIVE TERRY MARTIN Alaska State Legislature Room 411, State Capitol Juneau, Alaska 99811 465-3783 Position Statement: Sponsor of CSHB 46 DUGAN PETTY, Director Division of General Services Department of Administration P.O. Box 110210 Juneau, Alaska 99811-0210 Position Statement: Available to answer questions on CSHB 46 GREGORY A. DRONKERT, System Director Alaska Marine Highway System 1591 Glacier Avenue Juneau, Alaska 99802 465-3959 Position Statement: Provided overview of AMHS PREVIOUS ACTION BILL: HCR 26 SHORT TITLE: DECLARING 1994 THE YEAR OF CAPT VANCOUVER SPONSOR(S): LABOR & COMMERCE JRN-DATE JRN-PG ACTION 01/18/94 2096 (H) READ THE FIRST TIME/REFERRAL(S) 01/18/94 2096 (H) TRANSPORTATION 01/27/94 (H) TRA AT 05:00 PM CAPITOL 17 02/08/94 (H) TRA AT 05:00 PM CAPITOL 17 BILL: HB 46 SHORT TITLE: STATE-PAID TRAVEL MILEAGE CREDITS SPONSOR(S): REPRESENTATIVE(S) MARTIN JRN-DATE JRN-PG ACTION 01/12/93 43 (H) READ THE FIRST TIME/REFERRAL(S) 01/12/93 43 (H) STATE AFFAIRS, TRANSPORTATION, FINANCE 03/20/93 (H) STA AT 08:00 AM CAPITOL 102 03/20/93 (H) MINUTE(STA) 03/30/93 (H) STA AT 08:00 AM CAPITOL 102 03/30/93 (H) MINUTE(STA) 04/03/93 (H) MINUTE(STA) 04/05/93 972 (H) STA RPT CS(STA) 2DP 1DNP 3NR 04/05/93 972 (H) DP: VEZEY, OLBERG 04/05/93 972 (H) DNP: ULMER 04/05/93 972 (H) NR: B.DAVIS, G.DAVIS, KOTT 04/05/93 972 (H) -FISCAL NOTE (ADM) 4/5/93 04/05/93 972 (H) REFERRED TO TRANSPORTATION 04/06/93 (H) TRA AT 05:00 PM CAPITOL 17 04/13/93 (H) TRA AT 05:00 PM CAPITOL 17 04/13/93 (H) MINUTE(TRA) 04/15/93 (H) TRA AT 05:00 PM CAPITOL 17 04/15/93 (H) MINUTE(TRA) 04/15/93 (H) MINUTE(TRA) 02/08/94 (H) TRA AT 05:00 PM CAPITOL 17 ACTION NARRATIVE TAPE 94-3, SIDE A Number 000 CHAIR FOSTER called the meeting to order at 5:10 p.m. HCR 26 - DECLARING 1994 THE YEAR OF VANCOUVER CHAIR FOSTER introduced Representative Bill Hudson as the sponsor of HCR 26. Number 023 REPRESENTATIVE HUDSON introduced HCR 26 by stating, "HCR 26 was brought to me by the Alaska Maritime Heritage Foundation, some of my colleagues in Juneau, and Representative Fran Ulmer. This year marks the 200th anniversary of Captain George Vancouver's voyage to Cook's River and Prince William Sound, then to northern Southeast Alaska. In two small vessels, the Discovery (100 feet) and the Chatham (65 feet), the expedition had, by the end of 1793, finished exploring the Columbia River, British Columbia coast, and southern Southeast Alaska. HCR 26 declares 1994 to be the year of Vancouver to commemorate George Vancouver's important contribution to Alaska's history. "To celebrate the 200th anniversary of Vancouver's expedition, the newly formed Alaska Maritime Heritage Foundation Vancouver Bicentennial Committee is planning educational events. In Anchorage there are plans for a lecture series and a conference to commemorate Vancouver. Here in Juneau we plan to have a special exhibit at the Alaska State Museum and a series of speakers over the summer months. The exhibit, a major event called `Vancouver Meets the Tlingits' will consist of Native and European artifacts and trade goods that have had an influence on Native culture and change. "The National Geographic Society and the Alaska Geography and Education Program are very supportive of the concept and are working to prepare a curriculum for use in Alaska's schools. I believe this is an excellent opportunity to provide public education on many of Alaska's place names and the rich history of our state." Number 081 REPRESENTATIVE MACKIE moved that the committee pass HCR 26 out of the Transportation Committee. Number 083 There were no objections, and CHAIR FOSTER declared HCR 26 to be moved out of committee. Number 087 HB 46 - STATE-PAID TRAVEL MILEAGE CREDITS CHAIR FOSTER stated that he was neutral on CSHB 46 and it would be a committee decision as to whether or not to move the bill. Number 098 REPRESENTATIVE TERRY MARTIN, Prime Sponsor of HB 46, introduced CSHB 46 by stating, "CSHB 46 represents a simple and efficient effort to reduce the budget and potential waste in departmental operations. It targets the abuse and under-regulated tabulation of frequent flier credit miles by state employees during state paid flights. The purpose of the bill is to apply all mileage earned through state travel to the specific department authorizing the ticket. State employees conducting business, at state expense, should relinquish awarded miles as property of the state. As frequent flier award certificates are issued, they should in turn be applied to future travel expenses incurred by the department. "The bill should also enhance efficiency by deterring and limiting the number of employees attending the same meeting. In the same instance, it will promote information sharing and increase a team effort to reduce excessive travel in certain divisions. In terms of the national perspective, as of last year 14 states had frequent flier policies. All 14 describe the mileage as `property of the state' and require a central collection location in a division to maintain enforcement and consolidate travel data. In some cases, states whose employees travel extensively have two frequent flier mileage numbers: one for personal travel and one for state business. "In an effort to curb travel expenses, all state agencies should maintain a permanent, cumulative file of their personnel's travel records. The file should include, at a minimum, the total current airline frequent flier mileage accrued by state employees at state expense. Coupled with the passage of CSHB 46, tracking and recording funds spent on travel will help reduce waste in each departmental budget and should assist administrators in reaching a more fiscally conservative approach to state operations." Number 174 REPRESENTATIVE HUDSON commented that this subject is not a new one, and asked Representative Martin what the current position of the airlines was, in contrast to Alaska Airline's past position that frequent flier points were a bonus to the flier and nothing else. Number 186 REPRESENTATIVE MARTIN responded that this was something that would have to be worked out with the airlines, but 14 other states already have such programs. He added that he is amazed that the airlines are able to do this with IBM, ARCO, and other private enterprises as well and that Alaska Airlines has a monopoly going on and no incentive to cooperate. He added that a Juneau outfit, U.S. Travel, would be able to set up such a program for every department of state government. Number 210 REPRESENTATIVE HUDSON stated that he has always felt frequent flier miles are not state assets, but rather employee entitlements, since often employees traveling on state business must fly at night and on weekends. He expressed concern that, through CSHB 46, the organized employees of the state, rather than legislators and the governor and other such employees, are being asked to give up something that the state doesn't own. Number 231 REPRESENTATIVE MARTIN responded that, if this is the case, it should be an explicitly stated component of the employee benefits package. Number 243 REPRESENTATIVE HUDSON commented that the dialogue taking place was very important and emphasized his belief that the state has no call on the mileage points at issue. The state has a responsibility to pay the fare, and if they don't think the fare is appropriate, they should negotiate for a lower fare. He cited an earlier attempt to negotiate for a lower fare when Mark Air first flew into Juneau and offered blocks of seats at lower fares for state travelers, adding that in his mind such an approach was the proper way to do it -- not via the proposals contained in CSHB 46. He further added that he thought CSHB 46 would have a demoralizing effect. Number 261 REPRESENTATIVE MARTIN responded that a decision clearly should be made by the legislature on how to treat the mileage. He also commented that Mark Air's past efforts had been honest ones to save millions of dollars, but employees went over to Alaska Air and flew with them in order to get the free mileage. Number 270 REPRESENTATIVE FOSTER restated his position that he would either move or not move CSHB 46 at the end of discussion and ask for a vote thereon. Number 276 REPRESENTATIVE MACKIE stated that he understood CSHB 46 only deals with employees who are part of an organized bargaining unit and under contract and does not effect legislators, the governor, the governor's people, or other political people who are, nonetheless, state employees. He asked Representative Martin why that was the case. Number 281 REPRESENTATIVE MARTIN replied that under absolutely no circumstances was it his intent that legislators, the governor, the governor's people, or other political people be exempted from the requirements of CSHB 46. He added that any state of Alaska employee should be responsible for turning in the frequent flier miles to the state and the airline should be responsible for the points being credited to the state or state agency. Number 296 REPRESENTATIVE MACKIE expressed concern that only organized bargaining units would be losing frequent flier benefits. Number 302 REPRESENTATIVE MARTIN responded that they then needed to add words to the effect of "no one" to the bill. Number 312 REPRESENTATIVE MACKIE continued to express concern regarding the seeming exemption of legislators and other political employees from the terms of the CSHB 46, according to his interpretation of AS 39. Number 317 REPRESENTATIVE MARTIN expressed willingness to amend CSHB 46, though he stated that he did not construe AS 39 to say what Representative Mackie interpreted it as saying. Number 318 REPRESENTATIVE MACKIE stated to Chair Foster that he was not trying to be dilatory, but according to his reading, it was obvious CSHB 46 only dealt with employees in organized groups. Number 320 REPRESENTATIVE MARTIN said that this was the first he had ever heard of Representative Mackie's interpretation of CSHB 46. Number 330 REPRESENTATIVE VEZEY made the point that he recognized the demoralizing effect of losing benefits, but it certainly wouldn't be as demoralizing as the loss of a job or having a cohort lose a job. He added that he, personally, places jobs at a higher priority than travel benefits. Number 340 REPRESENTATIVE DAVIS stated that he had been under the impression that there is no mechanism for the airlines to credit the state, but Representative Martin's testimony contradicted that impression. He asked Representative Martin to confirm that if the state paid for the tickets, the state could, under law, receive the frequent flier benefits. Number 351 REPRESENTATIVE MARTIN responded that there is currently no mechanism in the state to implement a program such as he is suggesting. He added that he is frustrated with the entire situation, although U.S. Travel has told him that they could do it through a very simple process. Number 373 REPRESENTATIVE DAVIS asked Representative Martin to clarify what U.S. Travel is and if it is a travel agency. Number 376 REPRESENTATIVE MARTIN replied affirmatively, indicating that U.S. Travel is a travel agency. He mentioned receiving a program from U.S. Travel, but said he hadn't had the time to go down and see U.S. Travel. He added that U.S. Travel has told him that if the bill goes through, they can set up the system for the state. Number 380 CHAIR FOSTER reminded the committee that CSHB 46 had been in a subcommittee consisting of Representative Mulder and Representative Mackie and asked if there were any comments the subcommittee wished to make. Number 382 REPRESENTATIVE MULDER responded that he had asked the representative of Alaska Airlines if they had done anything like this, and they had not, and they were not excited about having the opportunity to do it. He added that many state employees don't look at travel as a benefit; rather, they view it as part of the job. He concluded that he does not feel that CSHB 46 is all that necessary at this point in time, although the issue it addresses is certainly fair game when looking for ways to cut overall spending. Number 395 REPRESENTATIVE MULDER stated that in deference to Chair Foster's request, he and Representative Mackie had moved CSHB 46 out of subcommittee so that it could be discussed by the entire committee. Number 399 REPRESENTATIVE MACKIE asked Representative Martin to confirm that what he was proposing was adding a new section which would result in all state employees being addressed in CSHB 46. Number 404 REPRESENTATIVE MARTIN confirmed that CSHB 46 addresses all state employees. Number 406 REPRESENTATIVE MACKIE commented that he felt he had a better understanding, but he would like to see if the bill could work before implementing it as legislation and, ultimately, he agrees with Representative Hudson that negotiating lower fares with the airlines is really the answer, not CSHB 46. Number 420 REPRESENTATIVE MARTIN stated that the legislature has a responsibility, one way or the other, to do something about this. He added that many state employees call and tell him how they and their families travel together, sometimes for 30 days, on state frequent flier miles. Number 440 REPRESENTATIVE HUDSON made the point that CSHB 46 is making a major public statement by, in effect, saying that nobody gets the mileage, and if you take the mileage, you get fired. And not only that, these terms aren't even negotiable through collective bargaining or other negotiation. Along with that, injured state employees and organized militia combine to make this very questionable public policy. He stressed the need to know the costs of implementing, and the importance of such a program to the state -- that the rationale would have to be great. Number 463 REPRESENTATIVE MARTIN replied that the rationale is to save the state money. Number 474 REPRESENTATIVE HUDSON remarked that he had done a good deal of collective bargaining, and just because something is silent doesn't mean it's acted on one way or another. In this case, according to all he's seen, Representative Hudson didn't consider frequent flier mileage ownership to be an issue to be acted upon, and considered the state to have no contractual right to the mileage. Number 489 CHAIR FOSTER asked if there were any other questions. Number 494 REPRESENTATIVE MACKIE asked if the Department of Administration (DOA) had a position on CSHB 46. Number 495 JIMMY PETTY, from the audience, identified himself as the Director of the Division of General Services, and stated that the DOA has a zero fiscal note for CSHB 46 and has not prepared a position paper at this point. He added that DOA has gone to Alaska Airlines with the idea that, if it were possible, pooling the miles could be of substantial benefit. Alaska Airlines' policy is to not allow pooling of miles, so there is no way the state can get the collective benefits of pooling mileage from Alaska Airlines. Alaska Airlines also told DOA that they view the miles as belonging to the employees -- the traveler. Number 520 REPRESENTATIVE DAVIS asked Mr. Petty to clarify that it wasn't an illegal thing, it was just Alaska Airlines' policy. Number 523 MR. PETTY confirmed Representative Davis' statement and said the question of illegality had to do with the prior bill, before the committee substitute was adopted, so that state statutes would not be violated. Number 527 REPRESENTATIVE DAVIS asked Mr. Petty how much the state spends per year on travel. Number 528 MR. PETTY said the DOA does not have good indicators on how much individual travel was taking place. Number 535 REPRESENTATIVE DAVIS expressed concern that the amount of money spent yearly by the state on travel is a valid question with regard to this entire issue. Number 539 MR. PETTY responded that from the governor's budget, provided by Representative Martin, it was very difficult to ascertain how much money went to airlines specifically, since travel was all lumped together. Number 540 REPRESENTATIVE HUDSON wondered if the travel budget indicates which airlines are flown and if mileage is claimed in every case. MR. PETTY acknowledged that Representative Hudson's comment was a possibility, and discussed state contracts for the best possible fare, period, without mileage incentives. Number 555 REPRESENTATIVE MARTIN stated there is a $46 million travel allocation, most of it for air travel. Number 558 REPRESENTATIVE MACKIE said that Representative Martin's numbers are neither achievable or realistic. Number 560 REPRESENTATIVE MARTIN expressed concern. Number 568 REPRESENTATIVE MACKIE made a motion to move the bill from committee, in deference to the wishes of Chair Foster. Number 569 CHAIR FOSTER asked for a voice vote as to whether CSHB 46 should be moved out of committee. Representative Davis and Representative Vezey said "yes," all other committee members said "no," and Chair Foster declared the bill to be held in committee. Number 578 ALASKA MARINE HIGHWAY SYSTEM OVERVIEW CHAIR FOSTER introduced GREG DRONKERT, Director of the Alaska Marine Highway System (AMHS). Number 580 MR. DRONKERT introduced himself, thanked Chair Foster and members of the committee and, due to the time constraint, offered to give the committee a condensed version of the AMHS issues and priorities. Number 585 CHAIR FOSTER replied that a condensed version of issues and priorities would be fine and the committee could delve into them in detail should they deem it necessary. Number 587 MR. DRONKERT stated his intent, as director, to focus on the core business at AMHS, with concentration on providing safe, efficient and reliable transportation. The other key issue for AMHS was asset utilization -- how assets are configured, how they're maintained, and how they're deployed. Number 592 MR. DRONKERT addressed the question, "why an Alaska Marine Highway System?" He stressed that the AMHS represents a critical lifeline for Alaskans; it must be open to all users and free, affordable access must be provided. The AMHS also represents a tremendous strategic asset to the state -- marine trade and transportation is a vital component of the state's infrastructure. He added that, historically, marine trade has been the foundation linking various components of our industrial base and trade. The AMHS mitigates the ability of outside forces to control the cost of our transportation, and provides immeasurable value in Alaska's ability to retain its independence and control its destiny by controlling ships, which in turn control trade. Number 620 MR. DRONKERT listed basic transportation, trade opportunities, jobs, security, and a critical link as benefits provided by the AMHS. Number 625 MR. DRONKERT reemphasized that the AMHS mission is to provide safe, reliable and efficient transportation. He listed the values of the AMHS as: direct and indirect jobs, carriage of passengers, carriage of vehicles and general cargo, generation of revenue, supporting Alaska shipyards, and significant indirect economic impacts. Number 632 MR. DRONKERT stated his belief that the real point is: value must be assessed by considering the strategic significance of the industry as it relates to Alaska's infrastructure, industrial base, trading position, and strategic security. Ultimately, he concluded, the socio- economic benefits of the AMHS exceed the costs. Number 635 MR. DRONKERT indicated that his objectives as director are to continue to meet the AMHS mission, provide safe, efficient and reliable basic service, and strive for continued improvement. He sees the issues as being: rising operating costs, increasing demand, an aging fleet, declining state revenues, inherent infrequency due to "public nature," and increasing regulatory requirements. Number 639 MR. DRONKERT stated that costs are driven by the types of vessels, how they're configured and their condition, as well as by their operating costs (fuel, crew, and repair costs), and by management and how efficiently it operates the system and utilizes assets. He cited an aging fleet, which is labor intensive to operate and expensive to maintain, as a reason for the AMHS's currently rising costs. In addition, there are rising crew costs; and labor agreements/vessel labor costs account for about 59% of the AMHS total operating budget. Last, variable vessel productivity and Jones Act requirements further contribute to rising operating costs. Number 643 MR. DRONKERT asserted that demand is driven by population, per capita income, tourism, development, trade, and the global economy. Demand has increased steadily. Since 1978 the AMHS has seen a 44% increase in passengers and a 61% increase in vehicles. However, there has been no increase in capacity during the same period of time. Mr. Dronkert stressed this as a key issue to bear in mind. Demand is projected to continue to rise and Mr. Dronkert predicts that demand will be constrained by supply -- if more supply cannot be provided, demand will be constrained. Inadequate supply will in turn reduce service, due to delays and overcrowding. Number 648 MR. DRONKERT cited an aging fleet as the next issue and mentioned that older vessels limit the type of service that AMHS can be in, and limit financial performance. Additionally, older vessels have a propensity to have more down time and higher costs, but AMHS has no swing of replacement vessels. Current AMHS vessels require extensive refurbishments to meet the service requirements. Number 648 MR. DRONKERT asserted that declining state revenues are another issue and result in increasing public scrutiny of the AMHS, questioning of the value of the state subsidy, and a reassessment of AMHS roles and objectives. Number 652 MR. DRONKERT referred to the ever increasing federal and international regulatory requirements, making the point that a lot of money is being spent to remain in compliance with U.S. Coast Guard, SOLAS, and EPA regulations. TAPE 94-3, SIDE B Number 000 MR. DRONKERT laid out AMHS priorities as ultimately culminating in safe, efficient, reliable transportation. Goals to be achieved in striving to meet the mission include reducing costs through fleet modernization, increased management efficiency and labor; increasing revenues through tariffs, asset utilization, and new services; increasing operational efficiency through organizational development, rationalization of service, promotion of complementary commercial operations, and development of Ketchikan-based repair facility; increasing system reliability and safety, through assessment of deficiencies, contingency planning, maintenance management, fleet modernization, and training; planning, through continued implementation of the AMHS Master Plan and assisting in comprehensive state DOT/PF intermodal transportation planning and assessment of statewide marine transportation issues; and budget considerations such as developing a long-range business plan and securing a continued, reliable state funding commitment. Number 025 MR. DRONKERT described his action plan for AMHS, beginning with his intent to complete initial organizational restructuring, solidify the organization's agenda, and commence AMHS organizational development activities. His financial plan calls for a focus on analysis and control, securing FY 95 operating and capital budget requests, assessing and, when required, restructuring tariffs, and developing a long-range business plan. Number 036 MR. DRONKERT identified the components of his operational action plan as assessing the winter 94-95 operating schedule, working towards optimization of load factors and revenues, and seeking equitable negotiation of labor agreements. Addressing the issue of AMHS assets, he plans to assess the 94-95 overhaul and capital improvement programs, prioritize/rationalize projects, continue fleet modernization, and work to reactivate the Ketchikan ship maintenance facility. Number 047 MR. DRONKERT concluded by emphasizing his intention to ensure integration of AMHS planning with the Department of Transportation and Public Facilities' comprehensive intermodal transportation strategy. Number 078 CHAIR FOSTER thanked Mr. Dronkert and announced, at 5:50 p.m., with the arrival of members of the DOT Budget Finance Subcommittee, that the House Transportation Committee meeting was convening into a work session by the Budget Finance Subcommittee.