04/08/2025 08:00 AM House COMMUNITY & REGIONAL AFFAIRS

                  HB 133-PAYMENT OF CONTRACTS                                                                               
                                                                                                                                
8:53:36 AM                                                                                                                    
                                                                                                                                
CO-CHAIR  HIMSCHOOT announced  that  the next  order of  business                                                               
would  be HOUSE  BILL  NO.  133, "An  Act  establishing a  30-day                                                               
deadline   for  the   payment  of   contracts  under   the  State                                                               
Procurement  Code;  establishing  deadlines for  the  payment  of                                                               
grants,  contracts,  and  reimbursement agreements  to  nonprofit                                                               
organizations, municipalities,  and Alaska  Native organizations;                                                               
relating to  payment of grants  to named recipients that  are not                                                               
municipalities; and providing for an effective date."                                                                           
                                                                                                                                
8:54:13 AM                                                                                                                    
                                                                                                                                
ELLA  LUBIN,  Staff,  Representative  Rebecca  Himschoot,  Alaska                                                               
State Legislature,  on behalf of Representative  Himschoot, prime                                                               
sponsor, said  HB 133  would bring  parity to  nonprofits, Alaska                                                               
Native organizations, and municipalities  for prompt payment from                                                               
the state that extends to  contracts, grants, and reimbursements.                                                               
The issue is longstanding and systemic.                                                                                         
                                                                                                                                
CO-CHAIR HIMSCHOOT requested an  explanation of the Department of                                                               
Health (DOH) fiscal notes.                                                                                                      
                                                                                                                                
8:56:33 AM                                                                                                                    
                                                                                                                                
PAM  HALLORAN,  Assistant   Commissioner,  Department  of  Health                                                               
(DOH), explained  that a  number of  factors are  contributing to                                                               
the delays:  the high volume  of grants; the  division's capacity                                                               
to produce quality invoices and  documentation in a high turnover                                                               
environment; and  budgetary issues  that take  time, such  as the                                                               
RPL  process.    She  reported  that  in  an  effort  to  improve                                                               
timelines,  new  leadership has  been  hired  in the  grants  and                                                               
contracts  section who  are committed  to providing  training and                                                               
additional resources  to staff to  speed up time,  identify gaps,                                                               
and improve  the situation.   When  calculating the  fiscal note,                                                               
the  10.5 percent  annualized interest  rate was  applied to  the                                                               
number of  late days resulting  in over $1.5 million  in interest                                                               
owed  by the  department from  unrestricted general  funds (UGF).                                                               
She said DOH  has requested one position within  each division to                                                               
allow  the  federal funding  sources  to  be properly  allocated,                                                               
ensure  compliance with  federal guidelines,  and make  sure that                                                               
contractors and grantees are paid on time.                                                                                      
                                                                                                                                
9:01:25 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE   PRAX  asked   whether  the   department  has   a                                                               
performance standard for paying contracts.                                                                                      
                                                                                                                                
MS.  HALLORAN  responded  in the  affirmative,  adding  that  the                                                               
department's   current   standards   could   be   improved   upon                                                               
particularly within the grants and contracts section.                                                                           
                                                                                                                                
REPRESENTATIVE PRAX  asked whether  there is a  standard timeline                                                               
for paying bills or whether it varies by contract.                                                                              
                                                                                                                                
9:04:06 AM                                                                                                                    
                                                                                                                                
JASON  GROVE, Procurement  Manager, Department  of Health  (DOH),                                                               
said the standard  is payment within 30 days receipt  of a proper                                                               
invoice.                                                                                                                        
                                                                                                                                
REPRESENTATIVE  PRAX  asked  whether  there  is  a  late  payment                                                               
penalty established in each contract.                                                                                           
                                                                                                                                
MR. GROVE answered generally, no.                                                                                               
                                                                                                                                
9:06:21 AM                                                                                                                    
                                                                                                                                
CO-CHAIR MEARS  opined that many  of the state's systems  are too                                                               
complex.  She  added that she is broadly  supportive of investing                                                               
to improve the  state's systems in the short-term  to ensure that                                                               
there is more money for programs  in the long term and less money                                                               
spent on administering money.                                                                                                   
                                                                                                                                
9:07:07 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE RUFFRIDGE  questioned the  total dollar  amount of                                                               
grants [in 2025].                                                                                                               
                                                                                                                                
9:08:13 AM                                                                                                                    
                                                                                                                                
ZOE OLSON,  Grants Administration  Manager, Department  of Health                                                               
(DOH),  said  the department  is  administering  $140 million  in                                                               
grants in fiscal year  2025 (FY 25).  In response  to a series of                                                               
follow  up  questions,  she said  the  department  employs  eight                                                               
fulltime  employees  to  administer  those  grants.    Typically,                                                               
grants are made on a 3-year  cycle and renewed on an annual basis                                                               
that  follows the  state fiscal  year.   The  department aims  to                                                               
                                                                                                                                
issue the grant awards on  July 1and  within the following month,                                                               
fully  execute   the  grant  agreement  and   issue  the  initial                                                               
payments.                                                                                                                       
                                                                                                                                
REPRESENTATIVE RUFFRIDGE  asked how  many grants are  applied for                                                               
in a fiscal year.                                                                                                               
                                                                                                                                
MS. OLSON said  on a given fiscal year,  the department processes                                                               
the applications for  grants in either a continuation  year or at                                                               
the start  of a new  3-year cycle.   Currently, this  year, there                                                               
are approximately 440 awards spread across 80 grant programs.                                                                   
                                                                                                                                
REPRESENTATIVE RUFFRIDGE questioned what's causing the delay.                                                                   
                                                                                                                                
MS.  OLSON  said the  proposed  PCNs  would  help build  out  the                                                               
accounting staff's  capacity.  She  shared her belief  that there                                                               
are two primary reasons for delays: logistics and communication.                                                                
                                                                                                                                
9:15:58 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE RUFFRIDGE  said the fiscal notes  seem to indicate                                                               
that it's the accounting, not  logistics or communication, that's                                                               
causing the delays.  He asked  how hiring 6 new accountants would                                                               
help with the logistics and communication.                                                                                      
                                                                                                                                
MS.  HALLORAN said  current staff  are "maxed  out" and  have too                                                               
many  things  to  balance.    She  shared  an  example  and  said                                                               
accounting  staff  is  needed  to  more  effectively  manage  the                                                               
department's budget  so payments can  be timely.  She  added that                                                               
efficiencies  are needed  to  effectively anticipate  forthcoming                                                               
costs that the department has obligated itself to.                                                                              
                                                                                                                                
CO-CHAIR HIMSCHOOT  reiterated tha  the goal  is not  to generate                                                               
interest, but to bring payments in  on time and lesser the impact                                                               
on operations.                                                                                                                  
                                                                                                                                
9:19:34 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  HOLLAND   sought  to  clarify  whether   the  new                                                               
accounting  positions are  to  supplement  an accounting  section                                                               
that is fully staffed or vacant positions.                                                                                      
                                                                                                                                
MS.  HALLORAN said  turnover impacts  DOH  greatly and  vacancies                                                               
vary by division.                                                                                                               
                                                                                                                                
MS. OLSON  conveyed that  there are open  positions in  the grant                                                               
team; however, they play a different role than the accountants.                                                                 
                                                                                                                                
9:23:25 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  PRAX  asked  whether   the  bill  is  asking  the                                                               
department to do  something that can't be done  and whether there                                                               
is  an alternative  way  to  do this  aside  from  putting it  in                                                               
statute.                                                                                                                        
                                                                                                                                
MS. HALLORAN  answered yes,  the department  is looking  at other                                                               
solutions,  such as  the launch  of the  Parascope system,  which                                                               
helps procurement  on the front  end by standing up  and tracking                                                               
grants.   The end goal is  to integrate the system  with the IRIS                                                               
accounting system to  streamline the work and  link the contracts                                                               
and grants  sections.   The department  is also  in collaboration                                                               
with two  other departments to  purchase a new grant  system with                                                               
the hope  of integrating  it with the  accounting system  to help                                                               
streamline processes and improvements.                                                                                          
                                                                                                                                
9:27:43 AM                                                                                                                    
                                                                                                                                
CO-CHAIR  HIMSCHOOT inquired  about Alaska  Department of  Fish &                                                               
Game's (ADF&G's) zero fiscal note.                                                                                              
                                                                                                                                
9:28:18 AM                                                                                                                    
                                                                                                                                
BONNIE   JENSEN,   Administrative   Services   Director,   Alaska                                                               
Department of Fish & Game  (ADF&G), said the department submitted                                                               
a  zero  fiscal note  because  it's  difficult to  determine  why                                                               
contract payments were  late.  She further noted  that ADF&G does                                                               
not  have  granting  authority,  so  payments  are  strictly  for                                                               
contractual agreements.                                                                                                         
                                                                                                                                
CO-CHAIR HIMSCHOOT asked  Ms. Lager to explain  the Department of                                                               
Commerce, Community & Economic Development (DCCED) fiscal note.                                                                 
                                                                                                                                
9:29:31 AM                                                                                                                    
                                                                                                                                
HANNAH   LAGER,  Director,   said  the   DCCED  fiscal   note  is                                                               
indeterminate at this time because  it's hard to determine future                                                               
impact and  how to resolve  it.   The change in  revenue reflects                                                               
the  advances in  Section  3  of the  bill,  which discusses  the                                                               
advances of grants to named  recipients resulting in a small loss                                                               
of interest to the general fund (GF).                                                                                           
                                                                                                                                
REPRESENTATIVE PRAX  asked whether there is  an internal standard                                                               
for paying on time.                                                                                                             
                                                                                                                                
MS. LAGER  answered yes, the  goal is  to pay invoices  within 30                                                               
days  based on  both statutory  and Alaska  Administrative Manual                                                               
guidance.   In response to a  series of follow up  questions, she                                                               
explained  that  DCCED  has  made  some  shifts  to  ensure  that                                                               
invoices come to shared inboxes  where multiple people can access                                                               
them, and a shift to procurement  cards so that payments are made                                                               
on the front end and reconciled on the back end.                                                                                
                                                                                                                                
9:32:21 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  PRAX  posed the  same  questions  to Ms.  Jensen,                                                               
asking  whether   ADF&G  has  performance  measures   for  timely                                                               
payments  and  whether  the  percentage   of  late  payments  are                                                               
tracked.                                                                                                                        
                                                                                                                                
MS. JENSEN agreed that invoices should  be paid within 30 days of                                                               
receipt and that invoices are difficult to track.                                                                               
                                                                                                                                
9:34:13 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE RUFFRIDGE asked for  the total grant dollar amount                                                               
in contracts  within Department of  Military &  Veterans' Affairs                                                               
(DMVA), how  its administered, and  how four new  positions would                                                               
help.                                                                                                                           
                                                                                                                                
9:35:28 AM                                                                                                                    
                                                                                                                                
ANGELA LAFLAMME,  Legislative Liaison,  Department of  Military &                                                               
Veterans'  Affairs, explained  that  outside of  the Division  of                                                               
Homeland  Security  and  Emergency   Management,  the  Office  of                                                               
Veterans  Affairs manages  grants  with no  late payment  issues.                                                               
For   regular  contracting   and  bill   pay,  the   same  30-day                                                               
procurement standard  is followed  per the  Alaska Administrative                                                               
Manual  with established  inboxes  for  invoices and  procurement                                                               
cards for  timely payments of  utility bills  and reconciliation.                                                               
She discussed  the administration  of federal and  state disaster                                                               
declaration funding,  which is managed  by a small team  of seven                                                               
in the grant administration section.   In response to a follow up                                                               
question from  Representative Ruffridge,  she confirmed  that the                                                               
new positions would  be proactive rather than  reactive and would                                                               
allow the  department to process  payments on the front  end more                                                               
timely.                                                                                                                         
                                                                                                                                
9:40:34 AM                                                                                                                    
                                                                                                                                
CO-CHAIR HIMSCHOOT announced that HB 133 was held over.