Legislature(2025 - 2026)GRUENBERG 120
05/17/2025 01:00 PM House STATE AFFAIRS
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| Audio | Topic |
|---|---|
| Start | |
| HB4 | |
| HB1 | |
| HB133 | |
| HB82 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 82 | TELECONFERENCED | |
| += | HB 133 | TELECONFERENCED | |
| += | HB 100 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | HB 4 | TELECONFERENCED | |
| += | HB 1 | TELECONFERENCED | |
HB 133-PAYMENT OF CONTRACTS
4:06:14 PM
CHAIR CARRICK 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." [Before
the committee was CSHB 133(CRA).]
CHAIR CARRICK remarked to the committee that she would like to
act on CSHB 133(CRA) early in the next legislative session. She
remarked that several testifiers were available to address any
questions or concerns regarding contract payments.
4:07:43 PM
CHAIR CARRICK, in response to Representative Vance, clarified
that the version of the bill before the committee was the one
that came out of the previous committee of referral.
4:09:05 PM
REPRESENTATIVE HIMSCHOOT, as prime sponsor, recommended that the
committee hear from invited testifiers, who could speak about
any issues with the proposed legislation.
4:09:36 PM
REPRESENTATIVE VANCE said that she had a question for the Alaska
Department of Fish & Game (ADF&G). Referring to page 4 of the
bill, regarding federal fish disaster funding, she asked whether
this funding would constitute a grant or be considered cash
assistance to an individual. She noted her reference was to
language found on page 4, [line 22], [subparagraph] (H): "state
funding that is required annually and is calculated through a
formula set in statute". She asked whether the proposed
legislation would impact federal fishery disaster funding that
comes into Alaska.
4:10:47 PM
BONNIE JENSEN, Director, Division of Administrative Services,
Alaska Department of Fish & Game, responded that the proposed
legislation would impact all federal pass-through funding that
ADF&G receives. She believed that fishermen receive funds
directly, but she would follow up with a concise answer.
REPRESENTATIVE VANCE requested a follow-up answer to the
committee during the interim regarding these designations. She
said that the proposed bill suggests that a grant does not
include cash assistance to an individual. She wanted to know
the legal stipulations associated with the distinctions between
cash assistance and grant funding. She did not know the legal
definitions pertaining to this. She said some of her fishing
constituents felt that their funds were not delivered in a
timely manner.
MS. JENSEN responded that ADF&G would be happy to follow up to
clarify the distinction.
CHAIR CARRICK told Ms. Jensen that if she had any additional
comments regarding the bill, the committee would be happy to
hear them.
4:15:07 PM
REPRESENTATIVE HOLLAND said he anticipates that the committee
will be looking into many of these issues during the interim,
and then resuming discussions in the next legislative session.
He said that understanding the workflow dynamic regarding
payment processing was imperative to understanding the current
payment issues. He said that he hoped that the upcoming annual
budget would recognize this issue and efforts could be made to
address prompt payment issues.
REPRESENTATIVE HOLLAND wondered whether these prompt payment
complications were department to department or whether there
were systematic issues related to software use and tools used in
the workflow. He understood that some departments were actively
taking steps to improve their workflow. He said that
understanding what steps of improvement were in place, and
developing plans were an important area of consideration during
the upcoming interim period.
4:17:44 PM
REPRESENTATIVE STORY said that it would help to have some
baseline data available for discussions in the upcoming
legislative session, to better understand payment dynamics. She
remarked on the importance of understanding late fees and
interest associated with delayed payments. She raised concern
about the 10.5 percent interest rate associated with late
payments, and that it would be good to know the extent of the
interest fees. She said that understanding this would better
help address the nonprofit and tribal entities sector.
4:18:44 PM
REPRESENTATIVE HIMSCHOOT invited her staff, Ella Lubin, to
address Representative Story's concern regarding late payment
fees and interest.
4:19:37 PM
ELLA LUBIN, Staff, Representative Rebecca Himschoot, Alaska
State Legislature, on behalf of Representative Himschoot, prime
sponsor of CSHB 133(CRA), responded that there was not adequate
information to fully address Representative Story's question
regarding late payment fees. She remarked that before
introducing the bill, Representative Himschoot's office reached
out to the Department of Transportation & Public Facilities
(DOT&PF) regarding work with private contractors for public
works projects. She reminded the committee that private
contractors are entitled to prompt payments as required by
Alaska Statute (AS). She said that the office has not heard
much from private contractors, but there were anecdotal stories
regarding late payments. She explained that it was difficult to
compare the private sector to nonprofit, tribal, and municipal
entities because of differences in cash reserves.
4:21:10 PM
REPRESENTATIVE HIMSCHOOT remarked that some private contractors
are hesitant to answer questions regarding late payments, since
they don't want to get in trouble with the State of Alaska
(SOA). She said that information has been difficult to acquire.
4:21:48 PM
REPRESENTATIVE VANCE asked Representative Himschoot whether she
has looked at any potential clogs regarding federal pass-through
funding with various SOA departments. She was thinking about
[the Fishery Improvement to Streamline untimely regulatory
Hurdles post Emergency Situation] (FISHES) Act passed by
Congress, and regarding federal fishery disaster funding, it was
determined that this money touched the federal Office of
Management and Budget (OMB) at least fifteen times. She said
that this was a clog regarding getting funds to recipients. She
said that some fishermen have waited up to eight years to
receive funding. She said that many fishermen were mad at SOA,
but when tracing the funding stream, the federal OMB was an area
of clogging. She said that the FISHES Act was cutting down the
funding delivery timeline by identifying the bureaucratic clogs.
REPRESENTATIVE VANCE asked Representative Himschoot whether,
given her research on this, she has been able to determine where
the clogs might be to make changes in statute or regulation.
MS. LUBIN answered that the Department of Health (DOH) could
address this type of question, given its experience working with
Medicaid reimbursements and federal money. Much of this passes
through SOA to support nonprofit groups.
4:24:10 PM
PAM HALLORAN, Assistant Commissioner, Central Office, Finance
and Management Services, Department of Health, said that
Medicaid payments for the most part were efficient, with
automatic processes in place. She said there are times when
vendors use contractors that can cause issues; however, she
opined that Medicaid payments were fairly streamlined.
4:25:11 PM
REPRESENTATIVE VANCE said that she was looking at the six fiscal
notes from DOH, and each one requested an additional staff
member to assist with Medicaid processing. She said that these
obligations have always existed for the department, and asked
whether there was anything else other than "manpower" that might
be considered when building a more efficient process.
MS. HALLORAN responded that when the DOH evaluated their fiscal
model, they primarily looked at the timeline from the invoice
date to transaction date. This did not include specific factors
for Medicaid. She said the volume of work related to payments
within the department was substantial. Since COVID-19, DOH has
experienced an overall capacity issue. She said that staff have
been responsible for receiving invoices, approving them, and
processing payments. She said that during the pandemic many
employees were burned out.
MS. HALLORAN remarked that DOH was onboarding staff, training
them, and working to rebuild its former operational capacity.
She said that contracts, excluding Medicaid, account for
approximately $575 million and grants account for around $145
million. She said that compared to two years ago, the
department is in a much better position with both promising
prospects and improvements.
MS. HALLORAN said that DOH is considering several initiatives.
The first is examining how the department can better leverage
its accounting system to improve workflow. Additionally, the
department is exploring the procurement of a new grant
management system, like ones used by other departments. She
recognized the challenges associated with different systems
utilized across agencies. Furthermore, the department recently
implemented a system called Periscope, which supports contract
visibility and management within the department.
REPRESENTATIVE VANCE understood that DOH is responsible for many
services, but also recognized that it is associated with the
most delays. She asked whether the department had a goal it was
trying to accomplish that would increase grant distribution and
turnover.
MS. HALLORAN responded that the department did have a goal. She
said that currently the department does not see grants as much
of a problem, since most DOH grants are advanced. She said it
takes around 11 days from the initial grant agreement to process
payment. She said the department is working on both
communication and training.
4:31:38 PM
REPRESENTATIVE HIMSCHOOT asked Ms. Halloran whether the extended
effective date proposed under CSHB 133(CRA) would give the
department enough time to come into compliance with the 30-day
expectation.
MS. HALLORAN responded that she appreciated the new effective
date, which would give the department time to acquire new staff,
onboard them, and provide training. She said that the
department manages over two hundred different programs, and
training required a certain degree of specification.
REPRESENTATIVE HIMSCHOOT asked Ms. Halloran whether she felt
that the department needed more staff, or if it could meet the
30-day requirements given the extended effective date and the
current departmental budget. Furthermore, she asked for
elaboration on the work from home policy available to department
employees.
MS. HALLORAN responded that the department did have staff
working from home. However, none worked from home full-time.
She said the department prefers that staff in non-probationary
status work in office full-time, but hybrid schedules were
available to employees that pass the probationary period and
receive supervisory permission.
MS. HALLORAN said that the department would need to look at the
new effective date, and check on both funding and staffing to
ensure that the timeline could be met.
4:35:05 PM
REPRESENTATIVE STORY remarked that it was difficult to assess
the extent of payment issues, since the committee did not hear
from any private contractors about what issues they may be
experiencing. She asked where there might be data that could
illustrate payments better, including any penalties.
4:36:05 PM
ERIC DEMOULIN, Finance Director, Division of Finance, Department
of Administration, responded that he could get some baseline
data prepared to illustrate payment dynamics. He explained that
in the state's accounting systems, there is a lot of variability
in terms of how payments are made across the state, because each
agency has the authority to spend funds. When looking at the
accounting system, he remarked that there are a lot of different
ways that agencies conduct their internal processes that best
fit their business. He noted that the invoicing system had a
universal field that could have data pulled for illustration.
He informed the committee that there may be potential
shortcomings to any pulled data. He said this is important to
understand when building efficiencies and establishing baseline
data, especially with grants.
MR. DEMOULIN said that there are several approaches that can be
taken to extrapolate grant-related information. He explained
that most grants managed across the state are tied to the
Department of Administration and tracked through chart-of-
account elements within the accounting system. He said that by
leveraging these elements, expenditures can be traced back to
their posting points and corresponding payments. He said that
while the technical details are complex, the key point is it can
paint a clear picture of grant activity in the state.
MR. DEMOULIN remarked that it was critical to outline any
deficiencies in the data used as a starting point. Doing so
would allow for better informed recommendations when improving
the processes. This effort should be viewed holistically, with
the goal of strengthening the state's overall approach to grant
management and reporting.
REPRESENTATIVE STORY asked whether there would be a column that
could identify late payment penalties.
MR. DEMOULIN responded that when looking at the state's
accounting system, there were object codes that could highlight
expenditure type, this could illustrate penalties or fines. He
explained that the codes were freeform fields and, as a result,
the integrity of any object code was not guaranteed and would
need careful review.
MR. DEMOULIN explained that when paying a vendor, the system
typically requires the use of multiple object codes to identify
costs. He said if an invoice is late and includes penalties,
the payment should be itemized to distinguish between service
expense and the fine. He said that without these distinctions,
the entire payment could be recorded under a single category,
which would obscure the true nature of the expenditure.
REPRESENTATIVE STORY asked whether Mr. DeMoulin had a sense of
how large the problem was regarding late payments from SOA.
MR. DEMOULIN responded that anecdotally he could not speak about
the issue. However, he noted that when looking at late
payments, there's a variety of reasons that they occur across
different state agencies. He pointed out the previous
testimonies regarding employee turnover and departmental
training. He said that until preliminary figures are collected,
he could not fully speak to the extent of the late payment
problem.
4:41:23 PM
CHAIR CARRICK remarked that a lot of the private contracts that
SOA pays to companies occur within the Department of Labor &
Workforce Development (DLWD), and the Department of
Transportation & Public Facilities (DOT&PF).
CHAIR CARRICK wished to understand what approach would be most
appropriate for payments. She inquired about whether most
private contractor payments were made in 30 days, and how
frequently payments lapsed past the 30-day period.
MR. DEMOULIN responded that he has worked on the finance side of
things for SOA for quite some time. He noted that he worked at
DLWD as a division operations manager for about a year, and then
as a finance officer for DOH. He said that he can speak only
about these experiences.
MR. DEMOULIN said SOA is always working toward the goal of
paying everybody as quickly as possible. He said that the
current method of payment is something that he does not view as
a deterrent. He said that he has never seen current methods
prioritize one payment over the other. He said the intent
always has been timely payment prioritization. He said that
delays are often caused by underlying issues.
CHAIR CARRICK asked for clarification of how frequent payments
to private contractors lapse.
MR. DEMOULIN responded that preliminary numbers would need to be
run to give a concise answer.
CHAIR CARRICK said that she wanted to hear testimony from Dan
DeBartolo with DLWD, since the department is a bit smaller and
he may have some anecdotal data regarding the extent of payment
lapses with private contractors.
4:45:20 PM
DAN DEBARTOLO, Director, Central Office, Division of
Administrative Services, Department of Labor and Workforce
Development, responded that when looking at the fiscal note
submitted by DLWD, there was indication that the department
experiences approximately $4,200 in interest charges from late
payments. He said that he extrapolated that information by
looking at the point in time when the department was late paying
invoices to contractors. He approximated that the department is
around 95 percent effective, accruing around $400 a month in
penalty fees.
MR. DEBARTOLO noted that as Mr. Demoulin had indicated, the
departments strive to meet 30-day deadlines for payment. He
said he does not believe that there is a systemic issue. He
said when using a first-in, first-out approach, sometimes people
responsible at the back end may be out and unable to process
payments. He said that departments can be caught in this type
of situation.
MR. DEBARTOLO said that at DOLWD, he did not see that anything
was being solved except for continuing to put forward the best
effort, as indicated on the fiscal note. He believed the
provisions are reasonable and every contractor should expect
payment within 30 days of submitting an invoice.
MR. DEBARTOLO explained that one concern with private
contractors is that DOLWD has entire divisions that are almost
100 percent federally funded. He said that if the state is
required to pay penalties, SOA cannot use federal funds to pay
penalties.
CHAIR CARRICK asked Mr. DeBartolo whether he could provide a
contrast of private contractor payments with non-private
entities included in CSHB 133(CRA).
MR. DEBARTOLO responded that grants are interesting, and many of
them went through DLWD's Workforce Investment Board and the
department's grant section. He explained the "reappropriation
period" occurs when a fiscal year ends and a new one begins,
typically around July 1 to the end of August. He discussed the
dynamics associated with closing out grants from the previous
fiscal year. He mentioned that many grantees reapply annually,
and if there are any performance issues, they are placed on
performance improvement plans. He said that this can affect
grant dynamics.
MR. DEBARTOLO noted for DLWD, often grant payments are not made
in the first 30 to 45 days of the new fiscal year. He explained
that grantees first submit requests for payments, typically
monthly or quarterly. He said that when getting requests during
the reappropriation period, the department often cannot process
grants quickly enough, which consequently can accrue interest
for SOA. He explained that the transition during the
reappropriation period can be challenging but otherwise the
department remains timely throughout the rest of the fiscal
year.
4:50:07 PM
REPRESENTATIVE MCCABE remarked that when looking through the
DHSS fiscal notes, there were a couple of things that he had not
seen before. He said that a bill with six different fiscal
notes was interesting. He remarked that looking at the fiscal
notes, he thought the department understood how far in arrears
they were, since they were able to calculate how much money it
would cost them given the 10.5 percent interest rates for late
payments. He said that if all the fiscal notes came to
fruition, and the department was not appropriated $909,000 for
the increased staff, then there could be as much as $1.55
million in interest payments. He described late payment
averages amongst departmental services: 73-day average for
department support services; 42-day for healthcare services; 88-
day for public assistance; 43-day for public health; 59-day for
senior disabilities; and 57-day for behavioral health. He said
that these are only averages and he would like to know what the
longest delay was. He said that an 88-day delay for public
assistance is a long time for a single mom with three kids. He
reiterated that the fiscal notes concerned him, and this was
something that needed further investigation.
4:52:42 PM
CHAIR CARRICK remarked that the committee needed to understand
the correlation between vacancy rates and timely processing of
payments. She said that the correlation between length of time
an employee had been staffed and late payment was worth
consideration as well.
4:53:24 PM
REPRESENTATIVE HIMSCHOOT offered to the committee that she
planned to work on the proposed legislation during the interim
period. She said that the departments have been responsive and
intend to solve any issues.
4:53:53 PM
REPRESENTATIVE HOLLAND remarked that he learned about some
process improvement projects currently underway in SOA from
previous meetings in other committees. He said that while many
of these projects focused on process improvements, they do not
pertain to grants but may be worth looking consideration.
REPRESENTATIVE HOLLAND said that rather than doubling down and
hiring more people to "Band-Aid" a process that is not working
well, there may be other approaches focused on process
improvement, efficiency building, and better technology. He
said there have been previous discussions regarding the
possibility of integrating new technology tools to ease the
burden of some "chronically unfilled" SOA positions. He asked
whether there was a current project that could illustrate
process improvement and whether it could help the committee
think differently about the issue.
MR. DEMOULIN responded that it was an open-ended question, but
he affirmed that there is an opportunity to leverage some
technologies. He echoed Ms. Halloran's previous comments,
mentioning both Periscope and looking at another grant
management system while also collaborating with other
departments.
MR. DEMOULIN remarked that when looking at the process of
approval or ensuring eligibilities for grantees, there is a lot
of manual work involved. He said that streamlined processes
could be built by leverages systems. For example, within a
grant management system, if robust enough, grant managers
working for SOA could authorize and validate that work was
completed and then process reimbursements. He said the system
could talk directly to accounting for payment processing rather
than rely on physical data entry and routing. He said this
would eliminate some current workflows.
MR. DEMOULIN said that when looking at building efficiencies
across the state, it has been mentioned that various agencies
have different grant management systems. He said each agency
collaborates with federal partners in various manners. For
instance, Federal Emergency Management Agency (FEMA) grants go
to SOA's [Division] of Motor Vehicles (DMV); health grants from
the U.S. Department of Homeland Security (DHS) go to SOA's DOH;
and U.S. Department of Transportation grants go to SOA's DOT&PF.
He said that these agencies are responsible for managing and
receiving funds, with many grant programs procured based on
departmental needs rather than through a statewide procurement
system. He said that SOA has received federal funds for many
years, and some of the operational processes have existed for
quite some time.
MR. DEMOULIN said that SOA could look at building potential
synergies and shared technologies. He understood that some
grant management systems are specifically tailored depending on
grant type. He said that given conversations with other
departments, it may be worthwhile attempting to build
interdepartmental synergies.
4:59:45 PM
REPRESENTATIVE VANCE appreciated the sponsor of the proposed
legislation. She said that when first looking at the proposed
legislation, it seemed like a simple compliance bill, but it was
not. She mentioned that audits completed by the Joint Committee
on Legislative Budget & Audit were a great resource for looking
at recommendations. She noted that the Department of
Administration (DOA) had made considerable strides for the year,
and strides that SOA had been waiting for. She remarked on the
challenges associated with staffing turnover, including in her
experience working at the legislature. She said that every
department has seemed to face this challenge since the COVID-19
pandemic.
REPRESENTATIVE VANCE asked Mr. Demoulin whether there has been
any success in raising salaries for certain positions to acquire
someone who brings more experience, and if it has provided value
to the department regarding timeliness and efficiency. She also
said that perhaps the jobs were unique enough that it may not
matter, since there may be a learning curve regardless.
MR. DEMOULIN responded that both factors are at play. He said
that organizations have proprietary systems, and even given
somebody with experience there would be learning curves.
However, more experienced hires may learn these systems faster.
He opined that when looking at salaries, it was important not to
overpay but, at the same time, pay fairly.
MR. DEMOULIN said that regarding the different systems across
the state, there is an additional cost for differences.
However, he said that if SOA had a single system, there would be
a new learning curve for state staff.
REPRESENTATIVE VANCE remarked that hiring new people and
training them often has higher costs than paying experienced
people more. She remarked that finding this balance was
crucial.
5:05:16 PM
REPRESENTATIVE MCCABE said that in the interest of brevity, he
would hold his additional questions.
5:05:36 PM
REPRESENTATIVE STORY thanked those who were available for
testimony during the committee meeting.
CHAIR CARRICK remarked on directing committee questions to the
bill sponsor's office or the departments. She remarked that the
department personnel have shown a willingness to answer
committee questions, and she wished for the committee to reopen
this legislation during the next legislative session.
CHAIR CARRICK announced that CSHB 133(CRA) was held over.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 1 Testimony Nils Andreassen 5-15-25.pdf |
HSTA 5/17/2025 1:00:00 PM |
HB 1 |
| HB 1 Citizens For Sound Money Follow Up 5-16-25.pdf |
HSTA 5/17/2025 1:00:00 PM |
HB 1 |
| HB 133 Written Testimony Rec'd 5-16-25.pdf |
HSTA 5/17/2025 1:00:00 PM |
HB 133 |
| HB 82 Sponsor Statement Version A.pdf |
HSTA 5/17/2025 1:00:00 PM |
HB 82 |
| HB 82 Ver A.pdf |
HSTA 5/17/2025 1:00:00 PM |
HB 82 |
| HB 82 Sectional Analysis Version A.pdf |
HSTA 5/17/2025 1:00:00 PM |
HB 82 |
| HB 1 Legal Memo Re. Definition of Person.pdf |
HSTA 5/17/2025 1:00:00 PM |
HB 1 |
| HB 1 Conceptual Amendment 3.pdf |
HSTA 5/17/2025 1:00:00 PM |
HB 1 |
| HB 82 Fiscal Note.pdf |
HSTA 5/17/2025 1:00:00 PM |
HB 82 |
| HB 133 Testimony - Toksook Bay 5.16.25.pdf |
HSTA 5/17/2025 1:00:00 PM |
HB 133 |
| HB 133 DCCED-DAS Response to HSTA 5.16.25.pdf |
HSTA 5/17/2025 1:00:00 PM |
HB 133 |
| HB1 RepMcCabe Response to Andressen.5.16.25.pdf |
HSTA 5/17/2025 1:00:00 PM |
HB 1 |
| HB 133 Written Testimony Rec'd 5-19-25.pdf |
HSTA 5/17/2025 1:00:00 PM |
HB 133 |