04/24/1998 09:00 AM House FIN

HOUSE BILL NO. 315                                                             
                                                                               
"An Act relating to operating appropriations for annual                        
maintenance and repair and periodic renewal and                                
replacement of public buildings and facilities; and                            
providing for an effective date."                                              
                                                                               
DENNY DEWITT, STAFF, REPRESENTATIVE MULDER noted that HB 315                   
is an attempt to change the way the State budgets                              
maintenance.  The legislature creates a maintenance and                        
operations budget in addition to the program budget and the                    
capital budget.  The Task Force found that there is a                          
difference in opinion regarding how budgetary decisions are                    
made and cause deferred maintenance.  Currently, funding for                   
programs and building maintenance are contained in the same                    
budget.  Subcommittees discuss the balance of the two                          
components.  Program managers face situations where they                       
must chose between operating items and deferred maintenance,                   
such as trimming back a program or painting a building.  In                    
such a scenario a program manager would probably chose not                     
to paint the building, while a facilities manager would                        
probably opt to paint the building.  The Task Force                            
recommended that the two be separated.  The Administration                     
would articulate the need for deferred maintenance.  The                       
need would be debated and there would be a clear indication                    
of the amounts for program management and operations and                       
facility maintenance.  He stressed that the legislation's                      
intent is to focus the issue of maintenance in terms of                        
state agencies, the Alaska Court System and the University                     
of Alaska.                                                                     
                                                                               
Co-Chair Therriault questioned how the maintenance budget                      
would be prevented from becoming a capital budget.  Mr.                        
DeWitt emphasized that funding is for the operation side.                      
Co-Chair Therriault stated that "replacement" implies                          
capital improvements.  Mr. DeWitt agreed that "replacement"                    
could probably be removed.                                                     
                                                                               
Representative Davies questioned if major renewal and                          
replacements would be in the capital budget.  He stressed                      
that the capital budget is not as systematic an approach as                    
the operating budget.  He asked if there would be three                        
items in the appropriation bill: operations, maintenance,                      
and renewal and replacement.   Mr. DeWitt explained that the                   
intent was for all three to be included as one item.                           
                                                                               
Representative Martin asserted that the State should commit                    
itself to a line item for annual maintenance of 3 to 4                         
percent of the facility.                                                       
                                                                               
In response to a question by Representative Grussendorf, Co-                   
Chair Therriault observed that the definition of "renewal"                     
is included on page 2.                                                         
                                                                               
Representative Davis spoke in support of separating                            
maintenance from operational expenses.                                         
                                                                               
Mr. DeWitt stated that the Task Force concluded that there                     
should be separate components in the appropriation bill for                    
deferred maintenance and operation, as opposed to two                          
separate appropriation bills.                                                  
                                                                               
Co-Chair Therriault questioned if maintenance would be                         
highlighted in a way that would show that the cost of                          
maintenance is going up and that replacement would be                          
expected.  Mr. DeWitt stated that he expected that                             
maintenance would be highlighted in a way that would show                      
the increasing cost.  He added that it would also show if                      
maintenance had been under-funded.  If there are significant                   
problems with a building it could be demonstrated that the                     
facility was under-funded or that management did not                           
properly maintain the building.  Results based budgeting                       
would be used to identify if the deferred maintenance                          
problem is being solved or created.                                            
                                                                               
Mr. DeWitt observed that the intent is to limit replacement                    
to major, worn-out building components as opposed to the                       
building itself.                                                               
                                                                               
Representative Davis observed that it is a systems or                          
component replacement as opposed to a building replacement.                    
                                                                               
Representative Martin stressed the need for proper insurance                   
programs and noted that a good deferred maintenance program                    
would reduce insurance costs.  He stressed that agencies                       
need to be able to save for larger maintenance needs.                          
                                                                               
Representative Davies observed that there is a struggle                        
between major repairs and replacement.                                         
                                                                               
(Tape Change, HFC 98 - 124, Side 2)                                            
                                                                               
Representative Davies stated that it is generally understood                   
that the legislation refers to smaller items that are                          
important to be replaced on a systematic basis to prevent                      
deferred maintenance.                                                          
                                                                               
Representative Grussendorf observed that the use of                            
"replacement" in the title creates a problem.                                  
                                                                               
JACK KREINHEDER, OFFICE OF MANAGEMENT AND BUDGET, OFFICE OF                    
THE GOVERNOR observed that the Administration supports the                     
intent of the legislation.  The Administration is concerned                    
with how effective the legislation would be at achieving its                   
goal.  He expressed concern that agencies would lose                           
flexibility.  He stressed that funding has been shifted from                   
operating expenses to cover maintenance.  He observed that                     
maintenance funding has been limited.  He stated that                          
renewal and replacement of agency components is an                             
appropriate element of the operating budget.                                   
                                                                               
Mr. Kreinheder observed that the Director of the Office of                     
Management and Budget put out a memorandum directing state                     
agencies to account for facility expenditures on a building                    
by building basis.  He questioned if expenditures should be                    
in a separate appropriation.  He observed that agencies need                   
a way to save up for major maintenance that is only needed                     
every 10 to 15 years.  Appropriations lapse every year.  He                    
recommended the Committee consider HB 463, which would                         
establish a rental fund that would allow money to be                           
accumulated for major maintenance.                                             
                                                                               
In response to a question by Representative Martin, Mr.                        
DeWitt observed that the Task Force did not address                            
insurance coverage.  The state of Alaska is self-insured.                      
                                                                               
Representative Mulder MOVED to amend the title to renewal                      
and replacement "for components" of public buildings.  Co-                     
Chair Therriault questioned if the language should be                          
included in the text.  Representative Mulder amended his                       
amendment to include revisions in the text.  There being NO                    
OBJECTION, it was so ordered.                                                  
                                                                               
Representative Mulder MOVED to report CSHB 315 (FIN) out of                    
Committee with the accompanying fiscal note.  There being NO                   
OBJECTION, it was so ordered.                                                  
                                                                               
CSHB 315 (FIN) was REPORTED out of Committee with a "do                        
pass" recommendation and with two zero fiscal notes, one by                    
the Office of the Governor and one by the Department of                        
Education, both dated 2/25/98.