04/06/1998 01:30 PM House FIN

HOUSE BILL NO. 400                                                             
                                                                               
"An Act combining parts of the Department of Commerce                          
and Economic Development and parts of the Department of                        
Community and Regional Affairs by transferring some of                         
their duties to a new Department of Commerce and Rural                         
Development; transferring some of the duties of the                            
Department of Commerce and Economic Development and the                        
Department of Community and Regional Affairs to other                          
existing agencies; eliminating the Department of                               
Commerce and Economic Development and the Department of                        
Community and Regional Affairs; relating to the                                
Department of Commerce and Rural Development; adjusting                        
the membership of certain multi-member bodies to                               
reflect the transfer of duties among departments and                           
the elimination of departments; and providing for an                           
effective date."                                                               
                                                                               
Representative Kohring spoke in support of HB 400.  He                         
maintained that HB 400 would save the state money by merging                   
the Department of Community and Regional Affairs and the                       
Department of Commerce and Economic Development.  He                           
emphasized that both departments are economically related.                     
The merger would eliminate one of the commissioner's                           
offices. He stated that the legislation would save                             
approximately $1,054 million dollars and cost $192 thousand                    
dollars to implement.  He asserted that there would be                         
minimal costs for moving personnel.  Personnel would remain                    
in place for the most part.  He maintained that functions                      
would remain in tact.  He provided members with information                    
showing overlapping functions of the two departments and a                     
chart demonstrating how the new Department of Commerce and                     
Rural Development would be setup (copy on file).   There                       
would be four Divisions: Rural Affairs Division, Statewide                     
Economic Development Division, Division of Administration,                     
and Independent Agencies.  Independent Agencies would be                       
divided into Corporations and Regulatory.  The Regulatory                      
component would be divided into Occupational Licensing,                        
Insurance, Alaska Public Utilities Commission, and                             
Investment Division.                                                           
                                                                               
Representative Kohring explained that childcare programs                       
would be transferred to the Department of Health and Social                    
Services.  Job related programs would be transferred to the                    
Department of Labor.                                                           
                                                                               
Representative Kohring noted support for the legislation.                      
He referred to a letter by Don Tanner, former Deputy                           
Commissioner, Department of Community and Regional Affairs                     
(copy on file).  Mr. Tanner wrote in support of the                            
legislation.   He read from a letter by Don Eller in support                   
of the legislation (copy on file).  Mr. Eller stated that HB
 promotes a unified and comprehensive system for rural                      
development.                                                                   
                                                                               
Representative Kohring reiterated that the legislation would                   
allow reductions without eliminating programs.  He                             
maintained that government would be restructured to deliver                    
services more efficiently.  He added that the legislation                      
would result in more than $1 million dollars in annual                         
savings for a one-time cost.                                                   
                                                                               
MIKE KRIEBER, STAFF, REPRESENTATIVE KOHRING added that the                     
legislation would move the Office of International Trade to                    
the Governor's Office.                                                         
                                                                               
JEFF BUSH, DEPUTY COMMISSIONER, DEPARTMENT OF COMMUNITY AND                    
REGIONAL AFFAIRS stated that the Administration is opposed                     
to the legislation.  He emphasized that the agencies'                          
functions are very different and should not be merged.  He                     
maintained that the legislation would dilute the Department                    
of Commerce and Economic Development's mission to promote                      
commerce and economic development.                                             
                                                                               
Mr. Bush observed that there is a wide difference in the                       
estimated fiscal impact between the Department and the                         
Sponsor.  The legislation estimates reductions from                            
elimination of several Administrative Services Division                        
employees.  He stated that these cuts are unrealistic.  The                    
sponsor fiscal note assumes a minimum amount of movement of                    
personnel.  He stated that this is not consistent with the                     
goal and purpose of the legislation.  If the goal is to                        
allow persons with similar functions to work together they                     
need to be located in the same building.  One time moving                      
estimates by the Department are based on Department of                         
Administration's analysis.  The Administration's estimate is                   
approximately ten times the estimate by the Sponsor.  The                      
Administration maintains that the cost of the legislation is                   
greater than short-term savings.                                               
                                                                               
REMOND HENDERSON, DIRECTOR, DIVISION OF ADMINISTRATIVE                         
SERVICES, DEPARTMENT OF COMMUNITY AND REGIONAL AFFAIRS                         
agreed with the comments of Mr. Bush.  He added that there                     
would be an adverse impact on rural Alaska.  He emphasized                     
that the Department of Community and Regional Affairs is                       
small and efficient.  He asserted that there would be an                       
impact on delivery of programs transferred to larger                           
agencies.  He expressed concern with the elimination of some                   
of the administrative positions.  A bottleneck would be                        
created by the reduction.  The legislation does not contain                    
a transition period.  He observed that other mergers and                       
consolidations have taken a period of time to accomplish.                      
                                                                               
Representative Kelly questioned if the fiscal note has                         
changed from the one attached to a similar bill that he                        
introduced two years ago.  Mr. Bush replied that moving                        
costs in the fiscal note have increased.                                       
                                                                               
HB 400 was HELD in Committee for further consideration.