Legislature(1997 - 1998)
04/29/1998 08:25 AM House FIN
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* first hearing in first committee of referral
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= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
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, Sponsor, 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 related to economic
development. He stressed that the legislation represents a
reengineering of government. He maintained that the
legislation would deliver programs with greater efficiency
and less dollars. The existing program structure would be
retained. Upper management would be reduced.
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.
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.
The merger would eliminate one of the commissioner's
offices. He stated that the legislation would save
approximately $1,054 million dollars and cost $194.4
thousand dollars to implement.
Representative Kohring observed that the Department would be
named the Department of Commerce and Rural Development. He
stressed that the Department of Community and Regional
Affairs would be retained as a division. He pointed out
support for the legislation. He noted that HB 400 was based
on legislation sponsored by Representative Kelly during a
previous session.
Representative Davies maintained that savings would be
accompanied by a reduction in services. He pointed out that
the mission of the Department of Community and Regional
Affairs is not just rural development. It is also the
department of municipal government. He did not think that
the legislation was consistent with constitutional intent.
Representative Kelly suggested that a lot of the
Department's functions are outside of their mission
statement.
Representative Kohring maintained that the majority of the
Department's programs are designed to help develop the
economy of rural Alaska. He noted that the new department
would be the 4th smallest agency.
MIKE KRIEBER, STAFF, REPRESENTATIVE KOHRING noted that the
merged department would have approximately 416 employees.
Representative Kohring stressed that it is better to reduce
upper level personnel than to cut programs.
Representative Davies felt that the issue should be
discussed in a budget subcommittee. He read from Gordon
Harrison's work on the Constitution. The Constitution
states that "an agency shall be established by law in the
executive branch of the state government to advised and
assist local governments. It shall review their activities,
collect and publish local government information, and
perform other duties prescribed by law." Representative
Davies observed that it is the only agency mandated by the
Constitution. Mr. Harrison concluded that its presence
symbolizes the importance of local government and the state
interest in fostering strong local self-government. He
spoke against the legislation.
Mr. Krieber stressed that the new department would still be
focused on rural issues. Local government assistance and
economic development would still occur in the new
department. He maintained that the removal of job training
and childcare would help the focus on local government and
assistance. Representative Davies pointed out that not all
local governments are in rural Alaska.
Representative Kohring asserted that programs would remain
intact under a new management structure.
Representative Davies expressed concern that local
governmental affairs will be missed from the mission
statement.
LAMAR COTTEN, DEPUTY DIRECTOR, DEPARTMENT OF COMMUNITY AND
REGIONAL AFFAIRS spoke in opposition to the legislation. He
stated that the Department does not think that the
legislation achieves any discernible goals in efficiency or
effectiveness. He observed that the new department would
combine international trade, occupational licensing, local
boundary commission, state assessor, and coastal management.
He did not think that there is a duplication of services.
He emphasized that there is coordination of effort. He did
not believe that the estimated cost savings would be
realized. He asserted that the two departments work
together. He maintained that the core mission would be
diluted.
JEFF BUSH, DEPUTY COMMISSIONER, DEPARTMENT OF COMMERCE AND
ECONOMIC DEVELOPMENT agreed that the Department's mission
and services would be diluted. He pointed out that the
legislation would eliminate one of the state of Alaska's two
seats on the Coastal Policy Council. He maintained that
personnel would have to be moved to truly coordinate
efforts. If personnel are not moved the only result would
be the elimination of a commissioner's office and a doubling
of work for the other commissioner.
KEVIN RITCHIE, EXECUTIVE DIRECTOR, ALASKA MUNICIPAL LEAGUE
agreed that duplication should be addressed where it exists.
He stressed that Alaska has a progressive structure for
state government. He maintained that Alaska's local
government is the best in the nation. He stressed that the
system is still evolving. As funding shrinks a strong local
government system becomes more important. He noted the
importance given local government in the Constitution.
Representative Kohring reiterated that the legislation would
save approximately $1,054 million dollars. He noted that
positions would be cut in the commissioner's office.
Mr. Krieber discussed the sponsor fiscal note (copy on
file). He emphasized that relocation costs were reduced due
to a duplication of computer costs. The cost of relocation
was calculated at $444 hundred dollars per employee. He
noted that the legislation would move fewer employees then
prior legislation that was proposed by Representative Kelly.
He maintained that cost savings would be incurred from the
consolidation of job service and childcare programs.
(Tape Change, HFC 98 - 133, Side 2)
Representative Kohring discussed the sponsor fiscal note.
He emphasized that there will be a minimum of relocation.
He maintained that the Department's relocation costs were
inflated.
Representative Davies stated that either there is a real
reason for merging the departments and there is real overlap
or there is no point in the discussion. He disagreed that
administrative positions can be eliminated without paying
attention to their function. He asserted that
administrative personnel are productive and necessary. He
stressed that duplication in management has not been
demonstrated.
Mr. Krieber observed that the Department of Commerce and
Economic Development is in seven different locations. He
emphasized that location is not the same as management
direction. Location in different structures does not
necessarily impede their interaction and synergy. He
observed that email can be used for communication.
TOM LAWSON, DIRECTOR, ADMINISTRATIVE SERVICES DIVISION,
DEPARTMENT OF COMMERCE AND ECONOMIC DEVELOPMENT discussed
the Department's fiscal note (copy on file). He discussed
page 2 of the fiscal note. The fiscal note would retain
administrative staff for the first 24 months. He observed
that workloads would increase while computer systems,
financial information and personnel costs were merged. The
fiscal note recommends that one commissioner and one
secretary are eliminated and one administrative services
directors be downgraded. Personnel rules require that when
a downgraded occurs that the salaries must be matched or
frozen for two years. He discussed moving costs. Moving
costs were estimated at $1,658.4 million dollars. At total
of 253 employees would be moved. He discussed page 4 of the
Department of Commerce and Economic Development's fiscal
note. Staff for the independent agencies would not be
moved. He maintained that there was no duplication on the
computer costs. A halftime position was included to help
with leasing issues.
KEITH GERKEN, DIVISION OF GENERAL SERVICES, DEPARTMENT OF
ADMINISTRATION explained that the estimated moving cost of
$6,100 thousand dollars per employee was based an average of
actual moves. He explained that funding is included in this
amount for a wire to the desktop that connects back to where
a server is located.
Mr. Lawson clarified that the $125 thousand dollar computer
estimate is a net after the cabling costs have been backed
out.
Representative Davies spoke in support of the Department of
Commerce and Economic Development's fiscal note.
Mr. Gerken clarified that personnel of the Department of
Community and Regional Affairs would not fit in the Bank of
America Building. Funding has been included in the Bank of
America purchase for relocation of Department of Commerce
and Economic Development personnel currently located in the
Frontier Building.
Representative Kohring disagreed that personnel would need
to be moved. He felt that the relocation cost of $6,100
thousand dollars per employee is inflated.
Representative Kelly did not dispute the Department's
estimates. He felt that savings would come in future years.
He emphasized that the merger would provide a more
streamlined and efficient vehicle.
Representative Kohring acknowledged that the true cost would
probably fall between the amount estimated by the sponsor
fiscal note and the Department of Commerce and Economic
Development's fiscal note. He stressed that savings would
come from trimming upper management. He pointed out that
relocation costs are one time costs.
REMOND HENDERSON, DIRECTOR, DIVISION OF ADMINISTRATIVE
SERVICES, DEPARTMENT OF COMMUNITY AND REGIONAL AFFAIRS
maintained that positions cannot be eliminated without
programs suffering. He pointed out that there is no deputy
director for administrative services in the Department of
Community and Regional Affairs. The Department of Community
and Regional Affairs already merged administrative positions
to eliminate an Accountant IV position. This merger has
created a bottleneck. The Department of Community and
Regional Affairs processes over $18.0 thousand dollars in
invoices and warrants of over $100 million dollars. Only
the Department of Health and Social Services, Department of
Education and the Department of Transportation and Public
Facilities have a higher volume of business. He maintained
that budget analyst positions are busy 100 percent of the
time. A secretary position was reclassified to assist with
budget work. He maintained that one budget analyst could
not take over the workload for both departments. He noted
that one of the special assistants that would be eliminated
under the sponsor fiscal note is not funded through general
funds. It is funded through interagency and federal funds.
Representative Grussendorf spoke against the legislation.
He maintained that it is not the legislature's function to
set management structure.
Representative Kelly suggested that the policy call to merge
the departments be made. He anticipated that the
Administration would conclude that there are efficiencies
that can be obtained from the new model.
Representative Kohring spoke in support of the legislation.
Representative Mulder MOVED to report HCS HB 400 (L&C) out
of Committee with the Department of Commerce and Economic
Development's fiscal note.
A roll call vote was taken on the motion.
IN FAVOR: Davis, Kelly, Kohring, Martin, Mulder, Therriault
OPPOSED: Davies, Grussendorf, Moses
Co-Chair Hanley and Representative Foster were absent from
the vote.
The MOTION PASSED (6-3).
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