04/06/2004 03:40 PM Senate STA

      CSHB 494(FIN)-ELECTRONIC PAYMENT FOR STATE BUSINESS                                                                   
                                                                                                                                
CHAIR  GARY  STEVENS  announced  CSHB   494(FIN)  to  be  up  for                                                               
consideration.                                                                                                                  
                                                                                                                                
SUE STANCLIFF,  staff to Speaker Kott,  paraphrased the following                                                               
sponsor statement:                                                                                                              
                                                                                                                                
     CSHB 494(FIN)  makes necessary  changes to  the methods                                                                    
     of  how  the  State  of Alaska  disburses  funds.  This                                                                    
     change will save the state  costs of issuing checks and                                                                    
     warrants  and  resolve  issues pertaining  to  time  of                                                                    
     disbursement and undistributed collections.                                                                                
                                                                                                                                
     Currently,  the   state  issues   approximately  96,500                                                                    
     checks and warrants per month.                                                                                             
          Unemployment Insurance Benefits:   28,000                                                                             
          Division of Finance to                                                                                                
          vendors & non-venders:             50,000                                                                             
          Child Support recipients:          13,000                                                                             
          PERS & TRS Retirees:                2,500                                                                             
          Payroll- active employees           3,000                                                                             
                                                                                                                                
     This legislation has the potential  of saving the State                                                                    
     of  Alaska considerable  funds  when  factoring in  the                                                                    
     reduction of  check fraud, reissuing of  lost or stolen                                                                    
     checks,  postage,  check  printing cost,  reduced  bank                                                                    
     service fees, and reduced labor cost.                                                                                      
                                                                                                                                
     In   addition,  this   would  benefit   businesses  and                                                                    
     citizens that receive funds via  direct deposit or mail                                                                    
     delivery.  There would  be no  check  cashing fees,  it                                                                    
     would reduce  liability of  check fraud,  and customers                                                                    
     could use debit or credit cards at businesses.                                                                             
                                                                                                                                
She said  it's worth noting  that since 1994,  the administration                                                               
has gone  from no direct  deposits to 89 percent  direct deposits                                                               
in  2003. This  is  a  considerable change,  but  there are  more                                                               
savings  to  be  had.  For  instance,  the  Division  of  Finance                                                               
currently works  with 50,000  venders and just  500 of  those are                                                               
set  up to  handle  electronic transfers.  That  number could  be                                                               
improved and  there are a number  of other areas such  as Workers                                                               
Compensation that are ready for review.                                                                                         
                                                                                                                                
CHAIR GARY STEVENS  asked her to speak to the  issue of fraud and                                                               
electronic transfers.                                                                                                           
                                                                                                                                
MS. STANCLIFF  opined that  check fraud is  already an  issue and                                                               
electronic transfers would eliminate that.                                                                                      
                                                                                                                                
SENATOR STEDMAN  referred to  page 6, line  18 and  asked whether                                                               
people  that aren't  comfortable with  electronic transfer  could                                                               
opt out of electronic transfer and have a warrant issued.                                                                       
                                                                                                                                
MS. STANCLIFF said that would be an option.                                                                                     
                                                                                                                                
CHAIR  GARY  STEVENS  asked  Kim  Garnero  whether  she  had  any                                                               
comments.                                                                                                                       
                                                                                                                                
KIM  GARNERO,  Director, Division  of  Finance,  stated that  the                                                               
State  of Alaska  is enthusiastic  about this  business procedure                                                               
and noted that the 500  venders that receive electronic transfers                                                               
will receive over $1 billion from the State this year.                                                                          
                                                                                                                                
They are  in the process of  making it possible for  consumers to                                                               
use  electronic  transfers  as   well.  The  rules  are  somewhat                                                               
different  than  the  ones  for business,  but  the  Division  of                                                               
Finance expects to  have that capability by the end  of the year.                                                               
However,  there are  exceptions and  risk management  has advised                                                               
that  they   don't  favor   electronic  transfers   for  Worker's                                                               
Compensation because it may be a disincentive to return to work.                                                                
                                                                                                                                
Currently they are  in the process of  updating their procurement                                                               
boilerplate and  although they can't impose  it retroactively, it                                                               
will  be a  requirement  for new  agreements.  Finally, they  are                                                               
looking at a statewide debit card.                                                                                              
                                                                                                                                
SENATOR COWDERY  asked how difficult  it would  be to opt  out of                                                               
electronic payments in favor of a warrant.                                                                                      
                                                                                                                                
MS. GARNERO said  it's optional at this point  and the Department                                                               
of Law has  advised that a hardship waiver would  be necessary if                                                               
electronic payments became mandatory.                                                                                           
                                                                                                                                
CHAIR GARY STEVENS asked for a motion.                                                                                          
                                                                                                                                
SENATOR  COWDERY motioned  to move  CSHB 494(FIN)  from committee                                                               
with  individual recommendations  and  attached  fiscal note.  He                                                               
also asked  for unanimous consent.  There being no  objection, it                                                               
was so ordered.