02/16/2012 09:00 AM Senate STATE AFFAIRS

        SB 129-CHILD CARE CTRS: STATE EMPLOYEES & OTHERS                                                                    
                                                                                                                                
9:33:11 AM                                                                                                                    
CHAIR  WIELECHOWSKI announced  the  consideration of  SB 129.  It                                                               
would allow child care centers  to be located in office buildings                                                               
owned or leased by the State of Alaska.                                                                                         
                                                                                                                                
GENEVIEVE  WOJTUSIK, staff,  Senator  Lesil  McGuire, offered  to                                                               
answer questions regarding SB 129, on behalf of the sponsor.                                                                    
                                                                                                                                
VERN  JONES,  Chief  Procurement  Officer,  Division  of  General                                                               
Services,  Department   of  Administration,   answered  questions                                                               
related to SB 129.                                                                                                              
                                                                                                                                
SENATOR MEYER  said he supports  the bill. He inquired  about the                                                               
cost of the day care program  to the state. He suggested that the                                                               
property could be leased and revenue  brought in. He asked if the                                                               
legislation was fair to small business day care centers.                                                                        
                                                                                                                                
9:35:33 AM                                                                                                                    
MR. JONES  said he thought it  was not accurate to  say there was                                                               
no cost for  the state to implement child care  in its facilities                                                               
or in  leased facilities. It  is more accurate  to say it  is not                                                               
possible  to  choose a  number;  therefore,  the fiscal  note  is                                                               
indeterminate.  He said  there is  a requirement  in the  bill to                                                               
include new centers if a new  facility is built, that houses more                                                               
than 250  employees. He  estimated the cost  if day  care centers                                                               
were added  to the last  three buildings the state  acquired. For                                                               
the Atwood  Building, the cost would  have been a little  over $2                                                               
million. It  is assumed  rent would  be charged  to the  day care                                                               
provider, so there would be no operational loss of funds.                                                                       
                                                                                                                                
MR. JONES  addressed Senator Meyer's question  about "opportunity                                                               
costs".  The  state  typically  operates  a  state  facility  and                                                               
charges a  tenant operating costs  at less than market  rates. He                                                               
referred  to  the  Atwood  Building   as  an  example  where  the                                                               
operating costs  are about half  the market rate.  Also difficult                                                               
to factor  in is the  fact that an  agency could be  displaced by                                                               
the day care  center and would have to pay  the open market rate.                                                               
It is difficult to predict many costs.                                                                                          
                                                                                                                                
SENATOR MEYER noted that day care  centers can be justified as an                                                               
employee benefit.  He questioned  if providing  a day  care would                                                               
displace  agencies.  He  wondered  who would  pay  custodial  and                                                               
utility costs of future centers.                                                                                                
                                                                                                                                
MR.  JONES explained  that a  different agency  deals with  those                                                               
costs. He said the Division  of General Services would likely try                                                               
to recoup operating costs. He  addressed Senator Meyer's question                                                               
about competition with  the private sector. He did  not see undue                                                               
favoritism  to  a  day  care provider.  There  are  strict  rules                                                               
regarding charge-back  rates which  could be cheaper  than market                                                               
rates. The  division typically  does not keep  track of  how many                                                               
people inhabit  a facility. However,  the division  is undergoing                                                               
an efficiency study and has  learned that only two buildings have                                                               
over  250  people;  the  State Office  Building  and  the  Atwood                                                               
Building. Also,  four leased facilities  currently have  over 250                                                               
in them.                                                                                                                        
                                                                                                                                
9:43:44 AM                                                                                                                    
SENATOR GIESSEL asked for clarification  about the amount charged                                                               
for operating costs - "about half the fair market value."                                                                       
                                                                                                                                
MR. JONES replied  that state agencies are charged  about half of                                                               
market  value for  leases  because of  strict  federal rules  for                                                               
operating costs and depreciation. The  Atwood and SOB are charged                                                               
roughly half of what could be gotten on the open market.                                                                        
                                                                                                                                
SENATOR  GIESSEL pointed  out  that a  private  company would  be                                                               
leasing the space for a child  care center. She said she wondered                                                               
if they  would qualify for the  same lease price break  the state                                                               
receives.                                                                                                                       
                                                                                                                                
MR. JONES  said the  state was  allowed to  charge rent  based on                                                               
federal guidelines,  but could also  charge the market rate  to a                                                               
non-state entity.  He said he  would have  to check on  that. The                                                               
fiscal note does not make any assumptions about the rate.                                                                       
                                                                                                                                
SENATOR GIESSEL spoke  of a private company  running a restaurant                                                               
in  the Atwood  Building.  She  asked what  rate  they are  being                                                               
charged.                                                                                                                        
                                                                                                                                
MR. JONES said  he thought they were being  charged an equivalent                                                               
rate, but he  would have to check on it.  Future day care centers                                                               
would not  be state-run  businesses; an RFP  would be  issued for                                                               
open market competition.                                                                                                        
                                                                                                                                
CHAIR WIELECHOWSKI said SB 129 would be held over.                                                                              
                                                                                                                                
              ^OVERVIEW: ALASKA NON-PROFIT ECONOMY                                                                          
                                                                                                                                
                                                                                                                                
9:47:36 AM                                                                                                                    
CHAIR WIELECHOWSKI  announced the  Foraker Group  presentation on                                                               
Alaska's nonprofit economy. Alaska  relies on nonprofit groups to                                                               
provide a wide  range of public services.  As economic conditions                                                               
in  Alaska  have tightened  and  the  legislature has  sought  to                                                               
constrain  state  spending,  many   of  these  organizations  are                                                               
struggling to meet public needs and accomplish their missions.                                                                  
                                                                                                                                
CHAIR  WIELECHOWSKI introduced  Dennis  McMillian, president  and                                                               
CEO of the Foraker Group. He  said that Mr. McMillian has devoted                                                               
his  professional  career   to  helping  nonprofit  organizations                                                               
better meet  the needs of  their communities. Mr.  McMillian came                                                               
to Alaska in 1992 to lead  the United Way of Anchorage, and since                                                               
then,   he   has   helped   build   the   state's   philanthropic                                                               
infrastructure  through  his work  with  United  Ways across  the                                                               
state,  and   through  his  support  in   developing  the  Alaska                                                               
Community  Foundation.  He  is a  strong  advocate  for  Alaska's                                                               
nonprofit sector. In 2001, Mr.  McMillian led the effort to start                                                               
the  Foraker Group  with the  mission of  building sustainability                                                               
and organizational capacity in Alaska's nonprofits.                                                                             
                                                                                                                                
At ease from 9:49:01 a.m. to 9:49:53 a.m.                                                                                       
                                                                                                                                
9:49:53 AM                                                                                                                    
KATHIE  WASSERMAN, Executive  Director,  Alaska Municipal  League                                                               
(AML),   Board  Member,   Foraker  Group,   contributed  to   the                                                               
discussion  of  Alaska  Nonprofit   Economy.  She  spoke  of  the                                                               
benefits  to  AML and  to  Alaska  from  the Foraker  Group.  The                                                               
Foraker  Group has  been instrumental  in  assisting AML's  board                                                               
operate more  effectively. Non-profits  that do  a good  job have                                                               
become much  stronger and  more effective due  to the  efforts of                                                               
the Foraker Group.                                                                                                              
                                                                                                                                
9:52:09 AM                                                                                                                    
DENNIS MCMILLIAN,  President & CEO,  Foraker Group,  presented an                                                               
overview entitled "Alaska Non-Profit  Economy." He predicted that                                                               
non-profit  requests would  escalate in  the future.  The Foraker                                                               
Group provides  training and research for  non-profits in Alaska.                                                               
They do research every three years to establish base-line data.                                                                 
                                                                                                                                
MR. MCMILLIAN reported  on the total number  of Alaska nonprofits                                                               
in 2010 in Alaska. He showed  a graph made by Institute of Social                                                               
and  Economic Research  (ISER) showing  the number  of registered                                                               
and  non-registered  nonprofits.   There  were  4,727  registered                                                               
nonprofits  and 2,300  other nonprofits.  He  commented on  which                                                               
groups do  not show up under  the 4,727 that are  registered. The                                                               
best  guess  is that  there  are  7,000 nonprofits  operating  in                                                               
Alaska currently.                                                                                                               
                                                                                                                                
MR. MCMILLIAN showed the expenditures  of nonprofits operating in                                                               
Alaska. It  is a $4.5  billion industry, three-quarters  of which                                                               
are 501(c)(3) charitable nonprofits.                                                                                            
                                                                                                                                
9:57:39 AM                                                                                                                    
MR.  MCMILLIAN  reported  on the  composition  of  Alaska  public                                                               
charities.  Nine   percent  of  the  organizations,   the  health                                                               
subsector, represents 61 percent of  employment and 60 percent of                                                               
expenditures.  He showed  how the  largest  ten public  charities                                                               
rank  by expenditures.  He noted  that  all ten  were related  to                                                               
health  care and  all but  three were  Native entities.  He added                                                               
that the  data was from  2007 and  not particularly good;  it was                                                               
ISER's best guess.                                                                                                              
                                                                                                                                
He detailed the public charity  composition of revenues in Alaska                                                               
as  compared  to   those  in  the  entire   United  States.  U.S.                                                               
Government grants  make up 43  percent of revenues in  Alaska, as                                                               
compared   to  only   9   percent   nationally.  The   charitable                                                               
contributions/other category  in Alaska is  18 percent  versus 23                                                               
percent nationally.                                                                                                             
                                                                                                                                
He noted  a trend in Alaska  since 2003 - government  grants have                                                               
dropped from 53 percent of total  revenues to 43 percent.  Alaska                                                               
is disproportionally  supported by foundations  and corporations.                                                               
The  state is  overly dependent  on one  industry for  charitable                                                               
contributions.  The  Click,  Pick,  Give program  has  helped  to                                                               
increase individual giving.                                                                                                     
                                                                                                                                
10:02:39 AM                                                                                                                   
CHAIR WIELECHOWSKI noted tax breaks  in Alaska for companies that                                                               
contribute to  education. He asked  how that type of  donation is                                                               
counted.                                                                                                                        
                                                                                                                                
MR. MCMILLIAN said that was IRS data.                                                                                           
                                                                                                                                
CHAIR WIELECHOWSKI  wondered if  that type of  donation increased                                                               
the number for government spending.                                                                                             
                                                                                                                                
MR. MCMILLAN guessed that it did.                                                                                               
                                                                                                                                
MR.  MCMILLIAN turned  to  the  trends in  Alaska  that would  be                                                               
affecting charitable funding  in the future. A  funding crisis is                                                               
inevitable  due  to  the  drop   in  contributions  from  federal                                                               
earmarks  and  from  organizations   turning  to  the  state  for                                                               
funding. He emphasized that the  nonprofits have been warned that                                                               
this was coming.                                                                                                                
                                                                                                                                
He addressed the  "crash of the herd" crisis,  which he described                                                               
as an  over population issue  - one  nonprofit for 28  people. He                                                               
spoke  of baby  boomer population  trends leading  to not  enough                                                               
people to serve  on, and staff, non-profits in  order to maintain                                                               
7,000 nonprofits.                                                                                                               
                                                                                                                                
MR.  MCMILLIAN   discussed  new  nonprofit  structures   such  as                                                               
networked institutions  with new ways of  partnering and merging.                                                               
He noted the Foraker Group was here to serve Alaska.                                                                            
                                                                                                                                
10:09:36 AM                                                                                                                   
SENATOR  MEYER   agreed  that  in  tough   times,  companies  and                                                               
nonprofits  will tend  to merge.  He asked  how religious  groups                                                               
qualify as nonprofits.                                                                                                          
                                                                                                                                
MR. MCMILLIAN said they are all  nonprofits and are a part of the                                                               
7,000.                                                                                                                          
                                                                                                                                
SENATOR MEYER  said that was  good because they work  together to                                                               
provide food banks and soup kitchens.                                                                                           
                                                                                                                                
MR.  MCMILLIAN noted  that in  the nonprofit  sector, competition                                                               
does not work.                                                                                                                  
                                                                                                                                
SENATOR  MEYER suggested  that  when  nonprofits request  funding                                                               
from the state, they should also have other matching funds.                                                                     
                                                                                                                                
MR. MCMILLIAN talked about capital  campaigns. He opined that the                                                               
state  will  have  to  have  a  different  strategy  for  funding                                                               
nonprofits.  He predicted  that nonprofits  will need  67 percent                                                               
from one donor when they seek funding from the state.                                                                           
                                                                                                                                
10:14:03 AM                                                                                                                   
SENATOR MEYER  appreciated the  work Foraker  does. He  said that                                                               
nonprofits often require business-related assistance.                                                                           
                                                                                                                                
CHAIR  WIELECHOWSKI  asked  for specific  steps  the  legislature                                                               
could   take   to   strengthen  nonprofits   and   ensure   their                                                               
sustainability in Alaska.                                                                                                       
                                                                                                                                
MR. MCMILLAN  referred to a handout  called "Nonprofit Sustaining                                                               
Guidelines." He suggested four things  to look for in a nonprofit                                                               
to determine  how sustainable it  will be: having focus  or clear                                                               
understanding by  the nonprofit of  itself and its goals  - being                                                               
strategic and thinking ahead; having  the right people involved -                                                               
working  together in  partnership; being  fluent in  partnerships                                                               
and in collaborations; generating  unrestricted cash and making a                                                               
profit.