Legislature(1999 - 2000)

04/22/1999 08:15 AM House CRA

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
HB 193 - ADMINISTRATION COSTS VILLAGE PUB SAFETY OFFICERS                                                                       
                                                                                                                                
CO-CHAIRMAN HARRIS announced that the final order of business                                                                   
before the committee would be HOUSE BILL NO. 193, "An Act related                                                               
to grants to nonprofit regional corporations for village public                                                                 
safety officers."                                                                                                               
                                                                                                                                
MATT GILL, Legislative Administrative Assistant for Representative                                                              
Mulder, Alaska State Legislature, noted that the committee should                                                               
have a proposed committee substitute (CS).                                                                                      
                                                                                                                                
Number 1878                                                                                                                     
                                                                                                                                
CO-CHAIRMAN HALCRO moved to adopt the proposed CSHB 193, Version                                                                
LS0841\G, Luckhaupt, 4/16/99, as the working document before the                                                                
committee.  There being no objection, it was so ordered.                                                                        
                                                                                                                                
MR. GILL explained that the intent of the proposed CS is to further                                                             
the discussion of an appropriate level of costs associated with the                                                             
administration of the Village Public Safety Officer Program (VPSO).                                                             
Village Public Safety Officers provide law enforcement, search and                                                              
rescue, emergency medical services and other duties as needed in                                                                
the villages.  The VPSO program began in 1979 as a federal                                                                      
demonstration grant.  Since 1981, the program has been funded                                                                   
entirely with state general funds which pass through the Department                                                             
of Public Safety to nonprofit regional corporations.  Those                                                                     
nonprofit corporations recruit and hire VPSOs.  Last year's budget                                                              
funded 84 VPSOs in 82 villages.                                                                                                 
                                                                                                                                
MR. GILL stated that the proposed CS would place an 18 percent cap                                                              
on overhead costs which would result in quite a bit of savings.                                                                 
The major impetus behind this legislation is to make the VPSO                                                                   
program more efficient.  There has been concern regarding the high                                                              
overhead rates.                                                                                                                 
                                                                                                                                
REPRESENTATIVE DYSON inquired as to what the proposed CS would do                                                               
to the overhead rate.                                                                                                           
                                                                                                                                
MR. GILL explained that HB 193 caps the overhead rate at 18                                                                     
percent.   On page 1, lines 7-13, the proposed CS includes the                                                                  
following language changes:                                                                                                     
                                                                                                                                
     "The indirect costs of a nonprofit regional corporation                                                                    
     to administer a grant received under this subsection may                                                                   
     not exceed 18 percent of the total amount of the grant.                                                                    
     Indirect costs include all costs other than                                                                                
          (1) the salary, benefits, overtime, and travel                                                                        
          of a village public safety officer or a                                                                               
          coordinator of the grant or program;                                                                                  
          (2) professional liability insurance; and                                                                             
          (3) equipment."                                                                                                       
                                                                                                                                
Number 2010                                                                                                                     
                                                                                                                                
REPRESENTATIVE DYSON inquired as to whether someone would be                                                                    
presenting information as to how reasonable that is and how that                                                                
would compare to administrative costs in other nonprofits or                                                                    
government agencies.                                                                                                            
                                                                                                                                
MR. GILL stated that there should be others via teleconference who                                                              
would be able to address that question.                                                                                         
                                                                                                                                
REPRESENTATIVE KOOKESH  noted that the Department of Public Safety                                                              
receives the funding through the legislature which is then passed                                                               
on to the VPSO through the nonprofits.  He asked if the Department                                                              
of Public Safety takes any administrative overhead costs.                                                                       
                                                                                                                                
MR. GILL replied yes.                                                                                                           
                                                                                                                                
REPRESENTATIVE KOOKESH inquired as to how much of the Department of                                                             
Public Safety's overhead administrative costs would be capped.                                                                  
                                                                                                                                
MR. GILL stated that HB 193 does not address the department.                                                                    
                                                                                                                                
REPRESENTATIVE KOOKESH requested that the Department of Public                                                                  
Safety information be provided to the committee before the bill                                                                 
moves.  Representative Kookesh understood from testimony received                                                               
last year, that the Department of Public Safety takes 25 percent.                                                               
If that is the case, he wondered why the sponsor would not also cap                                                             
the department's administrative overhead costs at 18 percent.                                                                   
                                                                                                                                
REPRESENTATIVE DYSON recommended that the committee attempt to                                                                  
obtain that information while this hearing is in progress.                                                                      
                                                                                                                                
REPRESENTATIVE JOULE asked if there was a reason why only one                                                                   
component was reviewed versus a broader view.                                                                                   
                                                                                                                                
MR. GILL said he was not sure.                                                                                                  
                                                                                                                                
REPRESENTATIVE DYSON stated that he vaguely remembered from last                                                                
year, that there were a couple of local nonprofits with                                                                         
administrative overhead rates that looked outrageous.                                                                           
Representative Dyson commented that, at first blush, the rates                                                                  
seemed to indicate that some organizations utilized overhead as a                                                               
way to subsidize the local organization at the expense of the VPSO                                                              
program.                                                                                                                        
                                                                                                                                
REPRESENTATIVE JOULE said that he was unsure as to how the indirect                                                             
process works and requested someone walk the committee through the                                                              
process.                                                                                                                        
                                                                                                                                
Number 2250                                                                                                                     
                                                                                                                                
KEN BISCHOFF, Director, Division of Administrative Services,                                                                    
Department of Public Safety, informed the committee that this                                                                   
legislation originated in the Senate through Senator Donley who was                                                             
concerned with these rates.  Senator Donley requested the Division                                                              
of Legislative Finance to do a statewide study in order to compare                                                              
these indirect rates.  Legislative Finance found that the rates                                                                 
tended to range between 18 to 22 percent.  The proposed CS before                                                               
the committee contains a much improved rate, considering the Senate                                                             
Community & Regional Affairs (CRA) Committee had a bill that                                                                    
proposed a 15 percent cap.  Mr. Bischoff noted that he had seen a                                                               
proposed CS, which has not yet been adopted, from the Senate CRA                                                                
committee which would mirror the rate in this proposed CS.                                                                      
                                                                                                                                
MR. BISCHOFF stated that the VPSO program is not handling their                                                                 
indirect costs any different than other programs.  He informed the                                                              
committee that city governments and other nonprofit organizations                                                               
have indirect cost recovery rates which fall in the ranges                                                                      
determined by the Division of Legislative Finance.  The reason for                                                              
that is as follows:  there are direct program costs which are                                                                   
intended to place VPSOs in the field; there are direct                                                                          
administrative costs to hire, pay, and maintain accounting records                                                              
of staff; and there are indirect cost rates, including building,                                                                
space, and utilities, which are typically developed as a federal                                                                
formula.  Mr. Bischoff explained that the VPSO program simply                                                                   
accepted the federally approved rate rather than the state                                                                      
establishing its own audit function and regulations regarding                                                                   
indirect cost rates.  The federally approved rate is audited and                                                                
approved by the federal agency every year.  The auditors of the                                                                 
nonprofits review those schedules and any questioned costs are                                                                  
reported to the department and those are settled out.  With regard                                                              
to the concern about accepting the federally approved formula, Mr.                                                              
Bischoff asked how much oversight and extra cost is desired from                                                                
the department in terms of administration of the program.                                                                       
                                                                                                                                
REPRESENTATIVE JOULE pointed out that in addition to the indirect                                                               
cost rate, the state troopers take a piece of the VPSO program.                                                                 
Representative Joule believed that at least one trooper's salary,                                                               
administrative costs, and in some cases, the cost of an aircraft is                                                             
paid from the VPSO program.  Therefore, he wondered if the state                                                                
troopers have some association with the program's indirect cost.                                                                
Is there an indirect rate that is applied to the state troopers?                                                                
                                                                                                                                
Number 2495                                                                                                                     
                                                                                                                                
MR. BISCHOFF informed the committee that the Department of Public                                                               
Safety, the Alaska State Troopers, does not have a federally                                                                    
approved indirect cost recovery rate.  The VPSO program                                                                         
appropriation includes three components, one of which is the                                                                    
contract component which would be impacted by this legislation.                                                                 
Another component is the support component which provides some of                                                               
the oversight trooper funding, aircraft funding, and VPSO training.                                                             
The third component is administration which is the VPSO-Trooper                                                                 
coordinator and clerical support which is treated as a direct cost.                                                             
No direct cost rate is applied because those are specifically                                                                   
budgeted in the state's budget.  Therefore, the department does not                                                             
apply an additional indirect rate to the administrative component.                                                              
                                                                                                                                
REPRESENTATIVE JOULE pointed out that although there may not be an                                                              
indirect cost applied, the money specified for the VPSO program has                                                             
money taken from it for the trooper oversight.  "Is that correct?"                                                              
                                                                                                                                
MR. BISCHOFF clarified that money is not taken from the contract                                                                
component.  The legislature approves a separate administrative                                                                  
allocation within the appropriation.  Contract funding is not used                                                              
for any administrative or overhead cost.                                                                                        
                                                                                                                                
REPRESENTATIVE KOOKESH inquired as to where the savings under the                                                               
18 percent cap would go.                                                                                                        
                                                                                                                                
MR. GILL stated that the House Finance Committee's intent is that                                                               
the savings would go to the VPSO.                                                                                               
                                                                                                                                
Number 2592                                                                                                                     
                                                                                                                                
REPRESENTATIVE KOOKESH noted that nonprofit organizations are not                                                               
required to participate in this program.  Would the Department of                                                               
Public Safety be forced to manage the VPSO program, if the                                                                      
nonprofit organization declines?  He indicated that in discussions                                                              
with nonprofits, the nonprofits have indicated they would decline                                                               
to participate.  Representative Kookesh suggested that it may not                                                               
be a bad move for the state to take over the VPSO program because                                                               
then the VPSOs would be allowed to participate in PERS.  Has that                                                               
been considered as a consequence of this legislation?                                                                           
                                                                                                                                
MR. GILL said that had been considered.  The goal of the                                                                        
legislation is not to take the program from the corporations.  Mr.                                                              
Gill noted that he has had problems determining the breakdown on                                                                
the numbers which makes it difficult to determine how the                                                                       
legislation will actually effect the program.                                                                                   
                                                                                                                                
REPRESENTATIVE KOOKESH indicated that he could support this                                                                     
legislation, but he was concerned with only addressing the VPSOs.                                                               
He preferred a bill that refers to all state agencies and state                                                                 
administrative contracts.  "Why target VPSOs which only are in                                                                  
rural Alaska?"                                                                                                                  
                                                                                                                                
REPRESENTATIVE DYSON asked what the overhead rates are for other                                                                
institutions around the state.                                                                                                  
                                                                                                                                
MR. BISCHOFF stated that he could only speak to the Legislative                                                                 
Finance study done last year which reported that the overhead rates                                                             
fall between 18 and 22 percent.  Mr. Bischoff informed the                                                                      
committee that he worked for Legislative Budget and Audit for eight                                                             
years.                                                                                                                          
                                                                                                                                
REPRESENTATIVE DYSON asked if there is a scale that would work                                                                  
against and drive up the overhead costs of some of the small                                                                    
nonprofit organizations.                                                                                                        
                                                                                                                                
MR. BISCHOFF acknowledged that there are some economies of scale.                                                               
                                                                                                                                
REPRESENTATIVE DYSON asked if that should be taken into account.                                                                
                                                                                                                                
MR. BISCHOFF offered to review that.                                                                                            
                                                                                                                                
REPRESENTATIVE DYSON commented that in his experience with                                                                      
nonprofits at the local government, every standard that was                                                                     
established was reflected in the books without much real change.                                                                
He asked if the 18 percent overhead rate was unreasonable.                                                                      
                                                                                                                                
MR. BISCHOFF said that the question was probably not appropriate                                                                
for him to answer.  However, there should be fairness and equity in                                                             
the handling of the program.  Furthermore, expanding the cap                                                                    
statewide would create general fund implications.                                                                               
                                                                                                                                
Number 2883                                                                                                                     
                                                                                                                                
REPRESENTATIVE MURKOWSKI asked if Legislative Audit has conducted                                                               
an audit to determine the indirect costs and where the problem lies                                                             
specifically.                                                                                                                   
                                                                                                                                
MR. BISCHOFF stated that he was not aware that Legislative Audit                                                                
has reviewed this statewide.                                                                                                    
                                                                                                                                
REPRESENTATIVE MURKOWSKI indicated that could provide some answers.                                                             
                                                                                                                                
CO-CHAIRMAN HALCRO asked if Mr. Bischoff knew what is included in                                                               
the indirect costs.                                                                                                             
                                                                                                                                
MR. BISCHOFF said that there are village contributions which are                                                                
not part of the state funding.                                                                                                  
                                                                                                                                
TAPE 99-27, SIDE B                                                                                                              
                                                                                                                                
REPRESENTATIVE KOOKESH commented that if this legislation passes,                                                               
the money is returned to the VPSO program which does not save the                                                               
state any money.                                                                                                                
                                                                                                                                
MR. GILL indicated that the legislation is more of an attempt to                                                                
get "more bang for your buck" with state dollars.                                                                               
                                                                                                                                
REPRESENTATIVE KOOKESH reiterated the need then to determine the                                                                
Department of Public Safety's administrative overhead costs                                                                     
                                                                                                                                
Number 2870                                                                                                                     
                                                                                                                                
MR. BISCHOFF informed the committee that the FY99 budget for the                                                                
contract component is $5,523,500.  There are two other components.                                                              
The support component which includes the training funds, the                                                                    
aircraft and some funding for oversight troopers.  An important                                                                 
aspect of the VPSO program is the daily communication with the                                                                  
state troopers.  Mr. Bischoff stated, "Based on the last decade of                                                              
how the budget has gone, that's overlapping clear into the trooper                                                              
detachment.  And we have as many as 30 or 40 troopers from time to                                                              
time responding to VPSO support type issues."  The support                                                                      
component in FY99 is $1.7 million, in terms of administrative                                                                   
costs, these are not indirect costs and no indirect rate is                                                                     
charged.  With regards to having a commander and clerical support                                                               
for the program to negotiate the contracts, to develop the budget                                                               
and keep the files, there is a FY99 budget of $271,200,000.                                                                     
                                                                                                                                
REPRESENTATIVE DYSON clarified that Representative Joule was asking                                                             
what percentage the Department of Public Safety takes from the VPSO                                                             
budget.                                                                                                                         
                                                                                                                                
MR. BISCHOFF explained that he would add the contract budget,                                                                   
$5,523,500, the support component, $1,702,700, and the                                                                          
administration component, $271,200, which results in a total of                                                                 
$7,497,400.  As a percentage of the total, the administrative                                                                   
component, $271,200, would be divided by the total of all the                                                                   
components, $7,497,400, which would result in 3.6 percent.                                                                      
                                                                                                                                
CO-CHAIRMAN HALCRO referred to the VPSO Program Contracts                                                                       
Comparison, FY99 spreadsheet.  The new indirect cost would be the                                                               
18 percent cap if it were in effect.                                                                                            
                                                                                                                                
MR. GILL agreed.                                                                                                                
                                                                                                                                
CO-CHAIRMAN HALCRO surmised then that with the 18 percent cap,                                                                  
$69,120 would be saved which would place an estimated $820 into the                                                             
wallets of the VPSO.                                                                                                            
                                                                                                                                
MR. GILL said that was correct.  He noted that there may be                                                                     
portions of the administrative direct costs and the recovered                                                                   
indirect costs that could be pulled out as direct costs such as                                                                 
equipment.  A break down on those numbers could result in more                                                                  
accurate figures.                                                                                                               
                                                                                                                                
REPRESENTATIVE KOOKESH interjected that the number would change if                                                              
the nonprofit declined to participate and the Department of Public                                                              
Safety had to take over the VPSO program.                                                                                       
                                                                                                                                
MR. GILL agreed.                                                                                                                
                                                                                                                                
Number 2600                                                                                                                     
                                                                                                                                
MR. BISCHOFF explained that originally, the VPSO program was                                                                    
established through a federal grant pilot in order to get local law                                                             
enforcement in the Bush.  If the state was required to manage the                                                               
VPSO program, the program would be subject to state personnel rules                                                             
and hiring practices.                                                                                                           
                                                                                                                                
REPRESENTATIVE KOOKESH said that was exactly his point.  If the                                                                 
nonprofits decline to participate, the burden to the state would be                                                             
more than everyone realizes.                                                                                                    
                                                                                                                                
REPRESENTATIVE JOULE referred to the Northwest Arctic Borough which                                                             
has a total grant of $484,773 with an indirect cost recovery of                                                                 
$91,871.  He believed that trooper support includes the cost of a                                                               
trooper, aircraft, and administrative assistant which totals about                                                              
$128,000.  That total is not three percent of that program.                                                                     
                                                                                                                                
MR. BISCHOFF stated that he was not sure of the comparison.  He                                                                 
pointed out that the trooper commander and the clerical support                                                                 
comprise the $271,000 and all other costs are direct.  He believed                                                              
that the nonprofit coordinators would support the notion that                                                                   
trooper oversight should be provided in order not to leave the VPSO                                                             
in the field alone.  The department views those as direct program                                                               
costs some of which are paid for from the VPSO support component                                                                
while many of them come indirectly from the state trooper budget                                                                
directly.                                                                                                                       
                                                                                                                                
Number 2427                                                                                                                     
                                                                                                                                
JOSIE STILES, Director, VPSO Program, KAWERAK, testified via                                                                    
teleconference from Nome.  Ms. Stiles opposed HB 193.  She                                                                      
emphasized the need to seek alternatives and consider adequate                                                                  
funding levels within the VPSO program.  Although each nonprofit                                                                
has different rates, the rates are the same in the sense that the                                                               
program is not being administered to make money.  Whether it is a                                                               
for profit or a nonprofit, either must be able to pay the                                                                       
administrative costs or it will not survive.  Ms. Stiles stated                                                                 
that HB 193 would limit the ability of a nonprofit organization to                                                              
recover its actual cost of doing business.                                                                                      
                                                                                                                                
MS. STILES informed the committee that nonprofit indirect rates are                                                             
based on the actual cost of operating programs in a specific                                                                    
locality.  She pointed out that KAWERAK does not operate for profit                                                             
enterprises.  KAWERAK provides services solely through federal and                                                              
state contracts and grants.  Ms. Stiles said that the choice is to                                                              
either subsidize the VPSO program from other government programs or                                                             
to not operate the VPSO program at all.                                                                                         
                                                                                                                                
MS. STILES said the primary concern is for the VPSOs who place                                                                  
their lives on the line while their wages are 24 percent lower than                                                             
the average law enforcement officer in Alaska.  Furthermore, the                                                                
state is mandated by PL280 to provide public safety services to                                                                 
rural Alaska which consists of 220 villages.  Only 81 villages have                                                             
VPSOs.  She also pointed out that PL280 limits nonprofits from                                                                  
federal funding, therefore nonprofits are forced to depend on the                                                               
state to provide this basic and critical service.  Ms. Stiles noted                                                             
that in addition to state funding, nonprofits can seek other                                                                    
funding sources.  KAWERAK has been successfully operating the VPSO                                                              
program since 1979.  She felt that Alaska has received quality                                                                  
public safety services at the most cost effective rate.  Ms. Stiles                                                             
requested that the indirect funding level be maintained.                                                                        
                                                                                                                                
CO-CHAIRMAN HALCRO asked Ms. Stiles for some examples of                                                                        
administrative direct costs.                                                                                                    
                                                                                                                                
MS. STILES identified her salary, benefits, travel and per diem,                                                                
and office support as examples of administrative direct costs.  She                                                             
noted that last year all those were included with the indirect                                                                  
rates which created a hardship.  This year she has not had any                                                                  
travel money, office support,  or telephone money.  Furthermore,                                                                
Ms. Stiles informed the committee that she would have to take four                                                              
weeks leave without pay.  Ms. Stiles said that she was happy to see                                                             
that the administrative direct costs were separated from the                                                                    
indirect costs.                                                                                                                 
                                                                                                                                
CO-CHAIRMAN HALCRO inquired as to examples of indirect costs.                                                                   
                                                                                                                                
LORETTA BULLARD, President, KAWERAK, testified via teleconference                                                               
from Nome.  Ms. Bullard informed the committee that indirect costs                                                              
include the following:  administrative salaries, audits, rent,                                                                  
utilities, insurance, copying, postage, board expenses, training,                                                               
et cetera.  Indirect costs are the general cost pool for all costs                                                              
which cannot be attributed by contract or grant to a particular                                                                 
project or program.                                                                                                             
                                                                                                                                
Number 2118                                                                                                                     
                                                                                                                                
STEVE GOMEZ, Director, VPSO Program, MANIILAQ Man Power (MANIILAQ                                                               
MP), testified via teleconference from Kotzebue.  Mr. Gomez opposed                                                             
HB 193.  He reiterated the state's responsibility to provide public                                                             
safety to all residents.  The VPSO program has proven to be very                                                                
cost effective.  The VPSOs provide many services besides law                                                                    
enforcement to Alaska's rural communities.  Mr. Gomez believed that                                                             
the VPSOs provide this service for about one-third of the cost of                                                               
what the state troopers could offer.  With the elimination of                                                                   
municipal assistance and revenue sharing, the VPSO program will                                                                 
become more important.  If HB 193 passes, the indirect rate a                                                                   
nonprofit could charge the state would be limited which would be                                                                
disastrous to the program.  The indirect rate the nonprofits charge                                                             
is established by the federal government.  Currently, MANIILAQ MP                                                               
has a 24 percent indirect rate and if forced to utilize an 18                                                                   
percent indirect rate, MANIILAQ MP would probably be forced to drop                                                             
the VPSO program.  Mr. Gomez indicated that would probably be the                                                               
case for many of the nonprofits.                                                                                                
                                                                                                                                
MR. GOMEZ commented that the state troopers do have the                                                                         
administrative and the support end which is taken from the VPSO                                                                 
Budget Request Unit (BRU).  Mr. Gomez determined that the troopers'                                                             
charges for support and administration equals about 26.3 percent of                                                             
the total.  In response to Co-Chairman Halcro, Mr. Gomez informed                                                               
the committee that he has 10 authorized VPSO positions of which                                                                 
seven are funded.  In further response to Co-Chairman Halcro, he                                                                
identified  the following as his indirect costs:  a portion of the                                                              
executive director and staff salaries and benefits; accounting,                                                                 
auditing, and legal services; utilities; equipment rental and                                                                   
maintenance; occupancy costs; administrative staff and board                                                                    
travel; and telephone costs.  Mr. Gomez identified the                                                                          
administrative direct costs as his salary, travel, per diem, and                                                                
benefits.                                                                                                                       
                                                                                                                                
REPRESENTATIVE JOULE asked if the indirect costs are audited and if                                                             
so, what are the results of the audit.  Have there been any                                                                     
discrepancies found?                                                                                                            
                                                                                                                                
MR. GOMEZ stated that the indirect costs are audited and the                                                                    
auditors have never found any problems with the indirect costs.                                                                 
                                                                                                                                
Number 1748                                                                                                                     
                                                                                                                                
REPRESENTATIVE KOOKESH asked Mr. Gomez to explain the 26.3 percent                                                              
to which he attributed to the troopers portion.                                                                                 
                                                                                                                                
MR. GOMEZ explained that adding the contract component, $5,523,500,                                                             
the trooper support, $1,721,000, and the administration costs,                                                                  
$253,500, would total $7,498,000.  Therefore, taking the trooper                                                                
support and the administration costs and dividing that into the                                                                 
total would result in the 26.3 percent which is the total that the                                                              
troopers keep.  With regards to the comment that the troopers use                                                               
the $1.7 million to respond to the VPSOs, the troopers have to                                                                  
respond regardless.                                                                                                             
                                                                                                                                
CO-CHAIRMAN HALCRO asked if Mr. Gomez was correct that the                                                                      
Department of Public Safety uses $1.7 million to oversee the VPSO                                                               
program.                                                                                                                        
                                                                                                                                
MR. GILL replied yes.  He clarified that the figures come from the                                                              
contract line for the VPSO.                                                                                                     
                                                                                                                                
CO-CHAIRMAN HALCRO believed this is where the concern lies.                                                                     
Co-Chairman Halcro determined that it takes the troopers $20,238                                                                
per VPSO to administer the program.  In Mr. Gomez's area, the                                                                   
troopers  cost almost $22,000.  All of that money is not getting                                                                
into the wallets of the individuals doing the work.                                                                             
                                                                                                                                
REPRESENTATIVE KOOKESH reiterated that if this is going to be taken                                                             
from the nonprofit then it should be taken from the troopers as                                                                 
well.                                                                                                                           
                                                                                                                                
MR. BISCHOFF stated that the money could be placed wherever.                                                                    
However, the VPSOs receive about seven weeks of academy training.                                                               
The question is where that cost should be placed, in the contract                                                               
or the support component.  Placing the cost in the contract                                                                     
component, would not place more VPSOs on the street, if the same                                                                
level of training is maintained.  With regard to oversight, Mr.                                                                 
Bischoff asked if the desire is to have an aircraft for support or                                                              
not.  Mr. Bischoff said, "Those are the trade-offs.  And if you                                                                 
choose to call those administrative, the troopers are skimming that                                                             
off the top; how are we supposed to respond?  How are the troopers                                                              
supposed to respond to the field? ... Do we dig deeper into the                                                                 
trooper's budget?  You know, it's a legislative policy decision."                                                               
                                                                                                                                
CO-CHAIRMAN HALCRO asked if the VPSO training occurs every year.                                                                
                                                                                                                                
MR. BISCHOFF stressed that the VPSO program has tremendous                                                                      
turnover.  With the help of the legislature last year, VPSOs                                                                    
received a 12 percent pay increase.  He believed that the                                                                       
Administration supports a 30 percent pay increase over time.                                                                    
Although pay increases may not place another VPSO on the street,                                                                
the increase may retain a VPSO and reduce the turnover.                                                                         
Additionally, turnover can be reduced through training and the                                                                  
ability to receive support from the troopers.  In further response                                                              
to Co-Chairman Halcro, Mr. Bischoff explained that the VPSO                                                                     
training is provided by the academy and tailored to the VPSO                                                                    
program.  The VPSOs are not run through the trooper training.  With                                                             
regards as to why the VPSOs do not receive trooper training, Mr.                                                                
Bischoff pointed out that VPSOs are unarmed and are not certified                                                               
police officers.                                                                                                                
                                                                                                                                
Number 1279                                                                                                                     
                                                                                                                                
FRANK PETERSON, VPSO Coordinator, Kodiak Area Native Association,                                                               
testified via teleconference from Kodiak.  Not including Kodiak,                                                                
there are six communities across Kodiak Island.  Five of those                                                                  
communities have funding for VPSOs.  Mr. Peterson opposed HB 193.                                                               
Mr. Peterson inquired as to how many people were funded by the                                                                  
Department of Public Safety's $271,200.                                                                                         
                                                                                                                                
MR. BISCHOFF identified the following three positions in the                                                                    
administrative component:  a commissioned officer in charge of the                                                              
VPSO program, an accounting tech position, and a clerk.                                                                         
                                                                                                                                
MR. PETERSON asked then if the $271,200 pays for three positions.                                                               
                                                                                                                                
CO-CHAIRMAN HARRIS said that was correct.                                                                                       
                                                                                                                                
MR. PETERSON informed the committee that the Kodiak Area Native                                                                 
Association indirect rate for the VPSO program is 26.7 percent.  He                                                             
did not know what the 18 percent cap would mean in the Kodiak VPSO                                                              
program.                                                                                                                        
                                                                                                                                
Number 1108                                                                                                                     
                                                                                                                                
JIM KNOPKE, VPSO Coordinator, Tanana Chiefs Council, Incorporated                                                               
(TCC), testified via teleconference from Fairbanks.  Mr. Knopke                                                                 
favored giving the VPSOs more money, however HB 193 is not the                                                                  
vehicle to achieve that.  Mr. Knopke said that he would also like                                                               
to see more VPSOs in the field.  He informed the committee that the                                                             
TCC includes 43 villages of which there are currently 10 funded                                                                 
VPSO positions.  Mr. Knopke receives calls daily from the other                                                                 
villages that would like to participate in the VPSO program.  He                                                                
noted that his indirect costs are derived from the cost of                                                                      
communication, rent, and utilities.  The administrative direct                                                                  
costs are Mr. Knopke's salary, benefits, and travel.  There is no                                                               
clerical support for the VPSO program.  Mr. Knopke stated that the                                                              
TCC's indirect rate is reflective of its ability to manage all of                                                               
its programs efficiently.  Mr. Knopke did not see how the savings                                                               
in HB 193 would be placed into the wallet of the VPSOs; how would                                                               
that be achieved?                                                                                                               
                                                                                                                                
CO-CHAIRMAN HALCRO explained that the intent would be that spending                                                             
less money on administrative overhead would result in more money                                                                
for those actually doing the work.  Co-Chairman Halcro expressed                                                                
concern with the high overhead in relation to the salary of the                                                                 
VPSO.  He suggested that one way in which to stem the turnover                                                                  
would be to ensure more money goes to the VPSO.                                                                                 
                                                                                                                                
REPRESENTATIVE KOOKESH pointed out that the three positions funded                                                              
by the $271,000 results in $91,000 per position.                                                                                
                                                                                                                                
CO-CHAIRMAN HALCRO agreed.                                                                                                      
                                                                                                                                
Number 0670                                                                                                                     
                                                                                                                                
TERRY HOEFFERLE, Bristol Bay Native Association (BBNA), testified                                                               
via teleconference from Dillingham.  Mr. Hoefferle informed the                                                                 
committee that the sponsor of HB 193 has told the BBNA that its                                                                 
administrative costs are too high.  Mr. Hoefferle asked, "Compared                                                              
to what?"  He did not believe there is a solid answer.  He compared                                                             
the BBNA VPSO program with the Dillingham Police Department.  The                                                               
BBNA VPSO program has a budget of about $730,000 which employs 11                                                               
officers and one program manager spread over an area of 40,000                                                                  
square miles.  The City of Dillingham employs 5 officers and 1                                                                  
police chief which costs $930,000 which does not include any of the                                                             
jail costs.                                                                                                                     
                                                                                                                                
MR. HOEFFERLE informed the committee that by his calculations the                                                               
Department of Public Safety has a 39.478 percent overhead rate.                                                                 
Mr. Hoefferle stated, "We have been arm wrestling with the State of                                                             
Alaska, the Department of Public Safety, for the last 15 years                                                                  
trying to increase the wages that are paid to these VPSO officers                                                               
and I would like to welcome the support of our urban legislators in                                                             
helping us do this."  Mr. Hoefferle did not believe that HB 193 was                                                             
directed at increasing the VPSO's wage.                                                                                         
                                                                                                                                
MR. HOEFFERLE informed the committee that the BBNA has not had a                                                                
single questioned cost by the auditors in the last 10 years.  The                                                               
BBNA's indirect cost is approved by the U.S. Department of Labor                                                                
and covers the actual costs.  If the state does not pay its portion                                                             
of the BBNA's approved indirect cost rate, then the actual costs of                                                             
the program are being subsidized by other programs which are paid                                                               
for by other government agencies.  At the proposed 18 percent rate,                                                             
Mr. Hoefferle indicated that it would problematic for the BBNA to                                                               
operate the VPSO program next year.  Mr. Hoefferle stated that                                                                  
ultimately the best thing for the VPSOs may be for the state to                                                                 
take over this program.  If the state takes over the VPSO program,                                                              
the VPSOs will have to be paid more than $12.50 per hour.  He                                                                   
believed that the minimum pay received by any officer in the                                                                    
Department of Public Safety is about $17.00 per hour.  The state                                                                
taking over the VPSO program could help address the high turn over                                                              
rate which Mr. Hoefferle believed to be the single greatest factor                                                              
contributing to the high administrative cost for the VPSO program.                                                              
Mr. Hoefferle urged the committee to review the program overall.                                                                
                                                                                                                                
BRAD ANGASAN, Program Manager, VPSO Program, Bristol Bay Native                                                                 
Association, testified via teleconference from Dillingham.  He                                                                  
reiterated Mr. Hoefferle's comments regarding the fact that if the                                                              
state has to take over the VPSO program, the state would have to                                                                
provide a comparable wage, differentials, and inclusion in the                                                                  
PERS.                                                                                                                           
                                                                                                                                
Number 0051                                                                                                                     
                                                                                                                                
ROBIN LOWN, Program Manager, VPSO Program, Tlingit and Haida                                                                    
Central Council, testified via teleconference from Anchorage.  He                                                               
informed the committee that he is also the Chairman of the                                                                      
Coordinators Committee which consists of all of the nonprofit VPSO                                                              
coordinators.                                                                                                                   
                                                                                                                                
TAPE 99-28, SIDE A                                                                                                              
                                                                                                                                
MR. LOWN echoed previous testimony that some of the nonprofits                                                                  
would probably drop the VPSO program if HB 193 does become law.                                                                 
With regard to the comments about VPSOs becoming state employees,                                                               
Mr. Lown highlighted how expensive that would be and the higher                                                                 
administrative costs that would result from the state                                                                           
administrative procedures.  Furthermore, the state would have to                                                                
deal with 80 separate communities.  Mr. Lown also mentioned the                                                                 
notion of putting the VPSO program out to competitive bid.                                                                      
Currently, the VPSO is required to go through nonprofit regional                                                                
corporations per statute.  Also the employees of security                                                                       
companies, which Mr. Lown assumed would  be those targeted for                                                                  
competitive bid, are not peace officers under the law.  Mr. Lown                                                                
noted that he had sent a letter discussing this matter.                                                                         
                                                                                                                                
MR. LOWN addressed the concern that nonprofits are making excessive                                                             
funds from indirect cost recovery.  Nonprofits recover expenses                                                                 
equally on all programs administered by the nonprofit.  Mr. Lown                                                                
pointed out that the nonprofit recovery is similar to that received                                                             
by the University of Alaska which has a cost recovery ranging from                                                              
21.3 to 51.3 percent depending upon which facility is reviewed.  He                                                             
reiterated that it is unknown what will happen with the VPSO                                                                    
program if HB 193 is passed.  Serious consideration should be given                                                             
to what HB 193 would do.                                                                                                        
                                                                                                                                
Number 0330                                                                                                                     
                                                                                                                                
RICHARD KRAUSE, VPSO Coordinator, Aleutian Pribilof Island                                                                      
Association, testified via teleconference from Anchorage.  Mr.                                                                  
Krause opposed HB 193.  He suggested that the committee review the                                                              
overall program.  He offered to discuss this with any member                                                                    
interested.  Mr. Krause noted that he had faxed each committee                                                                  
member a letter.  He reiterated Mr. Lown's comments regarding the                                                               
University of Alaska.                                                                                                           
                                                                                                                                
MR. KRAUSE pointed out that five of the nonprofits with VPSO                                                                    
programs do not pay those VPSOs any overtime.  Mr. Krause informed                                                              
the committee that he does not pay his VPSOs overtime because he                                                                
does have enough funding.                                                                                                       
                                                                                                                                
MR. GILL commented that information would continue to be gathered                                                               
on HB 193 in order to determine the exact direct and indirect                                                                   
costs.                                                                                                                          
                                                                                                                                
CO-CHAIRMAN HALCRO requested that Mr. Gill provide the committee                                                                
with a breakdown of the $1.7 million spent by the troopers.                                                                     
                                                                                                                                
CO-CHAIRMAN HARRIS announced that HB 193 would be held.                                                                         

Document Name Date/Time Subjects