Legislature(2001 - 2002)
01/30/2002 01:35 PM House FIN
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* first hearing in first committee of referral
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= bill was previously heard/scheduled
HOUSE BILL NO. 349
An Act relating to agency programs and financial plans.
REPRESENTATIVE FRED DYSON, SPONSOR, spoke in support of the
legislation. He maintained that [results based budgeting]
would provide the Administration with the best available
information. He provided members with an example of the
results based budgeting system used by the Municipality of
Anchorage: "Facility Management" (copy on file). He noted
that he used the budget system contained in the document
when he was on the Anchorage Assembly. He explained that
municipal departments present their activities and outputs
in decreasing levels of priority.
CHERYL FRASCA, MUNICIPALITY OF ANCHORAGE, ANCHORAGE,
provided information on the results based system used by the
Municipality of Anchorage. She discussed page 8 of the
handout. She explained that the funding line would be
similar to the state caps. Everything above the line would
be funded; everything below the line would not be funded. If
the funding level changes the funding line would move
upward, leaving more unfunded programs. If a service were
integral to the priority it could be moved up the funding
level. If there were a funding surplus the funding level
could be moved down.
Ms. Frasca explained that some departments list debt service
as their first priority; some departments prioritize their
commissioner's office; others set their core functions as
their first priority. She explained that the codes could
identify mandated services. She emphasized the need to
identify the level of funding mandated.
In response to a question by Representative Dyson, Ms.
Frasca acknowledged that the administration of the funding
process is complicated. Infrastructure must exist for the
system to work. She pointed out that information could be
presented in this format without acquiring the
infrastructure. The information can be used to provide clear
guidelines to the departments in respect to what a service
level should look like. She stressed the need to define
activities and to give definition and division of service
levels. The Anchorage Municipal Administration and Assembly
negotiated the use of funding level budgeting.
Representative Dyson asked if the state of Alaska could buy
software from the Municipality of Anchorage. Ms. Frasca did
not think that the software would be suitable. She observed
that they are looking at new systems.
Vice-Chair Bunde questioned if there is any reason the
system could not be adapted and moved to a state level. Ms.
Frasca responded that it is a good model to present to the
legislature and citizens because it shows the level of
service. She acknowledged that it would take time to
implement fully, but noted that it could be used as a
communication tool without actually producing the budget.
Vice-Chair Bunde asked what would keep departments from
placing a core function as number 10 and a burecratic
function as number one. Ms. Frasca responded that it is
important that the ranking process have integrity. She noted
that the legislature could rearrange the ranking to reflect
legislative priorities. The legislature would have the units
of information specific to the activities.
Representative Hudson noted that budgets are nothing more
than estimates of what are needed and what will be available
to meet the needs of the state on an annual basis. He asked
if the mayor has flexibility to meet emergencies and in
relationship to nonproductive items in the budget.
Ms. Frasca noted that there is flexibility to move money
within the departments.
Representative Hudson noted that information is presented in
a positive format and emphasized that lawmakers need to know
the negatives. He asked if there is an opportunity for the
departments to indicate the downside of not funding a
function for the public record. Mr. Frasca observed that
there are work sessions where department directors have an
opportunity to answer questions. This is an opportunity to
focus on what is below the funding line.
Representative Croft referred to municipal priorities on
pages 3 - 4. He agreed that it made sense to place services
into components but emphasized that it is the legislature's
duty to set the priorities.
Representative Dyson acknowledged the concern. He stressed
that it makes sense for those that are doing the work to
take the first cut at setting the priorities. He pointed out
that the Assembly has the opportunity to change the position
of items on the priority list. He pointed out that they have
the information available to understand the effect of
changes.
In response to a question by Representative Croft, Ms.
Frasca noted that the most important items are ranked on the
front page, but that those items near the cut line are the
most vulnerable. The department submits the rankings in the
mayor's budget. The funding line is drawn based on the
Assembly's approval.
Representative Croft questioned how often the Assembly
changes the rankings. Ms. Frasca noted that the Assembly
might choose to fund something that is below the line. The
department would rank the item the next year based on
available funds.
Representative Croft suggested that reductions are unlikely
to be done as cleanly as presented in the handout. He
pointed out that [if park maintenance were below the cut
line] it would be unlikely that all the maintenance for the
226 parks would be deleted. He suggested that items within
the maintenance component might be identified for funding.
Ms. Frasca agreed and pointed out that separate service
areas can be created and funded. She observed that there is
flexibility and emphasized that it is a way of presenting
information.
Representative Croft maintained that the system is similar
to the current state process.
Representative Lancaster questioned if the process saved
time or money or if it provided better service.
Representative Dyson responded that he did not know of any
systems that worked better.
Representative John Davies asked the mayor's level of
involvement in determining prioritization. Ms. Frasca
explained that the mayor reviews the service levels. The
mayor has not changed the ranking and priorities of the
departments. The critical decision is where the funding line
is drawn. If a service falls below the funding line the
mayor would look at what is above the line to see if there
is a service that can be reduced are eliminated.
Representative John Davies questioned how departments
distribute the funding. Ms. Frasca noted that it is similar
to the cap process set by the state legislature.
Representative Dyson interjected that the city of Anchorage
has a strong mayor system. He observed that the rankings
could be changed.
Representative Harris spoke in support of the legislation.
He observed that the legislature is only in session for 4
months, while the administration works 12 months. He
suggested that the Administration would have a better chance
of doing something with the budget, but acknowledged that
the legislature would have to manipulate the final product.
BRAD PIERCE, OFFICE OF MANAGEMENT AND BUDGET, OFFICE OF THE
GOVERNOR, spoke against the legislation. He observed that
the Governor opposes the bill as an unnecessary burden on
state agencies without producing meaningful results. He
observed that the governor proposes and the legislature
disposes. Prioritizing agency activities is a subjective
process. He pointed out that state departments have a much
broader function than municipal departments. He questioned
what criteria would be used to rank governmental functions.
The dilemma is that general government functions could be
placed on the bottom, but that without general governmental
functions like personnel and payroll nothing else would
exist. He observed that the Legislative Research Agency, at
various times, has been asked to make lists of state
programs that are mandated vs. discretionary. They have
produced a list of new programs added between 1981 and 1989
and lists of unique Alaska programs. Gordon Harrison wrote
an essay for the Long Range Financial Planning Commission on
the difficulty of defining basic services. The Long Range
Financial Planning Commission itself produced a preliminary
report that gave several different scenarios for cutting the
budget by $500 million dollars using different criteria for
what should be eliminated. All of these exercises so far
have proven to be pointless but they might provide some
guidance along the lines of what is being proposed in HB
349.
Representative Hudson observed that the intent is to have a
more direct dialog with the administration. He acknowledged
that the administration functions under the direction of the
legislature. He stressed the need for more information
regarding the harmful affects of not funding items. Mr.
Pierce responded that impact statements are created during
the subcommittee process. Representative Hudson emphasized
the need to work together with greater flexibility.
Representative Whitaker questioned the Administration's
objection. Mr. Pierce clarified that the subcommittee
process is already doing the directives of the bill. Co-
Chair Williams disagreed. Representative Harris maintained
that the subcommittees must dig [for information]. He
pointed out that there is a billion dollar deficient and
that priorities are needed. Vice-Chair Bunde recalled
instances where the relationship has been adversarial.
Representative Foster MOVED to report HB349 out of Committee
with the accompanying fiscal note. There being NO OBJECTION,
it was so ordered.
HB 349 was REPORTED out of Committee with a "do pass"
recommendation and with a zero fiscal note by the Office of
the Governor.
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