Legislature(2001 - 2002)

01/30/2002 01:35 PM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= 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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