Legislature(2017 - 2018)HOUSE FINANCE 519
04/14/2017 01:30 PM FINANCE
Note: the audio and video recordings are distinct records and are obtained from different sources. As such there may be key differences between the two. The audio recordings are captured by our records offices as the official record of the meeting and will have more accurate timestamps. Use the icons to switch between them.
Download Mp3. <- Right click and save file as
|Spring Revenue Forecast: Powerpoint|
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HOUSE BILL NO. 167 "An Act relating to performance reviews, audits, and termination of executive and legislative branch agencies, the University of Alaska, and the Alaska Court System." 5:27:23 PM REPRESENTATIVE GABRIELLE LEDOUX, SPONSOR, explained that the bill would repeal the requirement for performance audits. She reported that performance audits had not been funded for the previous couple of years. She thought their costs ran over $1 million. The audits were typically 800 to 1000 pages in length. She doubted anyone had ever read any. Someone had requested that she introduce the bill to eliminate the requirement. Representative Wilson did not agree with the reason for the proposed elimination. She wondered if the legislature was taking the wrong approach to finding efficiencies and measuring programs. She wondered if there was a better approach to take rather than requiring performance audits. KRIS CURTIS, LEGISLATIVE AUDITOR, ALASKA DIVISION OF LEGISLATIVE AUDIT, replied that she believed there was an expectation gap in terms of the definition of a performance audit. Performance audits were not in place to cut the budget. She continued that a very small piece of the audits had to do with the budget. Departments were asked to submit 10 percent reductions in their general funds and the consultant was asked to evaluate whether the reductions were in line with their findings of the reviews. She explained that a performance review included looking at the agency's mission and evaluating how it conducted its business. The performance reviews were not intended to help solve the state's budget crisis. The inherent problem with the audit reviews was that they had not been read. If the expectation was the performance reviews were going to help solve the budget, it was not valid. If the legislature chose to fund audits in the future, many changes should be made to make them effective. She had been asked to provide a summary of suggested changes. However, she did not have the resources to do so at present. She suggested it might be possible in the off-season. She added that if performance audits were to continue at the request of the legislature, some tweaks would need to be made to the process. 5:31:53 PM Vice-Chair Gara commented that the largest department had already been reviewed - the Department of Health and Social Services. He wondered if was correct. Ms. Curtis confirmed that DHSS had been audited. Vice-Chair Gara imagined that the DHSS audit would have been the most expensive audit process. He recalled that the department made the changes that seemed rational on the audit report. He could not say there was no value to the reports. However, the goal of the original bill was to review internal practices in the hopes of achieving 10 percent reductions wherever possible. He did not see the need for future audit reports. Representative Wilson thought only a portion of the Department of Health and Social Services had been audited. She asked if she was accurate. Ms. Curtis replied that the process called for Legislative Audit to help draft a scope of work. The scope was then provided to the committee, they approved it, and contractors were hired. The audit had been focused on the overall organization of the department, long-term care, and another piece that she did not recall in the moment. Representative Wilson thought that the entire department was going to be audited and noted her disappointment. She stated that if there was a possibility to tweak the program to achieve the original intent of the legislation at a lower price. 5:35:07 PM Ms. Curtis responded that she would have to receive guidance from policy makers on what they wanted to see from the bill. She clarified they were not audits, but reviews. The budget request was so high because the University was included in the list of departments to be reviewed. The cost was contingent on the size of the department. Representative Pruitt asked when the legislature's review had been scheduled. Ms. Curtis answered that it was scheduled the year it was defunded. The legislature, the Office of the Governor, and the Alaska Court System were scheduled in the same cycle. Representative Pruitt asked if there was harm to revising the program. He referred to a memorandum in members' packets. He wondered if there was a problem with leaving the law on the books. Ms. Curtis responded that the only problem had to do with the uncertainty of staffing. She detailed it was difficult to determine whether staff would be available. It had taken a lot to get the program running. If it was the will of policy makers, she could provide feedback on some of the obstacles in getting the reports to lawmakers to make a difference. She had feedback if individuals were interested in continuing the program. If it were left on the books, she would have to come before the legislature each year to request the funding. 5:38:34 PM Representative Pruitt thought the reviews were misunderstood. He believed there was an understanding by legislators and the public that the audits were to assist in finding efficiencies. He referenced suggestions made by Mr. Alexander and asked if the items he highlighted would assist in addressing inefficiencies in government. Ms. Curtis responded that she did not believe the problem with the program was how it had been structured. She offered that the current statutes provided direction for looking for efficiencies within departments and essentially providing a grade to an agency for accomplishing its mission. She believed it [the review process] had been well set up; however, using it as a tool to cut the budget appeared to be the expectation. She indicated that she was not in agreement with some of Mr. Alexander's suggestions. She reported that if the expectation were to use the review process to help an agency cut its budget, some tweaks should be made. She suggested that the Office of Management and Budget, because they have oversight of the agencies, might be a better source for suggested reductions. It was left to the departments to recommend cuts; however, some did not provide any feedback. She mentioned some other problems with the structure of the reports that limited their effectiveness. For instance, the reports came out in December, a time of the year when the Legislative Finance Division was busy with reviewing the budget. There was not much time to get the information to legislators, and the legislature lacked a working group to vet the report. There was also a lack of feedback as to what to include in the reports or any kind of follow-up mechanism. Ms. Curtis indicated that she struggled with how to get the legislature's attention. She posed the question as to who was responsible for implementing items. In the Legislative Budget and Audit Annual Report, the Legislative Finance Division was required to report on the savings. She shared that DHSS had reported over $1 million in savings from one of the recommendations in the report. She opined that there had been gems in the report. She noted that there was information in the Department of Corrections report about booking fees, parole fees that were on the books but not being collect. However, there was no one to gather the information. She claimed there were real problems with the way things were set up. She speculated that it was not a good use of funds to generate a report if the information was not used. She had a neutral position, but it was disappointing, based on the effort that went into generating the reports, not to see the material utilized. 5:43:00 PM Representative Guttenberg discussed that in the past the legislature had spent significant time defining missions and measures for the departments that he believed had been forgotten. The administration was required to produce a tool that would help the legislature in determining where to make reductions. He reported people did not like that the tool revealed certain places where additional monies should be spent. He cited an example of a mission and measure in the Recorder's Office. He thought the legislature had not had a vested interest in the report. He expressed concerns about eliminating the report in its entirety. He was glad Ms. Curtis pointed out some of the recommendations. He asked how often the recommendations had been taken up by the departments. 5:46:01 PM Ms. Curtis did not know of a mechanism in place to track implementation. She urged members to look at the Department of Education and Early Development's performance review. She characterized the report as a phenomenal report and encouraged all members to review it. She highlighted that the reports depended on a contractor, an expert in the field, being hired. In managing the reports, contractors had a vested interest in having additional studies done. She suggested contractors would always recommend conducting additional studies. She thought it was one obstacle. She added that it was important that the relationship between the department and the contractor remained professional. She shared that her staff had attended every meeting with the contractor. There were many lessons that had been learned that she believed could be applied in the future. Co-Chair Seaton reported that the House Finance Subcommittee for the Legislature's budget met on February 23rd and decided to ask the House Rules Committee to introduce a bill that would eliminate the provision of reviewing all of the departments in a 10-year cycle. The cost included $1 million and 3 full-time positions. The legislature did not fund the amount. He thought that routine performance reviews were not being used enough to justify the expense. He would rather that the legislature request a specific audit for a department when needed. He believed the committee should move the bill and get something off the books that required full-time positions to be hired. 5:49:53 PM Representative Wilson disagreed. She believed the legislature was partially at fault. She thought finance should have had a subcommittee review the reports. She also recommended reviewing a lesser number of departments each year. She had read the reviews and believed they contained good information. She found that some of the departments had done better than other ones. If the legislature were more involved, agencies would be more cooperative knowing they would be held accountable. She believed that accountability was a missing link. She thought that based on the times, the legislature should be taking a deeper look beyond a 90-day or 120-day session. She spoke to the importance of finding efficiencies. She thought follow- through was important to put into place without any additional costs. Members of the legislature could be appointed to review the reports. She believed the situation was a disservice to Legislative Budget and Audit. She did not support rushing the bill through when she thought the review process could be saved. Co-Chair Seaton surmised that Representative Wilson wanted to fund the reviews and to fund the three positions. Representative Wilson believed the legislature could not afford three positions. She thought that spending money on the University to conduct the review did not make sense. She suggested that maybe the issue could be addressed over the interim and that the state could pay for one review. 5:53:00 PM Representative Guttenberg was concerned that if the required audits were eliminated in statute, institutional memory could potentially be lost. In reference to the university, he thought one of its problems was in looking at its self. Co-Chair Foster asked committee members if they wanted to take action on the bill. He would provide more time for members to think about the bill. He indicated that the deadline for amendments was on Tuesday, April 17, 2017 at 5:00 p.m. Co-Chair Foster OPENED Public Testimony on HB 167. Co-Chair Foster CLOSED Public Testimony on HB 167. HB 167 was HEARD and HELD in committee for further consideration. Co-Chair Foster reviewed the agenda for the following day and recessed the meeting to a call of the chair [Note: the meeting never reconvened].