Legislature(2019 - 2020)ADAMS 519

03/03/2020 09:00 AM FINANCE

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
*+ HB 121 REPEAL STATE AGENCY PERFORMANCE AUDITS TELECONFERENCED
Heard & Held
-- Public Testimony --
*+ HB 209 ESTABLISH DEP'T OF MANAGEMENT AND BUDGET TELECONFERENCED
Heard & Held
-- Public Testimony --
+ Bills Previously Heard/Scheduled TELECONFERENCED
HOUSE BILL NO. 209                                                                                                            
                                                                                                                                
     "An  Act  relating  to  public  finance;  creating  the                                                                    
     Department of  Management and Budget;  transferring the                                                                    
     duties of  the office of  management and budget  to the                                                                    
     Department of Management and  Budget; and providing for                                                                    
     an effective date."                                                                                                        
                                                                                                                                
9:27:45 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE   STEVE   THOMPSON,  SPONSOR,   thanked   the                                                                    
committee  for hearing  the bill  and  reviewed its  purpose                                                                    
with a prepared statement:                                                                                                      
                                                                                                                                
    House Bill 209 transfers the Office of Management and                                                                    
     Budget to a freestanding budget agency.                                                                                    
    Currently OMB is located within the Governor's office                                                                    
    As an agency within the executive branch, the                                                                            
     commissioner  of  the   Department  of  Management  and                                                                    
     Budget will be subject  to legislative confirmation and                                                                    
     their   salary   determined   by  the   State   Officer                                                                    
     Compensation Commission.                                                                                                   
    This will also allow for additional legislative                                                                          
     oversight during the budgetary process                                                                                     
    There are 11 other states that require legislative                                                                       
    confirmation for the state's chief budget official                                                                          
    12 other states that have a freestanding budget agency                                                                   
    Since FY11 the annual salary of the Director has                                                                         
     increased from $136.4 to $194.7                                                                                            
    Total UGF spend is from $192.5 to $277.2 with benefits                                                                   
                                                                                                                                
Representative Thompson explained that  the bill was lengthy                                                                    
because it  had to  hit so  many agencies  on the  books. He                                                                    
detailed  that the  bill basically  just  changed the  words                                                                    
Office  of  Management and  Budget  (OMB)  to Department  of                                                                    
Management  and  Budget.  He   shared  that  his  staff  was                                                                    
available for any questions.                                                                                                    
                                                                                                                                
9:29:51 AM                                                                                                                    
                                                                                                                                
Representative  LeBon  referenced Representative  Thompson's                                                                    
mention of  significant history and  background information.                                                                    
He asked  if the  idea had been  churning in  the background                                                                    
for a while.                                                                                                                    
                                                                                                                                
Representative   Thompson  replied   in  the   negative.  He                                                                    
explained that  the idea  had arisen  from the  situation in                                                                    
the previous  year. The bill  originated from the  idea that                                                                    
the legislature should have more  oversight and knowledge of                                                                    
who was coming into the OMB [director] position.                                                                                
                                                                                                                                
Representative  Wool asked  if there  were hurdles  or costs                                                                    
associated  with establishing  a new  department aside  from                                                                    
the salary considerations and confirmation [of a director].                                                                     
                                                                                                                                
CRYSTAL  KOENEMAN,  STAFF,  REPRESENTATIVE  STEVE  THOMPSON,                                                                    
replied  that  there  were  about   eight  fiscal  notes  in                                                                    
committee  members'   bill  packets  (copy  on   file).  She                                                                    
confirmed  there were  additional  minimal costs  associated                                                                    
with  setting  up  an independent  agency  including  shared                                                                    
services,  procurement,  and   information  technology.  She                                                                    
would provide additional information  when fiscal notes were                                                                    
reviewed.                                                                                                                       
                                                                                                                                
Representative Knopp was interested  in the fiscal notes. He                                                                    
remarked  that  there  were numerous  notes  that  were  all                                                                    
substantial. He hoped to hear an  in depth review of each of                                                                    
the fiscal notes.                                                                                                               
                                                                                                                                
Co-Chair Johnston  shared her intention to  hear a sectional                                                                    
analysis followed by a review of the fiscal notes.                                                                              
                                                                                                                                
9:32:37 AM                                                                                                                    
                                                                                                                                
Vice-Chair Ortiz asked if the  costs would be ongoing or one                                                                    
time only.                                                                                                                      
                                                                                                                                
Ms.  Koeneman replied  that the  hope was  once things  were                                                                    
underway  the change  would be  budget neutral,  meaning the                                                                    
current costs  associated with OMB  under the Office  of the                                                                    
Governor  would   be  those  costs   moving  forward   as  a                                                                    
standalone  agency. She  noted  that  the legislature  would                                                                    
have that power through the budgetary process.                                                                                  
                                                                                                                                
Representative Tilton  asked whether  the bill  would result                                                                    
in any diminishment of the  separation of powers between the                                                                    
executive and legislative branches.                                                                                             
                                                                                                                                
Ms. Koeneman  answered that the  bill did not change  any of                                                                    
OMB's  powers and  duties. The  statutes currently  in place                                                                    
were contained  in the legislation, the  only difference was                                                                    
the change from  the word "office" to  "department" and from                                                                    
"director"  to "commissioner."  The  services OMB  currently                                                                    
provided would remain the same.                                                                                                 
                                                                                                                                
9:34:17 AM                                                                                                                    
                                                                                                                                
Co-Chair Johnston requested to hear the sectional analysis.                                                                     
                                                                                                                                
Ms.  Koeneman  complied.  Sections  1  through  30  included                                                                    
conforming language  changing the  Office of  Management and                                                                    
Budget  to   the  Department   of  Management   and  Budget.                                                                    
Additionally,  the sections  updated the  words "office"  to                                                                    
"department"  and  "director"  to "commissioner."  She  read                                                                    
from the sectional (copy on file):                                                                                              
                                                                                                                                
     Section  31: AS  44.17.005. Offices  and departments                                                                       
     Adding  the "Department  of Management  and Budget"  to                                                                    
     the list of principal offices and departments.                                                                             
     Section 32: Proposed new Chapter AS 44.22.010.                                                                             
     Chapter  22. Department  of Management  and Budget  (p.                                                                    
     33)                                                                                                                        
                                                                                                                                
     Sec. 44.22.010.  Commissioner of management  and budget                                                                    
       Establishes  the principal  executive officer  of the                                                                    
     Department   of   Management    and   Budget   is   the                                                                    
     commissioner of management and budget.                                                                                     
                                                                                                                                
     Sec. 44.22.020. Powers and  duties of the commissioner.                                                                    
     Outlines the  duties of the commissioner  of management                                                                    
     and budget.  (Identical language to current  powers and                                                                    
     duties of the director under AS 44.19.144)                                                                                 
                                                                                                                                
Ms. Koeneman  noted that Section  44.22.020 was  included in                                                                    
the  sections being  repealed at  the end  of the  bill. She                                                                    
remarked  the  language  was conforming.  She  continued  to                                                                    
review the sectional analysis:                                                                                                  
                                                                                                                                
     Sec. 44.22.030.  Powers and  duties of  the department.                                                                    
     Outlines  the duties  of the  department of  management                                                                    
     and budget.  (Identical language to current  powers and                                                                    
     duties of the department under AS 44.19.145)                                                                               
                                                                                                                                
     Sec.  44.22.040. Internal  audit records.  Requires the                                                                    
     department to  keep a complete  file of  audit reports.                                                                    
     (Identical language  to current internal  audit records                                                                    
     under AS 44.19.147)                                                                                                        
                                                                                                                                
     Sec. 44.22.050. Definitions.  Provides a definition for                                                                    
     the  commissioner  and  department  of  management  and                                                                    
     budget.                                                                                                                    
                                                                                                                                
     Section 33-35: Conforming  language changing the office                                                                    
     of  management   and  budget   to  the   Department  of                                                                    
     Management  and   Budget;  and  updating   "office"  to                                                                    
     "department".                                                                                                              
                                                                                                                                
     Section 36:  Repeals statutes  related to  the "office"                                                                    
     of management and budget.                                                                                                  
                                                                                                                                
     Section 37:  Transitional language that allows  for the                                                                    
     transfer of information and  documents from the "office                                                                    
     to the "department".                                                                                                       
                                                                                                                                
Ms. Koeneman explained that if  there were any current suits                                                                    
against OMB, they would continue  until they were worked out                                                                    
through   the  transition.   She  concluded   the  sectional                                                                    
analysis:                                                                                                                       
                                                                                                                                
    Section 38: Provides a July 1, 2020 effective date.                                                                         
                                                                                                                                
9:37:16 AM                                                                                                                    
                                                                                                                                
Representative Merrick asked if OMB  had taken a position on                                                                    
the legislation.                                                                                                                
                                                                                                                                
Ms. Koeneman replied that she did not believe so.                                                                               
                                                                                                                                
Representative Knopp  looked at Section  32 and asked  if it                                                                    
was the intent  that the commissioner would also  be the OMB                                                                    
director.  Alternatively, he  wondered if  there would  be a                                                                    
commissioner and director.                                                                                                      
                                                                                                                                
Ms. Koeneman  answered that the intention  was the positions                                                                    
currently  with  OMB  - the  director  and  staff  currently                                                                    
listed in OMB's personal service  expenditure - would be the                                                                    
staff for  the office.  She remarked  that the  fiscal notes                                                                    
had  additional positions  listed,  but  the bill  sponsor's                                                                    
intention was to  transfer the office as  it currently stood                                                                    
to  a standalone  department. She  relayed it  had been  her                                                                    
hope to only  modify the language in  statute; however, with                                                                    
the constitution, it had not been so easy.                                                                                      
                                                                                                                                
Representative  Wool  asked  if the  sponsor  foresaw  there                                                                    
being a  deputy commissioner. He pointed  out that typically                                                                    
there  was   at  least  one  deputy   commissioner  position                                                                    
alongside a commissioner position.  He asked if the parallel                                                                    
position existed,  such as  assistant director.  He wondered                                                                    
if there would be a straight transfer over.                                                                                     
                                                                                                                                
Ms. Koeneman  responded not  necessarily. She  detailed that                                                                    
in   name  the   position   would  probably   be  a   deputy                                                                    
commissioner but  depending on how  a governor set  up their                                                                    
OMB there was sometimes a  deputy director. She clarified it                                                                    
was  the  sponsor's  intention  that  the  comparable  level                                                                    
position would be the deputy.                                                                                                   
                                                                                                                                
9:39:49 AM                                                                                                                    
                                                                                                                                
Co-Chair  Johnston asked  to  hear a  review  of the  fiscal                                                                    
notes.                                                                                                                          
                                                                                                                                
SYLVAN  ROBB,  POLICY  ANALYST,  OFFICE  OF  MANAGEMENT  AND                                                                    
BUDGET, OFFICE  OF THE  GOVERNOR, began  by noting  that the                                                                    
State of Alaska had not  created a new department from whole                                                                    
cloth since  prior to 1975. She  noted that OMB had  run out                                                                    
of time  to continue  the historical research.  She reviewed                                                                    
the  eight  fiscal  notes.  There  were  not  OMB  component                                                                    
numbers to  use as  reference because the  component numbers                                                                    
did  not   exist.  She  detailed   that  the   proposed  new                                                                    
Department of  Management and Budget  would be  comprised of                                                                    
four  appropriations  with   seven  allocations.  The  first                                                                    
fiscal  note [Identifier  HB209-GOV-DIA-03-01-20] created  a                                                                    
division  of internal  audit. She  noted the  item had  been                                                                    
defunded for  many years; however, because  it was contained                                                                    
in  the statute  of the  bill,  OMB had  operated under  the                                                                    
assumption  there  would  be   interest  in  restarting  the                                                                    
function. She shared that the  last time a position had been                                                                    
filled was  in 2012  when there had  been one  position. She                                                                    
relayed that  the position  had been taken  off the  books a                                                                    
number of  years ago  as part  of a cleanup  as it  had been                                                                    
unfilled for many years.                                                                                                        
                                                                                                                                
9:42:03 AM                                                                                                                    
                                                                                                                                
Vice-Chair  Ortiz wanted  to ensure  he was  looking at  the                                                                    
right  fiscal  note.  He  asked  Ms.  Robb  to  provide  the                                                                    
identifier at the top [left] of the fiscal note.                                                                                
                                                                                                                                
Ms. Robb replied that the identifier was HB209-GOV-DIA-03-                                                                      
02-20.                                                                                                                          
                                                                                                                                
Representative Knopp  believed Ms.  Curtis and Ms.  Robb had                                                                    
both  stated  that  the  internal  audit  program  had  been                                                                    
discontinued. He  asked for verification  that Ms.  Robb had                                                                    
stated  that OMB  had  included the  program  in the  fiscal                                                                    
notes because  it was specified  in statute and  OMB assumed                                                                    
the legislature wanted to go back to the program.                                                                               
                                                                                                                                
Ms. Robb  replied that the  statute was contained in  HB 209                                                                    
and it  was the  assumption that  the bill  sponsor intended                                                                    
the functions to resume.                                                                                                        
                                                                                                                                
Representative  Knopp  asked  for  verification  there  were                                                                    
currently no  other internal  auditors in  any of  the state                                                                    
departments.                                                                                                                    
                                                                                                                                
Ms.   Robb   answered   that  within   the   Department   of                                                                    
Administration  the  Division  of Finance  performed  single                                                                    
audit work.  She added  that OMB  no longer  performed audit                                                                    
work.                                                                                                                           
                                                                                                                                
9:43:38 AM                                                                                                                    
                                                                                                                                
Representative LeBon  asked if any bargaining  units touched                                                                    
OMB  staffing  wise.  Alternatively,  he asked  if  OMB  was                                                                    
completely outside the bargaining unit influence.                                                                               
                                                                                                                                
Ms.  Robb answered  that under  the current  structure where                                                                    
OMB  was under  the governor's  office, all  staff positions                                                                    
were  fully  exempt.   If  the  office  was   changed  to  a                                                                    
department some of the positions may change to classified.                                                                      
                                                                                                                                
9:44:27 AM                                                                                                                    
                                                                                                                                
Ms. Robb  moved to the  next fiscal note,  Identifier HB209-                                                                    
GOV-DBA-03-02-20.  She  noted  the  note  pertained  to  the                                                                    
Department of  Management and  Budget, budget  analysis. She                                                                    
detailed that  the division represented the  majority of OMB                                                                    
as it  currently existed. The  note included  current budget                                                                    
analysts, a  chief budget  analyst, and  the addition  of an                                                                    
assistant (a position OMB had until recently).                                                                                  
                                                                                                                                
9:45:12 AM                                                                                                                    
                                                                                                                                
Ms. Robb looked at the  third fiscal note for Administrative                                                                    
Services,  Identifier  GOV-DAS-03-02-20. Currently  OMB  was                                                                    
part  of  the  governor's   office  and  the  administrative                                                                    
services covered  by the fiscal note  were services provided                                                                    
to OMB  as part of  the governor's office. For  example, OMB                                                                    
was able to take  advantage of governor's office procurement                                                                    
staff, human  resources staff, and  the finance  officer and                                                                    
administrative  services directors.  She  explained that  if                                                                    
OMB was turned  into a department, the  positions would need                                                                    
to  be created  in  order  to provide  the  services to  the                                                                    
department.                                                                                                                     
                                                                                                                                
Representative   Wool  asked   for  verification   the  note                                                                    
included all new positions.                                                                                                     
                                                                                                                                
Ms. Robb  agreed. She explained that  currently OMB received                                                                    
the services from the governor's office.                                                                                        
                                                                                                                                
Vice-Chair  Ortiz asked  for  a breakdown  of  the types  of                                                                    
services she was  referring to. He asked  for further detail                                                                    
on the five positions.                                                                                                          
                                                                                                                                
Ms. Robb answered that the  positions would provide services                                                                    
currently   received  from   the   governor's  office.   She                                                                    
elaborated  that the  positions  included an  administrative                                                                    
services  director  (as  in other  departments),  a  finance                                                                    
officer (it was  always necessary to have two  people in the                                                                    
financial  positions  because  people  cannot  certify  each                                                                    
other's work),  a budget manager, a  procurement specialist,                                                                    
and   a  human   resources  consultant.   She  noted   OMB's                                                                    
anticipation  that  in the  outyears  one  of the  positions                                                                    
would  no  longer be  needed  as  the current  consolidation                                                                    
efforts  for   procurement  and  human  resources   came  to                                                                    
fruition.                                                                                                                       
                                                                                                                                
9:47:45 AM                                                                                                                    
                                                                                                                                
Co-Chair  Johnston asked  members  to  hold their  questions                                                                    
until  the  end of  the  fiscal  note review.  She  reminded                                                                    
members that floor session began at 10:00 a.m.                                                                                  
                                                                                                                                
Ms. Robb  continued with the fourth  fiscal note, Identifier                                                                    
HB209-GOV-CO   for    administrative   services    and   the                                                                    
commissioner's office. She explained  that the creation of a                                                                    
new department  would require  a commissioner's  office. She                                                                    
detailed that  three of the  staff shown on the  fiscal note                                                                    
were existing staff. She referenced  an earlier question and                                                                    
relayed that there  was a deputy director at OMB  and it was                                                                    
the  assumption   that  person   would  become   the  deputy                                                                    
commissioner  for  the  new department.  She  detailed  that                                                                    
current Director Neil Steininger  had an assistant who would                                                                    
continue and  there would be  a special assistant to  act as                                                                    
the legislative  liaison and perform duties  normally filled                                                                    
by that role.                                                                                                                   
                                                                                                                                
Ms. Robb moved  to the fifth fiscal  note, Identifier HB209-                                                                    
GOV-PP  for policy  and planning.  The  note included  three                                                                    
existing OMB policy positions that  would continue under the                                                                    
new department.                                                                                                                 
                                                                                                                                
9:49:19 AM                                                                                                                    
                                                                                                                                
Ms. Robb  reviewed the sixth fiscal  note, Identifier HB209-                                                                    
GOV-SDC   for   policy    and   planning,   statewide   data                                                                    
clearinghouse.   The   note   reflected  the   current   OMB                                                                    
programmer  who maintained  the Alaska  Budget System  where                                                                    
all  budgeting  for  the  state   occurred.  The  note  also                                                                    
included the addition of a  research analyst in anticipation                                                                    
of the internal audit and  the collection of additional data                                                                    
(in order to make the best use of the data).                                                                                    
                                                                                                                                
9:50:09 AM                                                                                                                    
                                                                                                                                
Ms.  Robb  turned to  the  seventh  fiscal note,  Identifier                                                                    
HB209-GOV-ASD  for  policy   and  planning  and  centralized                                                                    
administrative services directors. The  note did not reflect                                                                    
a change.  She highlighted that the  administrative services                                                                    
directors had  been moved  into OMB  by Executive  Order 307                                                                    
[in  2019 under  the  Dunleavy  administration]. The  fiscal                                                                    
note reflected  the administrative services  directors would                                                                    
continue to be a part of the new department.                                                                                    
                                                                                                                                
Ms. Robb  turned to  the eighth  fiscal note,  OMB Component                                                                    
Number  1244. The  note represented  the removal  of funding                                                                    
for OMB.                                                                                                                        
                                                                                                                                
Co-Chair Johnston OPENED and CLOSED public testimony.                                                                           
                                                                                                                                
9:51:45 AM                                                                                                                    
                                                                                                                                
Representative   Wool  referenced   the   salaries  of   the                                                                    
commissioner   determined   by   the   salary   compensation                                                                    
commission. He noted the policy  planner position was listed                                                                    
as a salary range 27  at $229,000. He asked for verification                                                                    
the  salary was  considerably more  than the  commissioner's                                                                    
salary. He asked if the numbers were standard.                                                                                  
                                                                                                                                
Ms.  Koeneman replied  that  it was  not  uncommon in  other                                                                    
departments  to  have  the   commissioner's  topped  out  at                                                                    
$135,000 set  by the Salary  Compensation Commission  and to                                                                    
have  a  director   level  position  at  a   range  27  with                                                                    
additional pay  steps to outrank  the commissioner  in terms                                                                    
of pay.                                                                                                                         
                                                                                                                                
Representative Knopp  asked for  verification that  Ms. Robb                                                                    
had  reported  that a  new  state  department had  not  been                                                                    
created since 1974.                                                                                                             
                                                                                                                                
Ms. Robb replied  that OMB had struggled to  locate the last                                                                    
time  a department  had been  created.  They had  researched                                                                    
back to 1975 before running out of time.                                                                                        
                                                                                                                                
Representative   Knopp  thought   it   was  an   interesting                                                                    
conversation. He  believed it clearly  showed how  the state                                                                    
managed and  staffed its  departments. He  thought it  was a                                                                    
great  review and  opportunity to  talk  about the  internal                                                                    
audits  that were  not done  and the  research analysis  for                                                                    
internal auditors. He  opined it was a  good conversation to                                                                    
consider  how business  was being  conducted in  the state's                                                                    
departments.                                                                                                                    
                                                                                                                                
HB  209  was  HEARD  and   HELD  in  committee  for  further                                                                    
consideration.                                                                                                                  
                                                                                                                                
Co-Chair Johnston reviewed the schedule for the afternoon.                                                                      
                                                                                                                                

Document Name Date/Time Subjects
HB 121 Repealer List 2.4.2020.pdf HFIN 3/3/2020 9:00:00 AM
HB 121
HB 121 Sponsor Statement 2.4.2020.pdf HFIN 3/3/2020 9:00:00 AM
HB 121
HB 209 Budget Processes in the States - Spring 2015 Tables 2-5-20.pdf HFIN 3/3/2020 9:00:00 AM
HB 209
HB 209 FY11-20 OMB PS ED 2-5-20.pdf HFIN 3/3/2020 9:00:00 AM
HB 209
HB 209 Sectional Analysis v. M 1.28.2020.pdf HFIN 3/3/2020 9:00:00 AM
HB 209
HB 209 Sponsor Statement 1.28.2020.pdf HFIN 3/3/2020 9:00:00 AM
HB 209