Legislature(1997 - 1998)
03/30/1998 04:07 PM House RLS
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* first hearing in first committee of referral
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+ teleconferenced
= bill was previously heard/scheduled
SB 209 - TASK FORCE ON PRIVATIZATION Number 055 CHAIRMAN KOTT announced the committee would address SB 209, "An Act relating to the Task Force on Privatization; and providing for an effective date," sponsored by Senator Ward. Number 058 CRAIG JOHNSON, Legislative Administrative Assistant to Senator Jerry Ward, Alaska State Legislature, came before the committee to present SB 209. He stated the legislation is a bill which forms a task force to study state government with an eye towards privatization. He said the bill is very similar to a piece of legislation that Governor Knowles vetoed last session and he stated the reason was that it was a violation of the separation of powers. He noted in the committee members files there are legal opinions stating that it is not a separation of powers. Task forces are assigned all the time. The legislation does not violate any separation of powers. MR. JOHNSON referred to SB 209 and said three members would be appointed from the Senate, two from the majority, one from the minority. Three members would be appointed by the House with a majority and minority representation. Three members would be appointed by the Governor, which also provides for labor representation. Two members would be appointed from the public sector by the Senate, and two would be appointed from the public sector by the House. The task force would have a total of 13 members. MR. JOHNSON said the task force would study privatization. He noted there are 43 other states that currently have some type of privatization, including Alaska. With the budgets and the revenue short falls facing the legislature, the report from this task force would be an invaluable tool in determining not only what areas of government should be looked at for privatization, but also the areas that shouldn't be looked at for privatization. He said SB 209 is very similar to SB 68 which was basically a 2-year plan. The task force would be scheduled to report back to the legislature in November with a report. Number 107 CHAIRMAN KOTT noted that there is a proposed committee substitute (CS), Version B, dated 3/30/98. REPRESENTATIVE PHILLIPS moved to adopt the CS, Version B, dated 3/30/98. REPRESENTATIVE AL VEZEY objected. He said he would like somebody to explain the difference between SB 209 and the proposed CS. Number 125 MR. JOHNSON explained that Version B extends the date of the task force. He referred the committee to page 3, line 4, of the original version and said the task force would sunset in November and the CS would extend it until January 19, 1999. In Section 4, page 2, it removes the ability of this body to administer the oath. CHAIRMAN KOTT stated there is an additional change on page 2 where the language, "and may meet during the interim as well as during legislative sessions," was deleted. He said it was cumbersome and unnecessary. It was taken for granted that they would have to meet and whether or not they meet outside the legislative session or inside was something that they would need to determine. If the bill passes, there wouldn't be a legislative session beyond a special session, and based on the number of legislators that would be involved, they wouldn't hold a hearing during a special session. Number 158 REPRESENTATIVE VEZEY stated that he liked the original idea that the task force would have the authority to administer an oath. He questioned why that is being deleted. He said a task force is not particularly a politically or legislatively strong entity. Representative Vezey said he thinks that taking an oath should be something that perhaps should be done on a more regular basis. He pointed out that he has been lied to on a few occasions and he doesn't like it. Number 175 REPRESENTATIVE PHILLIPS stated she requested that the amendment be added to the legislation. She said she thinks it is unnecessary to put that burden on any committee in the legislature. It is degrading and demeaning and it leads to the possibility of requesting subpoenas and the Senate President and the Speaker of the House are the ones that are charged with issuing subpoenas if they are needed in the legislative body and not a task force committee chairman. CHAIRMAN KOTT noted the portion relating to the oath that was deleted in Section 4 on page 2, of the original versions. MR. JOHNSON pointed out that Senator Ward is not opposed to the date change. However, he did want to point out that part of the reason for the date change was to give the committee more time to act and respond. One of the things that is necessary to perform this, although it has been done many times before by other states, is that they have to deal with accurate information. One of the ways of dealing with accurate information is to know that when people come before the committee and testify that they in fact are providing accurate information. He stated that is the reason for the opposition to removing the oath from the legislation by the prime sponsor. Number 206 REPRESENTATIVE PHILLIPS stated that in her eight years of serving in the legislature and serving on numerous task forces and committees, she believes it is an insult to make people come up and take an oath of office that they're not going to tell a lie during a committee hearing. She said she thinks it is the wrong message to send as the legislature is trying to get the public to participate in the whole legislative scenario. She said, "If we immediately start the process by giving the information that they're not going to tell the truth, you've just blown everything we tried to do that was beneficial." She stated that there are numerous task forces and people don't have to give an oath. It is not a necessary to start that trend. Representative Phillips stated she strongly opposes the requirement for an oath. Number 222 CHAIRMAN KOTT asked Representative Phillips if she is aware as to whether or not a task force has ever been granted a subpoena or oath powers. REPRESENTATIVE PHILLIPS responded, "No, we have not. We have never granted subpoena powers. In my years, I don't that we've ever granted oath power." REPRESENTATIVE VEZEY said he would call for the question on the motion to adopt the CS. He said since he is agreeable to three out of four of the changes, he would ask to propose and amendment after the CS is adopted. CHAIRMAN KOTT asked if there is still objection to adopting the CS. There being none, the CS was before the committee. Number 258 DON ETHERIDGE, District Council of Laborers, came before the committee to testify against SB 209. He pointed out that last year his organization did support it with a two-year study. The council doesn't believe it can be done properly in the short amount that is currently being granted to be studied. Mr. Etheridge informed the committee members that it is very seldom that a task force is created in the second year of a legislature. The legislature that comes in next year doesn't have to act on any of the recommendations of the task force. He referred to the price of $10 per barrel of oil and said the budget is being reduced every day. We are looking at a 3 percent cut in all of the different departments. He said the council feels it will be a waste of time, energy and money to create the task force and the possibility exists that the recommendations won't be implemented. Mr. Etheridge pointed out the Department of Administration is already doing these types of studies on a daily basis. He discussed the fact that the central duplicating office is being closed. He pointed out that Local 71 used to do all the roadside brushing and that is now done under contracts and volunteer labor. They used to do all the janitorial work in all the state buildings, but it is now done cheaper with contracts. He referred to road striping and said they said it would be cheaper to do it under contract. They have now found out that it is not so the state is looking into buying new equipment to do striping again. He discussed other projects that had been contracted out and it was found that it wasn't cheaper to do that. He said he believes that it would be a waste of time, energy and money to do the study. Number 316 REPRESENTATIVE VEZEY asked Mr. Etheridge if he is opposed just to the task force or if he is opposed to studying the subject of privatization. MR. ETHERIDGE said the council is opposed to the particular task force. He said they supported the bill last year with a two-year study. He said last year, they sent every legislator a booklet called the "Pitfalls of Privatizing." It took one person two years to put together that booklet. It takes time to research the information. He said the council is not concerned about being looked at and compared to other industry. He stated that their members are doing a good job and are doing their jobs within a certain price range. Mr. Etheridge discussed subcontracts to maintain roads and said a company will go out and just maintain the surface and not take care of the culverts, ditching and road base. They only bid strictly on what they look at as just taking care of the surface by grading the road. The DOT/PF is currently looking at taking care of the road bases instead of the grading surfaces. They don't want to lose what they have and are concerned that it is not going to be done properly. Number 353 PAM LaBOLLE, President, Alaska State Chamber of Commerce, came before the committee to testify. She informed the committee that the Alaska State Chamber of Commerce supported the bill last year and they currently support it. Ms. LaBolle said they would have liked to have had a two-year process. Unfortunately, it was vetoed by the Governor and so we are left with a one-year process. However, any information that's gained will be useful to the next legislature. She stated the chamber, as an organization, will not let that information go away. They feel it is very important to start, whenever we can to do what does need to be done. Ms. LaBolle said she believes that the money spent for having such a task force will be money well spent if some privatization opportunities are identified that would provide more private sector jobs which would provide a tax base that will provide for the payment of the government we have. She stated the Alaska State Chamber strongly supports the legislation and urged that the committee support it. CHAIRMAN KOTT asked Ms. LaBolle if she is aware of task forces being created in the second half of a legislative session. MS. LaBOLLE stated that she can't think of any. She said sometimes the impact of having a shorter time period is that we get on with it faster. CHAIRMAN KOTT asked if the time period to study the issue would be the same whether or not it is in the first half or second half. There would still be that five-month or six-month period to study the issue. It is just a matter of whether or not the task force recommendations are going to be heard by the next legislature that comes into office. MS. LaBOLLE said she concurs with that. If there is information to be found and once it's been identified and exists, her organization isn't going to forget about it. She stated that she believes the information is important and valuable to whatever legislature is in at that time. Number 398 CHAIRMAN KOTT asked if the chamber has supported task forces in the past. MS. LaBOLLE informed the committee that they supported Long-Range Financial Planning Task Force. She pointed out that one thing she likes about SB 209 is that it is more defined that this is a recommendation to the legislature. The Long-Range Financial Planning Task Force kind of got away from us in the respect that it took a life of its own instead of coming back to the legislature for the legislature's approval of what they wanted to do. CHAIRMAN KOTT asked Ms. LaBolle if she knows when or if the legislature has ever acted on a task force recommendation. MS. LaBOLLE responded, "I think that there were some seeds in the Long-Range [Financial] Planning Task Force that actually -- I mean it was the Long-Range [Financial] Planning Task Force that even though it wasn't the plan that was adopted, it was some of the things that were identified in the work that was done that, indeed, provided some of the foundation for what the majority plan ended up doing." Number 422 IRENE NICHOLIA asked if the board members of the chamber voted in support of the bill. MS. LaBOLLE informed the committee that the state chamber meets annually in Anchorage in December. Local chambers send their representatives and the elected board members also come. There is usually about 100 people at the meeting from all over the state. They bring their priorities of what issues need to be addressed by the legislature. Privatization has been one of the chamber's top priorities for at least five years. In fact, two years in a row the chamber held a seminar in the summer. The first was in the summer of 1995, and they brought in national experts. Those experts discussed all of the things that were happening in privatization and how government was reducing size. The next year, the chamber followed up with a seminar that was focused on the Department of Transportation and Public Facilities. She said they brought in national and international experts to speak about how some governments had achieved some cost savings and improved efficiency by going to the private sector. REPRESENTATIVE NICHOLIA asked if the bill was voted on or was it approved by the board members. She asked if the chamber passed a resolution. MS. LaBOLLE responded that the chamber passed a resolution voted on by the board of directors who was elected by the membership. She said the board is approximately 70 people in size. REPRESENTATIVE NICHOLIA requested a copy of the resolution. REPRESENTATIVE PHILLIPS noted that the chamber also supported the Deferred Maintenance Task Force. She said that is probably one task force that is producing results and the legislature will proceed with those results. Number 470 REPRESENTATIVE BILL WILLIAMS stated that the task force will cost $25,000 for this year. He asked Ms. LaBolle if she thinks that the information that will come from it will be worth that amount. MS. LaBOLLE responded that she believes that there are some cost saving opportunities out there and it would take a very small one to pay a return of $25,000. Number 479 CHAIRMAN KOTT asked if there were any further people to testify on SB 209. MR. ETHERIDGE indicated that he wanted to make another comment. He said he had forgot to mention the fact that anything that is implemented as far as privatizing still has to go through the Department of Administration and they have to do a study on cost savings under the labor contacts. That would also be a very large additional cost that should be looked at. CHAIRMAN KOTT asked if those issues are identified in the current labor contacts. MR. ETHERIDGE responded in the affirmative. He said it is in subcontracting language in almost all the bargaining units. It states that before a public employee can be laid off due to contracting, the Department of Administration has to do a cost analysis to make sure that there will be a savings before they can contract out the work. CHAIRMAN KOTT asked if those items have been included in past contracts for the unions. MR. ETHERIDGE responded in the affirmative and stated that it is language that has been included ever since he has been involved in negotiating. He noted he has been negotiating labor contracts for the last 16 years. Number 509 REPRESENTATIVE NICHOLIA said there is $25,000 for the task force. She asked, "What would the cost be in your (indisc.)? Do you know what the estimate would be?" MR. ETHERIDGE stated, "It would depend upon the recommendation that is made by the task force as to how much or who they would like to see contracted out. Then it would come back to cost at that point. I've heard anywhere from $25,000 up to as high as $1 million for some of the costs studies that is being tossed around right now." Number 523 CHAIRMAN KOTT pointed out that there is a fiscal note from the Office of Management and Budget (OMB) that indicates that prior feasibility studies of this type, would have to be conducted by all the departments. Under most of the state's labor agreements, those cost anywhere between $20,000 and $50,000 per study. REPRESENTATIVE NICHOLIA said, "So you're talking about $25,000 already from Administrative Services that was written and signed by Pamela Varney. And then are you talking about an additional $20,000 to $50,000 to that amount?" CHAIRMAN KOTT responded, "In theory, I suspect you could be talking about that much. There are some other issues here that are identified in the analysis regarding the labor agreements which require other procedures to be followed before contracting out work. I don't know what those are so I don't know if there is any costs associated with those other issues." He noted that it would be something for the Twenty-First Legislature to consider as to whether or not, based on the findings, they even want to proceed to determine whether or not a feasibility study would show cost savings. Number 550 MR. JOHNSON said the way the collective bargaining agreements read is a formal feasibility study must be made prior to letting a contract. Prior to letting that contract, the next legislature will take the information that has been gained from the study and make the determination as to whether or not they want to proceed with the study and appropriate the money at that time. The task force would not incur any of those feasibility studies. It would be up to the next legislature to determine whether or not they choose to proceed with that. Mr. Johnson referred to the short time frame and stated that there has already been a lot of work done on privatization. He said, "To think that we wouldn't use Local 71's report, we plan on using that, we plan on using every piece of information." Mr. Johnson noted he has a copy of the Deferred Maintenance Task Force's report which was done in about the same amount of time. Number 569 REPRESENTATIVE PHILLIPS referred the Legislative Affairs Agency fiscal note and said there is an explanation sheet with continuing notes. She pointed out that the second paragraph on page 2 says that the task force is expected to travel once in 1998 and three times in 1999. She asked what the fiscal note was on the two-year task force. MR. JOHNSON pointed out that it was revised down from fiscal note last year. He said he believes that the travel and per diem was covered under the regular legislative budget, so that was not in the fiscal note. He said, "This year I think it was determined that to include their travel and per diem in the fiscal note - that was different and I think that there is an additional one trip for a staff member in this one that wasn't in the last one." REPRESENTATIVE PHILLIPS asked what the reference is to three trips on 1999, or is that an oversight. MR. JOHNSON pointed out that it relates to the fiscal year and not a calendar year. Number 588 REPRESENTATIVE NICHOLIA asked what the time frame would be. MR. JOHNSON stated it would begin immediately upon passage and it is hoped to have some meetings prior to leaving Juneau. He noted that the time frame would end January 19, 1999. He noted the state of Colorado has done a similar study in about the same amount of time. He pointed out that in the Governor's veto message he indicated that he would be directing his staff to begin looking at the privatization issue. Mr. Johnson said he anticipates that a lot of work has already been done if the veto message is accurate and the Governor lives up to it. CHAIRMAN KOTT asked Mr. Johnson if he knows if in the preliminary budget discussions whether or not departments have come forward and indicated that they are willing to proceed along some lines of privatization of if they are doing something along that continuum. MR. JOHNSON responded, "I have to assume, because the Governor is the head of that food chain, that the Governor's veto message where he states he would be directing his commissioner of Administration to be looking in that direction is accurate. I know of none specifically. The one budget I deal with is Corrections. I think we're all aware of what's happening in that area and the department has made the stand that basically makes their criteria, sound policy, et cetera, that they would look into it." Number 611 REPRESENTATIVE NICHOLIA explained that after Easter, the legislature is going to be very busy. She said she is wondering how the three members of the Senate and three members of the House fit into the time frame for meetings and getting the information together. MR. JOHNSON said he wouldn't want to speak to how any member of the body would fit into anything. That's not his position as a staffer. He said it is a doable time frame. He said, "If you look at the numbers - the staff available to this with six legislators is quite extensive. There is a lot of staff time available there after session. So we anticipate utilizing some of that staff as well. And depending on the chair, if Senator Ward were to be on this committee, I know a large part of my responsibility would be working on this task force." He apologized that he can't speak to the time of a senator or a representative. Number 627 CHAIRMAN KOTT pointed out that there is very little time. He referred to the process such as calendaring the bill, changes to the bill and then the bill sitting on the Governor's desk for 15 days, he can't see that any hearings could be conducted before the legislative session is over. The Speaker and President would have to identify some individuals to be on the task force. He noted he has made it clear that he does not want to be on the task force because it is a campaign year and there are some legislators that don't want to be inundated with those kinds of things. MR. JOHNSON indicated that there are some commissioners available to draft some letters to start some research so they can prepare some information for when there is a meeting. REPRESENTATIVE NICHOLIA questioned how the bill fits in with cutting $50 million from the budget. MR. JOHNSON responded, "I think that is probably the best fit we have. I think the report that Mr. Etheridge was mentioning said that - I don't want to misquote, but I think that the statement was at best 10 percent savings is what's been recognized. If it wasn't from that report, it's on many others. I have a two-foot stack of departmental privatizations from around the country. There are think tanks set up in California that area going to lend their assistance staff. They've just come back from Kansas where they've established the same thing. The nationwide reports is anywhere from 10 to 30 percent savings by privatization. If we take the low end of that number, 10 percent, and take a department - I'll say the Department of Corrections with $120 million or so budget. You don't have to cut too many 10 percents to get to the $50 million, and all the while not affecting a single service that's being delivered to your constituents. So we are able to trim the $50 [million] and deliver the same services equal the services they're receiving now. So I think that's a very good fit and I think that's the whole purpose. I think if the Finance Committees today had the benefit of the first year study that part of that $50 million cut that they're having to do now would be a much easier job to do instead some of the -- the very well thought out process they go through now might be enhanced by having some of this abilities. One of the big benefits of this is know what not to privatize or to look at because maybe everyone in Mr. Etheridge's local is doing a great job and they know that and that's a good thing for them to know too. So I think the budget cutting is the prime driving force behind this legislation." REPRESENTATIVE NICHOLIA said, "I just think this is almost worth $75,000, if all the estimates are correct in the fiscal note. And I just think $75,000 is a lot to spend when you don't know if this is going to be used by the next legislature." MR. JOHNSON said the fiscal note on the bill is not $75,000. REPRESENTATIVE NICHOLIA noted that she said that was an estimate. MR. JOHNSON referred to the additional $50,000 that is being referenced and said it would be up to the next legislature to appropriate. He noted there are six collective bargaining units and each one of them may require that, so it may be even more than that. However, if you're talking a 10 percent savings on $100 million budget or a $1 billion budget, the math is pretty clear. Number 687 REPRESENTATIVE VEZEY said, "I would quickly move that we - and I would defer to Leg Legal to draft it properly, but just adding the Section 4 (b) oath part to the bill be made as an amendment to this as - and incorporating the committee substitute and I'll address that." REPRESENTATIVE PHILLIPS objected. CHAIRMAN KOTT stated that there is a motion to reinsert the language that was in the previous version of the bill that dealt with the oath. REPRESENTATIVE VEZEY said he would point out that it is a permissive statement and it is not mandatory. He stated he thinks that committees and task forces appointed by the legislature probably already have this authority. He said that it is routinely put into statute the right to administer oaths. Representative Vezey said they are not giving subpoena or certain other special powers to the task force. It is a step that the legislature should start doing on a more routine basis. TAPE 98-6, SIDE B Number 006 CHAIRMAN KOTT said there is a motion to reinsert lines 26 and 27 of Version A of the bill and there is an objection. A roll call vote was taken. Representative Vezey voted in favor of the motion. Representatives Phillips, Williams, Nicholia and Kott voted against the motion. So the amendment failed to be adopted. REPRESENTATIVE WILLIAMS stated that he is concerned regarding the legislation and it is not because of the fact that it looks into privatizing, but it is because of the time. It is campaign year for 50 legislators. CHAIRMAN KOTT said he also shares Representative Williams concern. Number 055 REPRESENTATIVE PHILLIPS made a motion to move SB 209, as amended, from the House Rules Committee with individual recommendations and with the attached fiscal note. CHAIRMAN KOTT stated there is a motion to move CSSB 209, Version B, from committee with individual recommendations and with the accompanying fiscal note. He asked if there was an objection. REPRESENTATIVE VEZEY said he wanted to raise a point. He said he didn't know that the bill had been amended. He said he wanted to clarify that the committee is voting on HCSSB 209, Version B. CHAIRMAN KOTT said that is correct. He asked if there was an objection. REPRESENTATIVE NICHOLIA objected. Number 090 CHAIRMAN KOTT called for a brief at-ease at 4:56 a.m. He called the meeting back to order said there was an objection to moving the bill. A roll call vote was taken on the motion to move HCSSB 209, Version B. Representatives Vezey and Williams voted in favor of moving the bill. Representatives Nicholia, Phillips and Kott voted against moving the bill. So HCSSB 209(RLS) failed to move out of committee. SB 209 - TASK FORCE ON PRIVATIZATION Number 447 CHAIRMAN KOTT noted that he wanted to serve notice of reconsideration of his vote on SB 209.
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