Legislature(1997 - 1998)
02/21/1998 10:05 AM House STA
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HB 315 - OPERATING APPROPRIATIONS FOR MAINTENANCE Number 0979 CHAIR JAMES announced the last order of business would be HB 315, "An Act relating to operating appropriations for annual maintenance and repair and periodic renewal and replacement of public buildings and facilities; and providing for an effective date," sponsored by Representative Mulder. Chair James called for an at-ease at 11:16 p.m. She called the meeting back to order t 11:24 p.m. Number 0982 DENNIS DeWITT, Legislative Assistant to Representative Eldon Mulder, Alaska State Legislature, came before the committee to present HB 315. He informed the committee members that during the interim he was staff to the Deferred Maintenance Task Force. He explained that before the committee is a committee substitute for a proposed committee substitute for HB 315. REPRESENTATIVE IVAN made a motion to adopt the proposed committee substitute dated 2/16/98, Version B. There being no objection, Version B was before the committee. MR. DeWITT explained the proposed committee substitute for HB 315 focuses the need for budgeting maintenance in the annual budgeting process. Section 1 amends the Executive Budget Act to require that as part of the operational budget there should be line item requests for maintenance needs. Section 2 defines maintenance repair, renewal, replacement and operations. Section 3 provides for a July 1, 1998, effective date so that they hopefully will look at the preparation of the 2000 budget, which is done the fall of 1998. MR. DeWITT explained, "The purpose of this is to focus the debate on whether or not in the budget requests, and in the budget discussions and the enactment of the budget, proper attention is given to maintenance and that decisions are made as to whether or not appropriations to an agency are clearly defined as what's for program and what's for maintenance of facilities. Currently, many of you have seen the process we use for budgeting, and in the component that we'll look at, it'll include personnel services, travel, contractual commodities, equipment, land buildings, grants, claims and miscellaneous. Within that is the issue of maintenance of facilities. The problem that the task force noted as it moved around the state was that there were many managers that felt that the legislature had not adequately funded the maintenance component. There were many legislators who felt that indeed the appropriation had been made for maintenance, but that program managers opted to use that money to enhance their program rather than for maintenance." MR. DeWITT stated that if you separate the traditional activity for the programs from the maintenance issue, then clearly the discussion would be on what should be allocated toward maintenance and what should be allocated toward program operations. When the decision is made, there will be accountability both in terms of the requests that are made and in terms of the appropriation that is made at the legislative level as to what monies are to go for program operation and what will go toward maintenance activities. MR. DeWITT informed the committee that he worked with the Department of Transportation and Public Facilities (DOT/PF). He noted that the DOT/PF is a little different than most of the state agencies because their primary function is maintenance and operation. In the process proposed in the legislation, most of their budget would be in the line item relative to maintenance and operation. He said that would be different for most of the other agencies. Mr. DeWitt stated that he appreciated the work that the department did on the draft committee substitute, and he believes that they both understand the bill. The debate that will be created as a result of this action will be most interesting to watch over the next couple of years. Number 1224 CHAIR JAMES asked if the bill only includes public buildings and not schools. MR. DeWITT responded in the affirmative. He added that the schools will continue to be funded through the foundation formula. CHAIR JAMES asked Mr. DeWitt if he has given any thought to include in the foundation formula a maintenance item. MR. DeWITT explained that during the course of the task force, there was several discussions on that issue. He said while he did not research it, he was led to believe that they had already indicated that the foundation formula included in it maintenance dollars. He said he doesn't recall broad discussion, but he does recall speaking to members of the task force at different points and his recollection of most of the discussion was that making that cut was more the responsibility of the board rather than the legislature. Number 1324 CHAIR JAMES referred to the renewal and replacement and asked if there is currently authority for a sinking fund where allocations could be made into that account for renewal and replacement so the money would be there when it is needed. MR. DeWITT explained there is real difficulty with renewal and replacement funds because of the lapse date of operating funds. That is an issue that is very difficult to get hold of when making annual budgets and the dollars lapse if they're not encumbered or expended. They don't have a sinking fund ability that he is aware of. CHAIR JAMES referred to the Administration planning to implement a Rent Program and said they have to have a fund to put the rent monies into for maintenance and so forth. She asked if that is a fund that could be used for the same thing. She said, "If there is a line item, as an example, for maintenance and it includes these things. With renewal and replacement, you know, not necessarily spend that money this year." MR. DeWITT indicated he hasn't seen the proposal. He said if it has an ability to hold those dollars beyond the lapse date, his expectation of what would happen is those funds that were allocated for long-term renewal and replacement would be, under our system, extended into that fund. He said he believes that would help with the lapse date problem. Number 1475 REPRESENTATIVE VEZEY said, "I'm still a little confused on [AS] 37.07.020. What facilities are we talking about? Facilities I was told in the unincorporated borough - unincorporated area - unincorporated borough -- I just haven't, in my mind, pictured what facilities those are." MR. DeWITT referred to [AS] 37.07.020 and said it is the section of the Executive Budget Act that articulates the responsibilities of the governor to prepare and submit to the legislature a budget. He explained that what is being talked about with HB 315 is how budgets are prepared by the Administration and transmitted to the legislature. Number 1554 REPRESENTATIVE ELTON said it seems that the requirement makes sense because it elevates the issue of annual and periodic maintenance so that they don't get to a deferred maintenance problem. He referred to the Northern Region and asked if, "Under a separate line item, are you going to expect that they will delineate, for example, how many maintenance dollars they'll need for rural airports, how many they'll need for the Parks Highway or the road to Eagle or -- or is that going to be lump sum? It seems to me that to eliminate the finger pointing, a lump sum appropriation for maintenance is not going to do it because that doesn't get you down to the facility level or the transportation infrastructure level. How do you envision that being done in a manner that really does eliminate the finger pointing?" MR. DeWITT explained that the prime mission of the DOT/PF is basically maintenance and operation. To the extent that the subcommittees, through their work and the full committee, make a decision on how definitive that's going to be will have more or less specific accountability. That is going to have to be left to them working that through. Mr. DeWitt stated, "Currently, you can as a legislature, articulate as many line items or separate appropriations as you wish or as few. Typically, that's been done with reference to different programs within an agency, different divisions, different kinds of things. Annual fee in the various budgets that are passed, one or just a few large appropriations or you may see a multitude of very small appropriations - part of the budgeting process. What we're hoping to get with this, and maybe we could focus where it is a little more clear, again, let's use the pioneer home system which clearly has buildings, which clearly has a program operation and where we can clearly draw the line so we can decide whether or not cost of care or cost of facilities has been recognized either by the budget proposal or by the budget enacted. There I think you get the clear -- you'll have six buildings, you'll have activities for six buildings outlined in components within an appropriation for maintenance and operation and you'll have the program activities outlined. When you get to the Department of Transportation, as we found in the task force report, you can get down perhaps to the substation level where you have for a general area, maintenance and operation needs and appropriation, perhaps by component or perhaps by specific appropriation. But it's very difficult to get an intersection or 'X' number of miles on the Park Highway from mile 'X' to mile 'Y' in a budget document. This doesn't solve all the problems, but I think it takes a step towards recognizing that. What I think we'll find, unfortunately, in DOT is that this line item will become their largest appropriation and however it's segregated by component. But we will begin to see a smaller line item of the program side operation of DOT. We may have some interesting discoveries in terms of what other things they're doing or what the importance is or, in terms of DOT, some program things that we have not been addressing because maintenance and operation has been their primary thrusts -- wherein I think other departments will find that the program has been the primary thrust, but maintenance and operation has not been." Number 1859 REPRESENTATIVE ELTON referred to rents where DOT/PF charges off to a different agency the amount of money necessary to do the maintenance and asked which agency will be required to delineate the maintenance cost. He asked if it would be the agency pay the rent or the agency collecting the rent. MR. DeWITT said, "We currently appropriate, for the most part, to agencies the money to deal with their facility. They then contract through a reimbursable services agreement to DOT/PF, or sometimes they do it on their own, to come in and do the work. So my expectation is that the -- if it were a perfect world and I were running it, I would suggest that the cost of operation for the agency be funded through that agency's appropriation and then they contract to have services done, whether they purchase it from DOT or an outside contractor, or do it internally with their own maintenance people." REPRESENTATIVE ELTON discussed charging costs off to several different agencies and said his concern is that he doesn't want what is being put into law to get in the way of dealing with real facility costs that might be dealt with in the rental concept. MR. DeWITT said he doesn't think that'll be the case. He said this can certainly begin to highlight the rent number to the extent that they meet their rent for space utilized in the State Office Building. He said it would include heat, lights, snow plowing, and fixing the steps as well as the parking places. He said it would be allocated as it would be for any other commercial building. Through the Administration there will be some arguments about whether the rent number is right or not right, or whether it's fair or not fair. REPRESENTATIVE ELTON stated he is less concerned about the agency end than he is about the straightjacket that may be put upon DOT who owns the State Office Building and whether or not that straightjacket will give them the latitude to institute that kind of a program. MR. DeWITT said he doesn't see that to be a problem. Number 2229 CHAIR JAMES asked Mr. DeWitt if the maintenance of these building would be in the same line item as the maintenance of roads and airports. MR. DeWITT responded that it would be a line item, but he expects it would not be the same line item. It should be separated out. Mr. DeWitt explained, "The maintenance and operation of a building can be accomplished either through the owner -- if it's the agency we're appropriating to, using that money to take care of window seals and whatever, or it can be accomplished by paying rent to the agency that owns the building." He referred to the rent concept and said he would expect that they could fund rents through this particular line item. Mr. DeWitt pointed out that it is a pilot program and he thinks those are some of the questions that will get answered. He said the money appropriated would go to the agency and be RSA(ed) either to DOT or through contractual services to someone else, or it would be done by the people that work there. TAPE 98-22, SIDE A Number 0001 MR. DeWITT stated there is some balancing that will naturally occur in the budget. REPRESENTATIVE VEZEY stated, "We have considerable difficulties in our efforts to micro manage the Administration and their budgets." He asked what the consequences would be if the agency put forth a very adequate maintenance budget and the legislature doesn't fund it. CHAIR JAMES responded, "Well then the buck stops here. That's the whole issue." REPRESENTATIVE VEZEY said, "So all the planning process just goes up in smoke and we're back where we're at now?" CHAIR JAMES responded that she thinks Representative Vezey is right. She said that is the problem the legislature has when setting the appropriation process. There is no guarantee of the appropriation until it has gone through the legislative process. REPRESENTATIVE VEZEY asked what if the legislature does appropriate the money and the Administration uses the authority that the legislature has given them to transfer that money. Number 0148 MR. DeWITT explained that when separate appropriations are used, agencies cannot move money across appropriations. They can move it across components within an appropriation. He said if there is an agreement to put $100,000 in maintenance for the pioneers home buildings, it would be inappropriate and probably illegal to hire an activities director with that money. Mr. DeWitt explained, "The way we currently budget, you can sort of have that discussion and you make the appropriation in one line item. All you have to do is move it from one component of that appropriation to another component. It's quite legal and quite easy to do and that's where the frustration is in terms of being able to assign accountability. The accountability that will be assigned will be in terms of the governor's budget coming to the legislature which will specify what they believe is necessary for programs and what they believe is necessary for maintenance. And then the legislature's response, in terms of what if (indisc.), in terms of how it responds to those numbers." Number 0338 REPRESENTATIVE VEZEY said, "Within and an appropriation for maintenance, and we see this daily around here, we don't control - part of that goes to buying a computer to do the computerized maintenance program which happens to be used for that 2 percent of the time and 98 percent for social schedules of the Administrative Department or whatever. We don't control whether that goes for bricks an mortar or whether it goes for exempt personnel or nonexempt personnel. Our ability to micro manage has been a dismal failure in the past, I'm sure it will be in the future. Where is the handle? I don't quite understand what we think we're really controlling here." MR. DeWITT responded, "There is the ability to articulate what it is the legislature would like to have done with the money spent, and if it is appropriated in a general appropriation as I showed you - how we do it now - you come back the next year and you have another fight over whether you should have -- and again let's use larger issues because certain the finite issues are very very difficult, whether or not the money was used to maintain a building or whether the money was used to hire an activity director. In our current strategy, we basically then go back and say, 'You shouldn't have done that,' and you try and put more line items in the budget and you could still move around because the maintenance components is still somewhat within the same budget. There is no question in my mind that there will be those times when we buy a computer that is 2 percent for maintenance and 98 percent for other. And those are the arguments that need to be had in the subcommittee and the full committee. This simply allows us, I think, a better budget tool in terms of the input that's coming in to identify what's maintenance and the output from the legislature that identifies what we intended for maintenance and we intended for programs. Is it perfect? No. Will we get into scraps and arguments about whether that maintenance item was fully maintenance or had a little program component in it. No question in my mind, we will, but I think we'll reduce the arguments and differences to an area where there is a strong focus on whether maintenance is occurring. Decisions will have to be made on whether or not we're going to fund maintenance. And there is no way we can force funding or for that matter force spending, but at least we'll be able to identify and hold folks accountable and the voters will make their choices of which folks they want to be accountable." Number 0588 REPRESENTATIVE BERKOWITZ said the way he reads the language in the bill, there will be three new line items. One is for facility operations, one is for maintenance and repair, and one for renewal and replacement. He said it seems to him that if we are trying to delineate a category of maintenance, it should say that specifically rather than having three subitems. CHAIR JAMES said it is her understanding that (8), (9) and (10) are only definitions as opposed to line items. MR. DeWITT said that is correct. He said as he reads them, they will be prepared and presented separately from the appropriation in (a). He noted that the intent was that those three things would be identified for a separate appropriation. REPRESENTATIVE BERKOWITZ asked is it is one lump or in three separate items. Representative Berkowitz said "The way it's written is 'proposed annual appropriations' and it itemizes 1, 2 and 3 - 'must be presented separately.' What we're trying to do is have a maintenance line item. Is that correct?" MR. DeWITT responded, "I think it says, 'separately from appropriations for other proposed operating expenditures by the agency.' So as I read it, as the intent was, as the drafter told me it worked, and again it's (indisc.). There are these three will be funded separately from the rest of it and I think that could read as either 1 or 3 I suppose. Frankly, from the perspective of where we're going, I'm not sure that having three separate would be disastrous, although I think at least in the early going, one would be easier to work with because we're taking a new step that's going to require some looks at new accounting and some different responses." Number 0759 CHAIR JAMES noted there is back up and an opportunity for footnotes in the budget. She stated that it appears to her that facility operations, maintenance and repair, and renewal and replacement, all being separate things that are done, it appears that the money could be used amongst them. MR. DeWITT responded that he believes that's true. CHAIR JAMES stated that she would think that the footnote would be the delineation of what those numbers are calculated and not necessarily what those number are actually. MR. DeWITT informed the committee that he envisions seeing three components in an appropriation, one for each. He said he hasn't viewed it as three separate appropriations. In listening to Representative Berkowitz's interpretation, he thinks it is valid in that they could come in three separate as in one with three components. Mr. DeWitt said he thinks the operative issue is that it is separate from the other appropriations in the operating budget. Number 0857 JACK KREINHEDER, Senior Policy Analyst, Office of Management and Budget, Office of the Governor, came before the committee. He stated he would like to express agreement with Representative Vezey about micro management of the budget and he is glad to hear that they are in agreement on that subject. He informed the committee that he has discussed the legislation with Annalee McConnell, Director of the Office of Management and Budget. Mr. Kreinheder explained that they are not taking a formal position for or against the legislation. He said they are in full support of the overall goal of the bill which is adequate maintenance for state facilities. The question is, "Is this best approach to get there?" He stated the most important problem is not how the money is budgeted, it's the lack of money. When budgets are reduced or inflation is absorbed as it has been, the most important thing is preserving services to the public. Unfortunately, building maintenance is one of those things you can get away with short funding for awhile until it catches up to you. He said the intention is to address this issue in more detail when the legislation gets to the Finance Committee. He noted they don't have an objection to moving the bill. Number 0980 CHAIR JAMES said you have to admit that for years maintenance has not been addressed in the proper way that it should be. Nowhere have they ever dealt with renewal and replacement except in the capital budget. She said she takes the position that if we can't take care of our buildings, they should be sold and we should lease them back from a private individual. MR. KREINHEDER referred to the question of would this legislation hinder our efforts on this rental structure that we're developing and said he hasn't thought of that, but he is fairly confident that it would not be a problem in that regard. Number 1085 REPRESENTATIVE HODGINS made a motion to move CSHB 315, Version B, dated 2/16/98, out of committee with individual recommendations and with the attached fiscal notes. There being no objection, CSHB 315(STA) moved out of the House State Affairs Standing Committee.
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