Legislature(1999 - 2000)
02/01/1999 09:02 AM Senate FIN
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SENATE BILL NO. 44
"An Act making appropriations for year 2000
assessment, compliance, and remediation
projects; making appropriations under art.
IX, sec. 17c, Constitution of the State of
Alaska; and providing for an effective
date."
ROBERT POE
Commissioner, Department of Administration
(newly appointed)
He explained how Y2K is related to the way
dates are used in the computer.
The state was taking a three-fold approach
1) take care of ourselves (govt.) 2) reach
out to businesses 3) reach out to small and
medium sized businesses, who are most
vulnerable to Y2K problems because of their
inability to prepare for major losses.
We identified 200 functions the State of
Alaska provides. (He listed some examples.)
Of those we identified 89 that are mission
critical
CO-CHAIR JOHN
TORGERSON
Why did you identify economic well being at
the same level as life emergencies?
COMMISSIONER POE
Because the harm it could have on the
economy could be detrimental.
CO-CHAIR SEAN
PARNELL
Related keeping prisoners in cells to paying
small business vendors on time. Realize
importance of economic wellbeing to small
business, but think all would agree that
keeping prisoners in cells is more
important.
COMMISSIONER POE
Understand.
We plan to take care of 89 mission critical
items first then eventually address all 200
areas.
Refer to agency report. This was first
created internally, the evaluated with a
final external report released. There will
be an update produced each month and you
will be provided with a copy. They will also
be available on website which has had
already had many hits to site.
It takes money to fix systems.
In coming up with the list in SB44 we
applied a process, which you will also
probably follow. We put together a
committee of 3 people including myself,
someone from Office of Management and Budget
and someone from the Department of
Education.
Our Original request was $27.9 million. Of
that we were able to reduce the figure to
about $17. Million, including University of
Alaska.
However, we had bad news from contractor and
will have to raise the figure.
The average state expenditure for Y2K is
$74.1 million.
CO-CHAIR SEAN
PARNELL
Believe that to be unrealistic. Refer to
corporate figures.
COMMISSIONER POE
Number is accurate if you look at the entire
picture.
CO-CHAIR SEAN
PARNELL
If I looked at total to fix every aspect
including upgrades, AK's figure would be
much higher.
COMMISSIONER POE
Other states are not grouping other upgrades
into this figure, just Y2K fixes.
Only 300+ days left to get done.
Things will go wrong.
One of the best defenses against Y2K
litigation will be preventive steps taken
beforehand.
We've been using money from the state's risk
mgmt fund to address so far.
CO-CHAIR SEAN
PARNELL
Is this out of the Department of
Administration FY99 budget?
COMMISSIONER POE
Yes.
CO-CHAIR SEAN
PARNELL
Are the funds used for Department of
Administration Y2K fixes alone?
COMMISSIONER POE
No that's for all the departments.
CO-CHAIR SEAN
PARNELL
Your handout says that to date $791,000 has
been spent so far.
Request a list showing a breakdown by
departments listed in handout.
Doesn't this figure ignore other efforts
made by dept.s so far?
This figure doesn't reflect total state
costs to date?
COMMISSIONER POE
Correct. The reason we didn't layout all
those numbers is because it's hard to
differentiate Y2K expenditures from regular
upgrades.
CO-CHAIR SEAN
PARNELL
Further discussion.
So we have more expenditures in all
departments than shown here.
COMMISSIONER POE
We've had departments stop other upgrade
work and only focus on Y2K.
Every department is following the same five-
step process beginning with an inventory and
continuing on to test, replace equipment as
needed and lay out a contingency plan for
unexpected failures.
Part of the bill is a request to repay the
risk mgmt fund, which protects the state
against litigation.
Could walk through key aspects of the bill
if committee would like.
CO-CHAIR SEAN
PARNELL
Note people linked to meeting via
teleconference from the University of Alaska
that can address the committee later in the
meeting.
SENATOR AL ADAMS
Are we using existing programs or new funds
for these fixes?
POE
Both probably more existing programs than
new.
SENATOR AL ADAMS
(Request breakdown.)
POE
Often takes both to solve Y2K.
CO-CHAIR SEAN
PARNELL
But we don't have that information to make
our judgements.
POE
Yes we'll get that for you.
SENATOR AL ADAMS
What new people have been added to work on
project?
POE
Me, plus four others from different
agencies.
Quite a lot of work associated with the
project.
CO-CHAIR SEAN
PARNELL
So five positions are filled and funded?
POE
All are funded. One position is currently
vacant.
SENATOR JOHN
TORGERSON
What are you funding from the risk mgmt
fund?
POE
We are asking for reimbursement to the fund.
Other projects are being delayed to route
funds here.
(Listed dollar amounts of monies routed from
other projects to Y2K.)
We have made attempts to survey public
utilities throughout the state, many of
which haven't responded. We have to spend
more money to do another survey to try to
find out the status of their compatibility.
(Give an example of Village Safe Water
projects and the need to make sure there are
no imbedded chips in these systems.)
SENATOR JOHN
TORGERSON
So this money is already spent and the
projects are completed?
POE
Most of the projects are completed. The
money has already been spent.
SENATOR JOHN
TORGERSON
How much?
POE
Don't have exact figures.
$2.1 million has either been spent or
committed.
SENATOR JOHN
TORGERSON
You feel the risk management fund needs to
be reimbursed?
POE
Yes to insure the state.
POE
That's why the matter of self insurance is
so critical.
SENATOR RANDY
PHILLIPS
Your listing quotes 60 % of utilites. Is
that all utilities or just electric power
plants?
POE
All utilities.
CO-CHAIR SEAN
PARNELL
You indicated that $2.1 million has been
committed. How long has this Administration
been working on this program?
POE
Since the beginning of this Administration
some of the depts. have been working on the
problem
(Refer to state payroll system upgrades made
early in the Administration that
incorporated Y2K compliant systems.)
CO-CHAIR SEAN
PARNELL
Have you done any accounting of time and
effort spent on this? I want a figure
showing the human resources time spent on
this since the beginning.
POE
Don't have figures, its too difficult to
break out efforts spent on Y2K and time
spent on regular upgrades.
CO-CHAIR SEAN
PARNELL
The reason I bring this is up is that it
looks like a tremendous amount of work has
been done already with lots of work left to
be done. I want some idea of what's been
invested.
Also I don't want funds spent on other
upgrades that are not important to Y2K.
Want assurance of what steps you have taken
to make sure departments aren't taking
advantage of the Y2K funding to purchase
nonessential upgrades.
POE
We share that cynical view.
(Explain process to ensure requests were
required for mission critical Y2K fixes.)
About $10 million of the original request we
sent back as not fitting the criteria.
CO-CHAIR SEAN
PARNELL
So if we have additional information of some
falling through cracks you'd want to know
about?
POE
Yes.
SENATOR JOHN
TORGERSON
(Refer to the public utilities surveys and
steps taken to assist them in becoming
capatible.)
POE
We want to know what areas have problems.
Need to know what communities are venerable
to public utilities.
Realize some of the communities are not
techniology advances and don't even have the
information to determine their capabilities.
SENATOR JOHN
TORGERSON
Does that mean we should not expect to see
anything in this year's capital budget for
Y2K items?
POE
I believe so; I didn't do the capital
budget.
SENATOR JOHN
TORGERSON
(Note some federal match finding and
inquired what those funds were intended to
address.)
POE
Some are for the Medicaid system, some are
for Department of Transportation and Public
Utilities for a Marine Hwy project.
SENATOR JOHN
TORGERSON
I find it surprising that the Kennicott
needs assessment. Isn't that new vessel?
POE
When the contract was made, Y2K wasn't
included as part of the contract. There is
now some discrepency about who is
responsible, the state or the builder. That
is a common problem in many communities.
Our contracts today require Y2K
compatibility.
SENATOR JOHN
TORGERSON
I don't find it laughable, somebody in
Department of Transportation and Public
Utilities wasn't paying attention when they
drew up the contract.
SENATOR RANDY
PHILLIPS
Is the Department of Corrections here to
address their request?
POE
Not here.
SENATOR RANDY
PHILLIPS
Regarding small public utilities. What
percentage of the population is compliant?
If no electricity going into computers then
it doesn't matter if that computer is
compliant.
POE
Agree.
We've committed risk mgmt funds to look at
that issue.
SENATOR AL ADAMS
(Refer to the opening statement comments
that Y2K problems are date related.) Seems
like we'd find someone to write software to
figure this out?
POE
Many have asked that same question before
you. There is no silver bullet. Depending
on the technology, different fixes are
needed. Some systems have imbedded chips.
There are several products. One has been
written for Cobalt. It depends on the
particular program. That's why it's such a
difficult problem.
SENATOR GARY WILKEN
(Refer to Pg1 line 11-13 of the bill stating
Y2K problems have already been sufferred.)
POE
In the state we've found actuarial systems.
Example, one agency bought lots of rubber
stamps saying that they were Y2K compatible,
but they didn't have year 1999. (Also refer
to Fairbanks' new 911 system that is not Y2K
compliant.)
SENATOR RANDY
PHILLIPS
Have you looked at other jurisdictions and
how they are solving problems?
POE
Looked at all 50 states plus Canada. I'm not
worried about Canada.
SENATOR JOHN
TORGERSON
Regarding the risk mgmt account. Is that
your target to leave $5 million in the acct?
What has the low balance been over last 5
years?
POE
We would like a balance of $5 million. Can
get figure of the lowest account balance for
you.
SENATOR JOHN
TORGERSON
(Refer to a potential of less exposure and
suggested the need for a $5 million balance
might be overestimated. Refer to billing of
agencies.)
POE
Department of Administration bills agencies
based on the number of employees in their
department for their contribution to the
fund.
CO-CHAIR SEAN
PARNELL
Have you ascertained different problems such
as June 30th?
POE
We will have problems on June 30. We've
identified on the inventory list what the
failure dates will be.
CO-CHAIR SEAN
PARNELL
Have all the systems you identified been
taken care of?
POE
Some are still having problems.
CO-CHAIR SEAN
PARNELL
What I'd like to see is a spreadsheet in the
bill listing all of the projects.
POE
Will get for you.
CO-CHAIR SEAN
PARNELL
Also want you to identify funds to be used.
SENATOR JOHN
TORGERSON
AK Railroad is known for making money and
not having to rely on the state for any
supplemental. Therefore, why are their
programs included here?
POE
The proposed money will be spent from the
railroad funds for their systems.
SENATOR JOHN
TORGERSON
They've already spent this money?
POE
Expenditures were made in FY99 out of the
railroad fund.
SENATOR JOHN
TORGERSON
Will you make sure the proposed new
locomotives are Y2K compatible?
POE
Yes.
CO-CHAIR SEAN
PARNELL
(Noted listing of federal receipts of $2.4
million.) Are these funds allocated just for
Y2K projects?
JANET CLARKE
Department of Health and Social Services
(Addressed federal funds allocated to her
department. She explained the federal match
for Medicaid.)
The funds are relative to our Medicaid
expenditures.
CO-CHAIR SEAN
PARNELL
(Ask for further explanation.)
So we've spent this much money before for
other Medicaid program expenditures?
CLARKE
Should be a little higher.
SENATOR AL ADAMS
Is there a restriction on how the funds can
be spent?
CLARKE
They can only be spent on Medicaid programs.
CO-CHAIR SEAN
PARNELL
What is the maximum amount of federal funds
we can get in 1999 to address Y2K Medicaid
problems?
CLARKE
If we needed to spend more, we would get a
higher match. It is not a cash dollar
amount.
SENATOR RANDY
PHILLIPS
Have you looked at other businesses in AK
and how they are solving problems? (Refer
to a credit union that claims to be Y2K
compatible.)
POE
The credit union was pressured by their
regulators early on so they have made the
necesarry upgrades.
Tape: SFC - 99 #15, Side B 2:15 PM
We have also Looked at hospitals and their
efforts.
(Refer to the outreach stage of the
department's three-phase approach.) We are
talking with chambers of commerce about this
issue. Some are really taking the matter
seriously others aren't.
National Bank of Alaska is offering some
help to its small business customers. Plus
we are doing outreach and have info on the
web.
We are putting out a list of AK contractors
who are available to address issues.
SENATOR LYDA GREEN
(Ask explanation of risk management.)
POE
There are a number of areas were we cover
our own liability such as airports, marine
facilities. Other than that we have
insurance policies with huge deductibles.
We use those funds to settle large claims
against the state.
My understanding is that fund is billed to
departments based on number of employees
working in a particular department.
SENATOR LYDA GREEN
Is there any limit on what that fund can be
used for?
POE
There is, If you're asking how fund could be
used for Y2K. I can answer.
There have been studies showing a potential
for large lawsuits regarding Y2K problems.
If efforts are made in advance to avoid some
of the problems we felt that would reduce
lawsuits to the state. Therefore, we can
justify using this fund..
SENATOR GARY WILKEN
Are we going to hear from University of
Alaska this morning?
CO-CHAIR SEAN
PARNELL
(Speak to Steve Smith via teleconference.)
Did you want to only answer questions or
also give a presentation?
STEVE SMITH
I can give a short presentation.
CO-CHAIR SEAN
PARNELL
We will wrap up Department of Administration
first.
Regarding the Department of Corrections
request. There is some question if this is
just an upgrade from 386's to Pentium
processors, or is it to meet Y2K
compatibility requiremtns?
POE
I understand your concern. But the old 386
computers are not Y2K compatible.
CO-CHAIR SEAN
PARNELL
Are they used just for word-processing?
POE
We need to look at each one. If a computer
is used only for word processing and isn't
hooked up to a network, then we won't need
to replace it. But if it is hooked up to a
LAN then it needs to be compatible. We have
to ask what that computer is doing.
CO-CHAIR SEAN
PARNELL
Alaska Court System
CHRIS CHRISTENSEN
Staff Council, Alaska Court System
We were the last branch to computerize and
this has worked to help us with Y2K
problems. Since our systems are new, we
have installed compliant systems as we went
along.
Most everything is compliant.
What we do need is upgrade to the telephone
systems. (Refer to importance of court
proceedings taking place via teleconference.
Note many proceedings are handled long-
distance to save on travel expenses.)
Also have a security systems in 5 buildings
which will stop working in 2000. Jail cells
in court buildings currently run on non-Y2K
compliant equipment and need to be made
secure.
SENATOR JOHN
TORGERSON
Are we expecting Y2K expenditure requests
for the court system in the capital budget?
CHRIS CHRISTENSEN
No, our facilities are under the care of
Department of Transportation and Public
Utilities, which will ask for funds to cover
expenses for systems like the elevators.
POE
These Department of Transportation and
Public Utilities requests won't be in
addition to the $1.9 million requested in
this bill.
CHRIS CHRISTENSEN
We have 59 facilities, but they are
leasehold and the landlord will take care of
making them compliant.
SENATOR RANDY
PHILLIPS
Department of Public Safety - what about
their requests?
POE
(Refer to only one item.) Other than that
they don't have further requests. Part of
their maintenance efforts has allowed them
to take care of making their systems
compliant.
CO-CHAIR SEAN
PARNELL
Teleconference - hear from University of
Alaska on their $5million request.
STEVE SMITH
Interim Chief Information Officer heading up
Y2K
MaryLou Burton is handling internal systems.
Our request has included all three major
campuses, Anchorage, Fairbanks and Juneau,
and their outlying facilities.
The University of Alaska is doing much to
address the issue.
Original estimate that was $7.9 million
would be needed. As we reassessed the figure
has gone down.
The amount would have been much higher if we
hadn't started years ago to address fiscal
systems and student information systems.
We have been in the process of upgrading our
library systems.
Even when vendor says a system its Y2K
compliant, we have ran tests to make sure.
We have put together a plan for an event of
failure. Our first priority is life-
threatening issues. Students living in on-
campus housing. The next priority is with
student finances.
We have some challenges with our facilities
being so spread out across the state.
We have concerns with the potential loss of
some research data.
We have strict criteria to estimate what
upgrades meet the criteria for essential Y2K
problems.
We want to make sure people are not
replacing desktops just to upgrade them.
Also we have some federal requirements
setting deadlines for us to make sure we are
compliant. Such as NOAA, NASA, National
Science Foundation...
We are looking at secondary suppliers making
sure they can deliver things such as food.
We're spending lots of time on contingency
planning. Were planning to have staff on
board and on call as we switch over to
January 1, 2000.
A few weeks ago we did a test of the
Fairbanks campus' power plant that blew up
the system and shut down power.
CO-CHAIR SEAN
PARNELL
SENATOR LYDA GREEN
Please explain the phrase, "loss of research
data."
STEVE SMITH
(Speak to the research efforts and explain
that many research projects are done as
contract studies.) We expect some loss of
data. We have some tools to address the
potential.
We can't prevent it all in advance, but
planning to address critical areas if they
crash.
SENATOR LYDA GREEN
Are you talking about data already collected
not future data?
STEVE SMITH
Yes. Much of this information was gathered
using older machines. It would affect
future data where we have devises in the
field such as volcano reading equipment.
SENATOR LYDA GREEN
Did any of the federal agencies that imposed
requirements programs give money towards the
project? NASA, NOAA, NSF, etc.?
SMITH
No, with two exceptions. (Explain.)
SENATOR LYDA GREEN
Do you have a dollar figure on that to show
the amount contributed?
SMITH
No but will get it for you?
SENATOR JOHN
TORGERSON
Are you expecting any reimbursement for the
federally required upgrades to apply toward
the $5 million request?
SMITH
We are not expecting reimbursement except
the 2 exceptions already allocated.
SENATOR JOHN
TORGERSON
How much money is in the university's risk
management pool?
SMITH
We did take money from that pool and we'll
send detailed information to you.
TORGERSON
(Request high and low account balances over
the last five years.)
SENATOR RANDY
PHILLIPS
(Refer to the last page of the handout.)
SMITH
Repeat listing of mission critical items.
SENATOR RANDY
PHILLIPS
(Request the university send a priority list
to the committee.)
SMITH
We will do that.
SENATOR RANDY
PHILLIPS
I disagree with the list as its written. I
would like to have a list detailing number
one priority, number two...)
SMITH
Will provide.
SENATOR RANDY
PHILLIPS
If there is no electricity, you can't pay
people regardless if your payroll system is
compatible.
SENATOR GARY WILKEN
(Refer to handout page 6.) I see 20-25 life
threatening matters, including TV and radio.
I would like this list reprioritized. Some
things may be an inconvenience, but I don't
think they could be considered life
threatening.
STEVE SMITH
We will go through and reprioritize items
and give more detail on others. For example,
the TV and radio system is part of the
emergency broadcast system and must be made
compatible.
SENATOR GARY WILKEN
Banner system.
SMITH
Working on banner system with the intention
of making it Y2K compliant. When we began,
some hardware was not available as Y2K
compliant and we are getting those now as
they do become available.
SENATOR JOHN
TORGERSON
Section 4 shows a lapse date of June 30,
1999?
POE
We want to lapse at the next fiscal year so
we can get through this year.
SENATOR JOHN
TORGERSON
Is that was the section says?
POE
It says these are capital projects and would
fall under the five-year lapse rule.
SENATOR JOHN
TORGERSON
Would you mind if we gave a lapse date of
Dec 30, 1999?
POE
We request a little after that to cover
unanticipated problems that will probably
arise for next 3-4 months.
SENATOR JOHN
TORGERSON
Then why is this request so important now?
POE
Some problems will still occur, but we need
to prevent as many as possible.
SENATOR JOHN
TORGERSON
Are the funds subject to reappropriation if
not spent here?
POE
We are asking you to appropriate the funds
to the Y2K office. Funds that are not needed
for one Y2K problem then can be diverted to
another Y2K problems if necessary. We would
be made accountable for all expenditures and
would report back to you next year.
SENATOR AL ADAMS
Clarification question. You have requested $
5 million of which you have borrowed $2
million from the risk mgmt fund. Do you plan
to replenish that fund?
SMITH
Yes. Explain.
CO-CHAIR SEAN
PARNELL
I will appoint a subcommittee to address t
his issue in more detail. Senator Gary
Wilken chair, Senator Randy Phillips,
Senator Lyda Green, Senator Al Adams. Ask
them to investigate more thoroughly and
obtain as much information as possible.
Instead of giving a formal presentation to
the committee, ask to report to co-chair
offices with information by next Fri.
SENATOR LOREN LEMAN
Don't have back up in my file and would like
to see what is entailed.
CO-CHAIR SEAN
PARNELL
Every office received a material packet. I
realize we need much more info.
SENATOR GARY WILKEN
Want subcommittee to meet right away. My
intention is to go through the departments
and ask for backup. The more detail the
better. I like the court system's format
and request other agencies follow that
format.
CO-CHAIR SEAN
PARNELL
How much has the University of Alaska spent
to date on the Y2K issue?
SMITH
Will have to research exact figure. Estimate
about $2 million.
I will be in Juneau Wednesday through Friday
and will be happy to meet with interested
parties and bring backup.
SENATOR DAVE DONLEY
Did anyone bring up the aspect of liability
of the vendors that sold us equipment and
software? Equipment that is 5-6 years old
should have been made compatible. This is a
matter of product liability and basic
warranty.
POE
I've monitored some lawsuits. At issue is
how long companies should have been making
systems compatible. One case was thrown out
of court with the opinion that you can't sue
for things that have not happened yet. A
second time, the same case was thrown out
because the vendor made upgrades available
free or at a low cost.
There are also problems with manufactures
that subcontracted items, integrated them
into their systems and are unaware of Y2K
difficulties.
SENATOR DAVE DONLEY
Have you discussed this matter with the
attorney general? I think we should sue.
With regard to the argument that you can't
sue for damages not yet incurred, we have
already incurred immediate damages in the
cost of upgrades we need to make in
anticipation.
POE
Our focus has been to avoid our own
potential damages for things we havn't
upgraded.
CO-CHAIR SEAN
PARNELL
Where does the buck stop? Are there
certifications for measures already taken to
verify that they are compliant?
POE
Contractors are reluctant to certify that a
system is in compliance. They are worried
about their own liability.
Tape: SFC - 99 #16, Side A 2:15 PM
POE
There are still issues of interconnections
with other systems that may cause other
problems.
Importance of contingency plans.
CO-CHAIR SEAN
PARNELL
I'm reluctant to spend the money without
guaranteed results. I want the subcommittee
to look at further.
POE
CO-CHAIR SEAN
PARNELL
The problem is not just with vendors not
issuing a certification, some internal
sources are also refusing.
POE
The things we are fixing we will say are
compliant.
However, something along the way could still
cause problems.
CO-CHAIR SEAN
PARNELL
Understand, but we need some kind of
certification.
SENATOR DAVE DONLEY
I will be asking again at every meeting if
you talked to attorney general about
litigating vendors for their part in this.
Vendors made lots of money off of state and
businesses.
POE
Others support a bill to remove them from
any liability.
SENATOR DAVE DONLEY
Won't support. Some made lots of money
POE
CO-CHAIR SEAN
PARNELL
Think that the people looking for immunity
at this point are not those who sold but
those who bought.
SENATE FINANCE COMMITTEE
LOG NOTES
02/01/99
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