Legislature(1999 - 2000)
01/18/1999 11:10 AM House BUD
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* first hearing in first committee of referral
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JOINT COMMITTEE ON LEGISLATIVE BUDGET AND AUDIT
January 18, 1999
11:10 a.m.
MEMBERS PRESENT
Senator Randy Phillips, Chairman
Senator Al Adams
Senator Rick Halford
Senator Drue Pearce
Representative Con Bunde
Representative Eric Croft
Representative Jeannette James
Representative Gene Therriault
MEMBERS ABSENT
Senator John Torgerson
OTHER HOUSE MEMBERS PRESENT
Representative Gail Phillips
OTHER SENATE MEMBERS PRESENT
Senator Dave Donley
COMMITTEE CALENDER
APPROVAL OF MINUTES
EXECUTIVE SESSION
CONSIDERATION OF PRELIMINARY AUDITS AND SPECIAL AUDIT REQUESTS
REVISED PROGRAMS - LEGISLATIVE (RPLs)
WITNESS REGISTER
PAT DAVIDSON, Legislative Auditor
Legislative Audit Division
P.O. Box 113300
Juneau, Alaska 99811-3300
Telephone: (907) 465-3830
POSITION STATEMENT: Presented audit history.
KATHY PORTERFIELD, Managing Partner
KPMG LLP
601 West 5th Avenue
Anchorage, Alaska 99501
Telephone: (907) 265-1212
POSITION STATEMENT: Answered questions on wage and benefit study
project purpose.
TAMARA COOK, Director
Legislative Legal and Research Services
Legislative Affairs Agency
130 Seward Street, Suite 409
Juneau, Alaska 99801-2105
Telephone: (907) 465-2450
POSITION STATEMENT: Presented and answered questions on drafted
legislation.
TOM WILLIAMS, Senate Finance Committee Staff
Senator Sharp
Alaska State Legislature
Capitol Building, Room 516
Juneau, Alaska 99801
Telephone: (907) 465-3004
POSITION STATEMENT: Presented changes that need to be made to the
wage and benefit study.
ACTION NARRATIVE
LBA 1/18/99 TAPE 1
Number 0001
CHAIR RANDY PHILLIPS called the Joint Committee on Legislative
Budget and Audit meeting to order at 11:10 a.m. Members present
at the call to order were Representatives Con Bunde, Croft, James
and Therriault and Senators Phillips, Adams, Halford and Pearce.
APPROVAL OF MINUTES
SENATOR AL ADAMS made a motion to approve the minutes for the
meeting held on December 11, 1998. There being no objection, it
was so ordered.
EXECUTIVE SESSION
Number 0153
SENATOR ADAMS made a motion to move to executive session in order
to discuss the preliminary audit reports. There being no
objection, the committee went into executive session [time
unspecified].
Senator Donley joined the meeting during executive session.
The committee resumed open session [time unspecified].
CONSIDERATION OF PRELIMINARY AUDITS AND SPECIAL AUDIT REQUESTS
Number 0212
SENATOR DRUE PEARCE made a motion to release the five final
audits to the public. There being no objection, it was so
ordered.
PAT DAVIDSON, Legislative Auditor, Legislative Audit Division,
said that over the past year the audit division has been working
through a backlog of audit requests. In 1995-1996 the audit
division was averaging close to 17 requests per year. In 1997
the audit division received 36 requests, double the workload.
Most of 1998 was spent meeting all the requests from 1995, 1996
and 1997. The audits being worked on at present were requested
in January and April of 1998. Within six to eight months,
assuming a constant flow at 17 audits per year, the division is
hoping to be able to complete an audit within two to three months
of the request.
Number 0360
SENATOR HALFORD explained, "In the last session we passed a bill
that required the recordation of the RS 2477 rights-of-way, and
it had a fiscal note. They were to be recorded by January 1, by
law; none of them have been recorded. The Administration has now
said they may record the seven that have been surveyed, but it
sounds like they are not inclined to record the rest of them.
The fiscal note was funded. I'd like to know what they're doing
with the money." He followed up by saying that he didn't think
it required an extensive audit, but more a "mini-audit."
Number 0435
SENATOR ADAMS stated that he didn't think the amount of money was
sufficient to carry out the rights-of-way and that it needed to
be looked at closely in order to go through on the surveys.
MS. DAVIDSON addressed Senator Halford stating that she would
write a letter to the Department of Natural Resources asking
about their intentions and what they have done with the money.
Also, through an analysis of the accounting records she felt that
the audit division could do some verification.
Number 0491
SENATOR PEARCE requested a report of the 1998 calender year
compensation for the Governor, the staff of the Governor's
office, and the commissioners by the end of the month.
MS. DAVIDSON replied by stating, "I think that we could take that
on, not so much as an audit request, but as a compilation of
survey. I think that the agencies went through it last year; I
think that they're going to be prepared to do it again this year.
Timingwise, I think that we probably could request the
information from the agencies, get it compiled. I would estimate
that it should be ready by the end of February, if possibly
earlier."
Number 0631
TOM WILLIAMS, Senate Finance Committee Staff, stated that the
final draft of the wage and benefits study, prepared by KPMG, was
submitted at the meeting held on December 11, 1998. The
contractor was asked to make more of an "apples-to-apples"
comparison with regards to state salaries. He continued by
saying, "All of the comparison salaries had been standardized to
a forty-hour work week. The intent was to also standardize those
state of Alaska positions that were over-time eligible to a 40-
hour workweek. That had not been done in the December 11 draft.
The contractor has done that and the change in their conclusion
appears on page 1 of the executive summary. In essence the
December 11 draft stated that the comparison salaries were at the
high end of the market, whether it was analyzed by looking at the
market median or the market weighted average. By making those
adjustments, the request of the last meeting, the state
employees' overall salaries, wages and benefits, comes in at the
top of the market range if you use the market median, and
actually it comes in above the competitive market range if you
use the market weighted average. So, you didn't change it as
significantly as what we might have thought, but it did change
that. For the most part, that is the only substantive issue that
has changed between the December 11 and current draft."
Number 0774
REPRESENTATIVE BUNDE referred to page 2 of the wage and benefit
study, second bullet from the bottom, which states that, "State
contributions for SBS and PERS are 25 percent higher than
retirement and social security contributions for survey
participants overall, but similar to retirement contributions for
public employers in the survey." He asked Kathy Porterfield,
"Are 25 percent higher than an assessment of everyone, but they
are similar to other state employees in other states? I guess I
don't quite understand that."
Number 0819
KATHY PORTERFIELD, Managing Partner, KPMG LLP, replied they're
similar to the other public employers in the survey, which are
listed in the wage and benefits study on page 8.
REPRESENTATIVE BUNDE made a motion to move the legislative budget
and audit wage and benefit study out for public release. There
being no objection, it was so ordered.
Number 0891
TOM WILLIAMS explained that Amendment 1 will make the contract
current by changing the date and project manager. KPMG has
signed off on it and it has been reviewed by legal counsel.
REPRESENTATIVE BUNDE made a motion to amend the contract. There
being no objection, it was so ordered.
REPRESENTATIVE BUNDE asked Senator Pearce what the draw down is.
SENATOR PEARCE replied, "1.1 billion."
REPRESENTATIVE BUNDE continued, "On page 2, state contributions
for state workers medical benefits are 31 percent higher than
average, for retirement 25 percent higher than average, for paid
time off it's 48 percent higher than average."
Number 0952
SENATOR HALFORD made a motion to draft legislation for committee
approval.
REPRESENTATIVE CROFT objected, stating that he believes the
twenty-first legislature's Legislative Budget and Audit Committee
and their chairperson should be the ones recommending drafting
legislation.
Number 1025
REPRESENTATIVE JAMES replied, "I don't see there is any reason
why we shouldn't make a recommendation, since we've had two years
of experience. I think it's wise to have a recommendation from
the next Legislative Budget and Audit Committee, but I think it
needs both of the them."
CHAIRMAN PHILLIPS addressed Senator Croft, stating that it is
normal for the prior Legislative Budget and Audit Committee to
introduce legislation, and then the next Legislative Budget and
Audit Committee can "pick up the ball and carry it."
REPRESENTATIVE THERRIAULT asked, "So this is the same language?"
Number 1100
TAMARA COOK, Director, Legislative Legal and Research Services,
Legislative Affairs Agency, stated, "The bill that was passed
last year and vetoed by the Governor is SB 347, and it's very
much simpler. It required a changed paragraph two to read after
the revision, 'expenditures of additional federal or other
program receipts under the revised program may only commence
after the next regular session has convened and has been in
session for 30 days.' My concern with that is that it doesn't
contain any time periods, which will ensure that the legislature
gets a notice from the Governor of an intention to begin
expenditures while the legislature is in session for a period to
react to that. So, the draft that I prepared is a bit more
elaborate. In particular, if you look at paragraph three, you'll
see that I've plugged in some time periods. It may be somewhat
arbitrary. They can be changed if the committee wishes. I've
just wanted to make sure that we wouldn't be faced with the
Governor making an expenditure recommendation the day before
expenditures start, because he waits until the 30-day period to
make his recommendation. So, especially if you look at the sub-
paragraph B, you'll see that I have indicated that expenditures
can commence only after the legislature has been convened for at
least 30 days after the committee has received the Governor's
notice of the intent."
SENATOR ADAMS wondered, "Now if there is a time line or a window
of federal funds when we're not in session, we can still address
that, even with the passage of this legislation?"
Number 1191
MS. COOK responded by saying, "It depends on the action of the
committee...Under this bill if the committee approves an
expenditure of program receipts, again, they can be expended
immediately upon receipt of that approval. The Governor is
prohibited from making an expenditure for a delayed period if the
committee acts to disapprove within 90 days, and even if it is a
federal funding situation that would be true under this bill.
The Governor wouldn't be able to spend for a period. He can
still make the decision that he's going to spend the program
receipts, federal or otherwise, despite the LB&A's [Legislative
Budget and Audit Committee's] disapproval. But he can't start
spending that money until he has given notice of that decision
and the legislature has had 30 days after that notice to respond
if there is a mechanism by which they wish to respond, either
politically or through, possibly, passage of legislation."
Number 1243
REPRESENTATIVE CROFT stated that the appropriation that occurred
during the interim to acquire land on the Homer Spit, which the
Legislative Budget and Audit Committee rejected, the Governor
went ahead and did. Under this new statute, the Governor could
not have done that until 30 days from 1/19/99.
MS. COOK responded by saying that two things would have to occur
before the Governor could make the expenditure. First, the
Governor would have to notify the committee of his intent, and
second, the Governor would not be able to spend the money until
the session had been convened for 30 days. This way the
legislative body has an opportunity to react to the "expenditure
in the offing."
Number 1288
SENATOR DONLEY asked what the reaction would be if the
legislature didn't want the Governor to expend the funds.
MS. COOK responded, "It largely depends upon the way budget
treats appropriations of program receipts. Right now what we're
doing in the front section is a blanket appropriation of program
receipts. We're not identifying particular sources or trying to
separate, except in very rare instances, particular types of
program receipts. If we get a situation where the legislature
knows that the Governor is going to spend money, it will be hard
to amend a prior appropriation to peel out the approval for a
particular set of program receipts the way we've got it now. And
furthermore, if we take legislative action that would be subject
to a Governor's veto. So, it's not clear that it's going to be
very easy for the legislature to act. Now, what David Teal has
suggested to me-and these are all things that have to be worked
out really in the finance committee bill, but he has proposed and
it's not a bad idea-is an appropriation of program receipts with
an automatic lapse date, so that you don't have to face the veto
issue. And then what would happen, I would presume, is before
the 30-day period runs and these things lapse the legislature
would actually re-up them, pass a bill to re-up the ones that the
legislature has decided we're going to permit to have continue to
be expended without lapsing."
Number 1360
SENATOR DONLEY wondered why the burden was put on the legislature
to act. He suggested it would be better to say it is not
approved unless the legislature approves it in the first 30 days.
MS. COOK responded, "Because we basically had a system like that,
that was held invalid. It was actually a more complicated
statute that existed. There was a lawsuit filed in a case called
Kelly (ph) v. Hammond, which said that once the legislature
appropriates money it cannot delegate to a committee the power of
appropriating, of ultimately determining whether the money will
be spent or not. That becomes an executive branch prerogative at
that point. So, the best that we can try to do here is delay
that expenditure action to build some time for the legislature to
react. The other obvious approach is never to make a blanket
appropriation of program receipts."
Number 1429
SENATOR DONLEY asked if she was saying that the current
structuring of the front section as a blanket is the problem.
MS. COOK replied, "This is the best I think we can do if the
legislature wants to have a blanket appropriation of program
receipts, which is valuable in cases involving an anticipated,
especially federal funding that may come up that we want the
state to have an opportunity to use within a narrow window. It's
also possible to take the program receipt front section language
that is a broad appropriation and limit it to only federal funds
for example, and make the political decision that if there are
additional program receipts from the sale of fishing licenses
that they come in for a supplemental, but they're going to have
to talk to the full legislature. These are our policy questions,
that if the legislature still wants a general approach to the
expenditure of program receipts, but wants an opportunity to
review that, the best we can do--we cannot set up a system that
is constitutional that will allow the result of the legislative
review after the appropriation to change the fact of the
appropriation. All we can do is try to build in enough delay so
that if there is a disagreement between the legislature and the
Governor that there is at least an opportunity to negotiate
politically or to seek a legal remedy."
REPRESENTATIVE THERRIAULT asked if the automatic lapse date would
be when the legislature convenes.
Number 1501
MS. COOK responded, "Essentially as I understand David Teal's
idea is that we'd put in an appropriation of the program receipts
and then we'd automatically lapse that appropriation on, say, day
25. And if the legislature hadn't acted to pass an appropriation
bill, taking particular program receipts that had been approved
out of that lapse prevision, they would lapse to the extent that
they hadn't already been spent. Some of these may be spent
before that day, but that type of a mechanism would have to be
built into the appropriation act. The alternative that the
legislature faces is the need to pass an appropriation bill
amending one of their ... prior year appropriation of program
receipts in a way that prevents the Governor's expenditure that
they disapprove of, and of course when you pass an appropriation
Act then you buy the...potential of a veto. However, even
building in a delay in expenditure opens the possibility up for
some sort of negotiation to occur, which we don't have now."
Number 1558
REPRESENTATIVE THERRIAULT voiced his concern about a meeting that
took place during the summer where something was turned down by
the committee and one of the members said, "Well, you shouldn't
be upset; the Administration can go ahead in 45 days anyways."
He followed by saying that legislators need to only say "no" to
things they really don't want implemented.
Number 1605
REPRESENTATIVE JAMES said it seems the process of having the
lapse date is the best way to be effective. There is no way for
the committee to react if it is a blanket approval. Without the
lapse date the whole thing seems to be just an exercise in
futility.
MS. COOK stated, "I think that that is basically correct. The
problem is that both the lapse date, if you go the lapse date
route, or if there is no lapse date, then the legislature does at
least have the opportunity to introduce a piece of legislation
pulling out the program receipts that they're upset about from
the prior year appropriation that is amending that prior year
bill. The problem with brand new legislation is that it's
subject to a veto, of course. But there would be that
possibility of attempting that."
REPRESENTATIVE JAMES followed up by referring to some of her
previous legislation on regulations that had a lapse date. She
felt that if it was specified what was included and what was left
out, it would be hard to veto that.
Number 1701
MS. COOK stated, "That is correct. That's why I think Mr. Teal
thought that this may be a mechanism that the finance committees
will want to look at. There are some other possibilities out
there, as I understand it, one of which is using a blanket
appropriation of federal funds for program receipts, and perhaps
a blanket appropriation for program receipts for those agencies
that have a history of not abusing their use of program receipts,
but when you get into a particular situation where there is what
the legislature feels to be an abuse of program receipt
authority, simply peeling that department out of the program
receipt broad language and making that particular department come
to the legislature for a supplemental, and make their case before
the full legislature. So there are a couple of things that can
be done...Most of those decisions have got to be made on the
finance committee level and will go into an appropriation act.
All this does is create a statutory mechanism so that we're going
to try to build in at least a delay in an expenditure when LB&A
[Legislative Budget and Audit] disapproves. Right now we have 45
days and that's not been long enough. We're trying to build in
something that will ensure that the delay period will include a
time when the legislature as a whole is in session, so that they
have the chance to react to the extent that they can under the
circumstances, and think about a solution. It doesn't fully
address the worries that the legislature has had in this area."
REPRESENTATIVE BUNDE suggested that debating the merits of the
bills could be done more productively at another time.
Number 1764
SENATOR HALFORD stated, "We are totally in control of what
happens with regard to budget appropriations if we're willing to
write the budget that way. The reason that we have a problem is
because of the legislature's attempt to be reasonable with the
executive on things that nobody saw ahead of time that may come
up. I think we should introduce the bill, put it on the table,
negotiate with the executive. I think it was a serious mistake
to veto this kind of a bill because the legislature does have the
ability not to put that language in there. And if we don't get a
solution in this session, in a bill that becomes law, the
appropriation in the front section of the budget should be
specific to federal funds, it should be specific department by
department with a maximum amount, and if they know of a program
receipt they should have to come to us before we write the budget
and we should have to give them some kind of a specific amount in
case they may get that, so that the legislature takes back its
constitutional authority unless there's a solution worked out by
agreement. That's why I think we should put the bill on the
floor, or put the bill in."
Number 1812
REPRESENTATIVE CROFT stated that he felt the discussion on the
merits of the bill before introduction is appropriate, and that's
why he objected earlier, saying that it should be done by the
current Legislative Budget and Audit Committee. He followed up
by saying that he was ready to vote on whether this Legislative
Budget and Audit Committee puts this forward to the future
Legislative Budget and Audit Committee.
CHAIRMAN PHILLIPS requested a roll call vote. Senator Phillips,
Donley, Halford, Pearce, and Representative Bunde, James, and
Therriault voted in favor of the motion. Voting against it were
Senator Adams and Representative Croft. Therefore, the motion to
introduce legislation passed by a vote of 7-2.
Number 1894
REPRESENTATIVE THERRIAULT added, "The one RPL that was turned
down, dealing with aerospace, one of the issues that was brought
up is they were requesting the ability to receive and expend the
interest money off the federal funds that they had held, and they
have received that approval."
ADJOURNMENT
CHAIRMAN RANDY PHILLIPS turned the gavel over to the next chair
of the Legislative Budget and Audit Committee, Representative
Gail Phillips, for adjournment.
CHAIR GAIL PHILLIPS adjourned the Legislative Budget and Audit
Committee meeting at 12:20 p.m.
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