Legislature(1999 - 2000)
04/22/1999 08:15 AM House CRA
| Audio | Topic |
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE COMMUNITY AND REGIONAL AFFAIRS
STANDING COMMITTEE
April 22, 1999
8:15 a.m.
MEMBERS PRESENT
Representative Andrew Halcro, Co-Chairman
Representative John Harris, Co-Chairman
Representative Carl Morgan
Representative Lisa Murkowski
Representative Fred Dyson
Representative Reggie Joule
Representative Albert Kookesh
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
HOUSE BILL NO. 200
"An Act relating to exemptions for municipal property taxes for
certain primary residences; relating to property tax equivalency
payments for certain residents; and providing for an effective
date."
- MOVED CSHB 200(CRA) OUT OF COMMITTEE
HOUSE CONCURRENT RESOLUTION NO. 6
Establishing the Task Force on the Impacts of Transfers of
Governmental Functions to Local Governments.
- MOVED CSHCR 6(CRA) OUT OF COMMITTEE
*HOUSE BILL NO. 193
"An Act related to grants to nonprofit regional corporations for
village public safety officers."
- HEARD AND HELD
(* First public hearing)
PREVIOUS ACTION
BILL: HB 200
SHORT TITLE: MUNICIPAL PROPERTY TAX EXEMPTIONS
SPONSOR(S): FINANCE
Jrn-Date Jrn-Page Action
4/15/99 824 (H) READ THE FIRST TIME - REFERRAL(S)
4/15/99 824 (H) CRA,FIN
4/20/99 (H) CRA AT 8:00 AM CAPITOL 124
4/20/99 (H) HEARD AND HELD
4/22/99 (H) CRA AT 8:00 AM CAPITOL 124
BILL: HCR 6
SHORT TITLE: TASK FORCE:TRANSFER STATE FUNCTIONS
SPONSOR(S): REPRESENTATIVES(S) BERKOWITZ, Halcro
Jrn-Date Jrn-Page Action
4/12/99 730 (H) READ THE FIRST TIME - REFERRAL(S)
4/12/99 730 (H) CRA, FIN
4/20/99 (H) CRA AT 8:00 AM CAPITOL 124
4/20/99 (H) HEARD AND HELD
4/22/99 (H) CRA AT 8:00 AM CAPITOL 124
BILL: HB 193
SHORT TITLE: ADMINISTRATION COSTS VILLAGE PUB SAFETY OFFICERS
SPONSOR(S): FINANCE
Jrn-Date Jrn-Page Action
4/13/99 795 (H) READ THE FIRST TIME - REFERRAL(S)
4/13/99 795 (H) CRA, FIN
4/22/99 (H) CRA AT 8:00 AM CAPITOL 124
WITNESS REGISTER
TOM WRIGHT, Legislative Assistant
for Representative Porter
Alaska State Legislature
Capitol Building, Room 208
Juneau, Alaska 99801
Telephone: (907) 465-4930
POSITION STATEMENT: Testified on behalf of House Finance
Committee.
STEVE VAN SANT, State Assessor
Department of Community & Regional Affairs
333 West 4th, Suite 220
Anchorage, Alaska 99501
Telephone: (907) 269-4605
POSITION STATEMENT: Testified on HB 200.
KEVIN RITCHIE
Alaska Municipal League
217 Second Street
Juneau, Alaska
Telephone: (907) 586-1325
POSITION STATEMENT: Testified on HB 200.
PATRICK FLYNN, Legislative Assistant
for Representative Berkowitz
Alaska State Legislature
Capitol Building, Room 404
Juneau, Alaska 99801
Telephone: (907) 465-4919
POSITION STATEMENT: Presented the proposed CS for HCR 6.
MATT GILL, Legislative Administrative Assistant
for Representative Mulder
Alaska State Legislature
Capitol Building, Room 507
Juneau, Alaska 99801
Telephone: (907) 465-2647
POSITION STATEMENT: Presented the proposed CS for HB 193.
KEN BISCHOFF, Director
Division of Administrative Services
Department of Public Safety
PO Box 111200
Juneau, Alaska 99811-1200
Telephone: (907) 465-4336
POSITION STATEMENT: Provided information on the proposed CS for
HB 193 as well as the VPSO program in general.
JOSIE STILES, Director
VPSO Program
KAWERAK
PO Box 948
Nome, Alaska 99762
Telephone: (907) 443-9010
POSITION STATEMENT: Opposed HB 193.
LORETTA BULLARD, President
KAWERAK
PO Box 948
Nome, Alaska 99762
Telephone: (907) 443-5231
POSITION STATEMENT: Provided information on indirect costs.
STEVE GOMEZ, Director
VPSO Program
MANIILAQ Man Power
PO Box 725
Kotzebue, Alaska 99752
Telephone: (907) 442-3860
POSITION STATEMENT: Opposed HB 193.
FRANK PETERSON, VPSO Coordinator
Kodiak Area Native Association
3449 East Rezanor
Kodiak, Alaska 99615
Telephone: (907) 486-9815
POSITION STATEMENT: Opposed HB 193.
JIM KNOPKE, VPSO Coordinator
Tanana Chiefs Council, Incorporated
122 First Avenue
Fairbanks, Alaska 99701
Telephone: (907) 452-8251
POSITION STATEMENT: Discussed HB 193 and VPSO program.
TERRY HOEFFERLE
Bristol Bay Native Association
PO Box 310
Dillingham, Alaska 99576
Telephone: (907) 842-5257
POSITION STATEMENT: Discussed on HB 193 and the VPSO program.
BRAD ANGASAN, Program Manager
VPSO Program
Bristol Bay Native Association
PO Box 310
Dillingham, Alaska 99576
Telephone: (907) 842-5257
POSITION STATEMENT: Discussed the possible transfer of the VPSO
program to the state.
ROBIN LOWN, Program Manager
VPSO Program
Tlingit and Haida Central Council
Chairman, Coordinators Committee
320 West Willoughby
Juneau, Alack 99801
Telephone: (907) 463-7188
POSITION STATEMENT: Discussed HB 193 and possible ramifications.
RICHARD KRAUSE, VPSO Coordinator
Aleutian Pribilof Island Association
401 East Fireweed
Anchorage, Alaska 99502
Telephone: (907) 276-2700
POSITION STATEMENT: Opposed HB 193.
ACTION NARRATIVE
TAPE 99-27, SIDE A
Number 0001
CO-CHAIRMAN HARRIS called the House Community and Regional Affairs
Standing Committee meeting to order at 8:15 a.m. Members present
at the call to order were Representatives Halcro, Harris, Morgan,
Murkowski, Dyson, Joule and Kookesh.
HB 200 - MUNICIPAL PROPERTY TAX EXEMPTIONS
CO-CHAIRMAN HARRIS announced that the first order of business
before the committee would be HOUSE BILL NO. 200, "An Act relating
to exemptions for municipal property taxes for certain primary
residences; relating to property tax equivalency payments for
certain residents; and providing for an effective date."
TOM WRIGHT, Legislative Assistant for Representative Porter, Alaska
State Legislature, noted that he was presenting HB 200 on behalf of
the House Finance Committee. He informed the committee that a
proposed committee substitute (CS) has been drafted and
distributed.
Number 0156
REPRESENTATIVE MURKOWSKI moved to adopt the proposed CS, Version
LS0807\G, Cook, 4/20/99, as the working document before the
committee. There being no objection, it was so ordered.
MR. WRIGHT explained that the substantial change in the proposed CS
occurs on page 2, line 28 which states, "An ordinance adopted under
this subsection may limit the exemption to only those individuals
with financial need as defined in the ordinance." The new language
is in response to discussion at the last hearing regarding the
option of a needs based provision for the municipalities. Mr.
Wright emphasized that this is an optional program for the
municipalities. He informed the committee that the Kenai Peninsula
Borough has an unlimited property tax exemption which means that
property of seniors and disabled veterans is not taxed. The Kenai
Assembly meet a few years ago to reduce the exemption to $150,000
which they could not accomplish. This is a very difficult decision
for the local governments.
CO-CHAIRMAN HALCRO asked if currently, any property owned by a
senior or disabled veteran that is under $150,000 would be exempt.
MR. WRIGHT said that was correct. In further response to
Co-Chairman Halcro, Mr. Wright stated that the $150,000 limit is a
statewide limit.
CO-CHAIRMAN HALCRO expressed concern with the possible abuse of
this exemption by those under the exemption buying a house for
others who would not fall under the exemption. Co-Chairman Halcro
noted that there have been recommendations to require Alaska
residency for a specified time. Currently, the Municipality of
Anchorage has a little over $13 million which is granted to
property tax exemptions to seniors of which approximately 10
percent is obtained through fraud.
MR. WRIGHT indicated that a municipality could address that through
ordinance.
REPRESENTATIVE MURKOWSKI asked if the new language "to only those
individuals with financial need" is appropriate.
MR. WRIGHT understood that this language merely provides the
municipality another option for offering the exemption. He pointed
out that the word "may" makes it optional.
STEVE VAN SANT, State Assessor, Department of Community & Regional
Affairs, testified via teleconference from Anchorage. He informed
the committee that he had received a call from the Department of
Education regarding the exemption from the full value determination
for purposes of school funding on local contributions. There was
concern regarding the over $150,000 limit which is currently
included in the valuation. Mr. Van Sant informed the committee
that the following municipalities utilize over the $150,000 limit:
Haines Borough, the Kenai Peninsula Borough, the City Craig, and
the City of Valdez. Those four municipalities total $11.3 million
which is a 4 mill equivalency that equates to $45,000 in school
funding which could cost the state extra if each municipality
maintained the same exemption.
Number 0866
KEVIN RITCHIE, Alaska Municipal League (AML), noted that the AML
does not know of any municipality that is interested in eliminating
the exemption. Mr. Ritchie informed the committee that the
exemption has increased by 400 percent in the last nine years and
is increasing at about $2-3 million per year. There are various
proposals that have been discussed by municipalities over the
years. One of the proposals is to reduce the maximum. Currently,
the average senior exemption is a little over $100,000 according to
the 1998 Alaska Taxable. Therefore, the growth of the exemption
could be reduced by lowering the cap. Lowering the cap to $100,000
would not effect the average person receiving the exemption, but
the growth would be slowed. Another proposal is the needs based
option which would mean that a senior receiving an annual income
over a specified amount would have the exemption reduced or
eliminated. There is also a proposal for a tax deferral system in
which a senior's tax would be deferred for the life of the senior.
When the property transfers, the tax would essentially be a lien on
the property.
MR. RITCHIE pointed out, "...all the things that we feel that are
plausible to happen to this, don't save money, but generally slow
the growth of the exemption which is growing at a very fast rate."
REPRESENTATIVE MURKOWSKI inquired as to whether any municipality
with AML has expressed concern with administering the exemption
based on need.
MR. RITCHIE said that the AML does not have any information on that
option. He noted that there would obviously be costs associated
with the needs based option. Furthermore, this is an area to which
many seniors have been resistant. In response to Representative
Murkowski, Mr. Ritchie said that the local government should have
any option available to determine what is best for each community.
He commented that this topic will not be taken lightly by anyone,
therefore any change will only occur after much study. The
language needs to be broad enough to allow a community a full range
of options.
Number 1234
CO-CHAIRMAN HALCRO moved that the committee report CSHB 200 out of
committee with individual recommendations and the attached zero
fiscal note. There being no objection, it was so ordered.
The committee stood at-ease from 8:34 a.m. to 8:35 a.m.
HCR 6 - TASK FORCE: TRANSFER STATE FUNCTIONS
CO-CHAIRMAN HARRIS announced that the next order of business before
the committee would be HOUSE CONCURRENT RESOLUTION NO. 6,
Establishing the Task Force on the Impacts of Transfers of
Governmental Functions to Local Governments.
PATRICK FLYNN, Legislative Assistant for Representative Berkowitz,
Alaska State Legislature, informed the committee that it should
have a draft committee substitute (CS) based on the recommendations
from Tuesday's hearing.
Number 1340
REPRESENTATIVE MURKOWSKI moved that the committee adopt the
proposed CSHCR 6, Version LS0803\G, Cramer, 4/20/99, as the working
document before the committee. There being no objection, it was so
ordered.
MR. FLYNN explained the changes in the proposed CS. On page 1,
line 5 language referring to the decline in daily production in oil
was inserted. The Whereas clause on page 1, lines 11-12 was
inserted. The role of the federal government was included in the
task force on page 2, lines 1-3. Page 2, lines 6-13 reduces the
number of appointees by the Senate President and the House Speaker
by one each and replaces them with two appointees appointed by the
AML and one appointee appointed by the Alaska Federation of Natives
(AFN) to represent the unincorporated borough.
CO-CHAIRMAN HALCRO referred to page 2, lines 1-3 and asked if the
language provided the flexibility to address the tribal government.
MR. FLYNN believed the language does allow that flexibility, but he
was open to making the language more explicit.
REPRESENTATIVE MURKOWSKI referred to page 2, lines 14-15 which
states that members are not entitled to travel or per diem
payments. She assumed that the members appointed by the AML and
AFN are those that are not entitled.
MR. FLYNN clarified that the members appointed by the AML and the
AFN are not entitled to travel or per diem payments. The
legislature cannot give those members a per diem because that would
be an appropriation which must be done through natural bills.
Number 1559
CO-CHAIRMAN HALCRO proposed an amendment on page 2, line 1, after
"state," insert "tribal".
CO-CHAIRMAN HARRIS asked if there were any objections.
REPRESENTATIVE KOOKESH believed that the amendment made sense.
However, he indicated that perhaps the language "nonprofit" would
work better than "tribal". Sometimes legislation has failed due to
the language "tribal".
REPRESENTATIVE DYSON appreciated both concerns. However,
Representative Dyson felt that Representative Kookesh was probably
being more wary than necessary. There has been an interest to
ensure that the legislature does not do anything to substantiate
any portions of Alaska falling into the "Indian Country" category.
Representative Dyson believed that "tribal" would work and be
understood here. Utilizing that language would work towards
building bridges between rural and urban Alaska.
REPRESENTATIVE KOOKESH commented that in reality, the tribes do
provide service to rural Alaska. He said that he wanted to make
sure that the language did not hinder the bill's passage.
REPRESENTATIVE BERKOWITZ stated that the language would strengthen
the legislation. He noted that he would like for the legislation
to be as inclusive as possible. Representative Berkowitz
suggested, "Just so the record is clear, I would include under that
'tribal', just for the intent in my mind, that it would include
nonprofits."
CO-CHAIRMAN HALCRO appreciated the intent that this is to be all
inclusive.
CO-CHAIRMAN HARRIS noted that the resolution has a House Finance
Committee referral. Co-Chairman Harris asked if there were any
objections to the amendment. There being no objections, the
amendment was adopted.
Number 1827
CO-CHAIRMAN HALCRO moved to report CSHCR 6, Version LS0803\G,
Cramer, 4/20/99, as amended out of committee with individual
recommendations and the accompanying zero fiscal note. There being
no objection, it was so ordered.
The committee stood at-ease from 8:44 a.m. to 8:47 a.m.
HB 193 - ADMINISTRATION COSTS VILLAGE PUB SAFETY OFFICERS
CO-CHAIRMAN HARRIS announced that the final order of business
before the committee would be HOUSE BILL NO. 193, "An Act related
to grants to nonprofit regional corporations for village public
safety officers."
MATT GILL, Legislative Administrative Assistant for Representative
Mulder, Alaska State Legislature, noted that the committee should
have a proposed committee substitute (CS).
Number 1878
CO-CHAIRMAN HALCRO moved to adopt the proposed CSHB 193, Version
LS0841\G, Luckhaupt, 4/16/99, as the working document before the
committee. There being no objection, it was so ordered.
MR. GILL explained that the intent of the proposed CS is to further
the discussion of an appropriate level of costs associated with the
administration of the Village Public Safety Officer Program (VPSO).
Village Public Safety Officers provide law enforcement, search and
rescue, emergency medical services and other duties as needed in
the villages. The VPSO program began in 1979 as a federal
demonstration grant. Since 1981, the program has been funded
entirely with state general funds which pass through the Department
of Public Safety to nonprofit regional corporations. Those
nonprofit corporations recruit and hire VPSOs. Last year's budget
funded 84 VPSOs in 82 villages.
MR. GILL stated that the proposed CS would place an 18 percent cap
on overhead costs which would result in quite a bit of savings.
The major impetus behind this legislation is to make the VPSO
program more efficient. There has been concern regarding the high
overhead rates.
REPRESENTATIVE DYSON inquired as to what the proposed CS would do
to the overhead rate.
MR. GILL explained that HB 193 caps the overhead rate at 18
percent. On page 1, lines 7-13, the proposed CS includes the
following language changes:
"The indirect costs of a nonprofit regional corporation
to administer a grant received under this subsection may
not exceed 18 percent of the total amount of the grant.
Indirect costs include all costs other than
(1) the salary, benefits, overtime, and travel
of a village public safety officer or a
coordinator of the grant or program;
(2) professional liability insurance; and
(3) equipment."
Number 2010
REPRESENTATIVE DYSON inquired as to whether someone would be
presenting information as to how reasonable that is and how that
would compare to administrative costs in other nonprofits or
government agencies.
MR. GILL stated that there should be others via teleconference who
would be able to address that question.
REPRESENTATIVE KOOKESH noted that the Department of Public Safety
receives the funding through the legislature which is then passed
on to the VPSO through the nonprofits. He asked if the Department
of Public Safety takes any administrative overhead costs.
MR. GILL replied yes.
REPRESENTATIVE KOOKESH inquired as to how much of the Department of
Public Safety's overhead administrative costs would be capped.
MR. GILL stated that HB 193 does not address the department.
REPRESENTATIVE KOOKESH requested that the Department of Public
Safety information be provided to the committee before the bill
moves. Representative Kookesh understood from testimony received
last year, that the Department of Public Safety takes 25 percent.
If that is the case, he wondered why the sponsor would not also cap
the department's administrative overhead costs at 18 percent.
REPRESENTATIVE DYSON recommended that the committee attempt to
obtain that information while this hearing is in progress.
REPRESENTATIVE JOULE asked if there was a reason why only one
component was reviewed versus a broader view.
MR. GILL said he was not sure.
REPRESENTATIVE DYSON stated that he vaguely remembered from last
year, that there were a couple of local nonprofits with
administrative overhead rates that looked outrageous.
Representative Dyson commented that, at first blush, the rates
seemed to indicate that some organizations utilized overhead as a
way to subsidize the local organization at the expense of the VPSO
program.
REPRESENTATIVE JOULE said that he was unsure as to how the indirect
process works and requested someone walk the committee through the
process.
Number 2250
KEN BISCHOFF, Director, Division of Administrative Services,
Department of Public Safety, informed the committee that this
legislation originated in the Senate through Senator Donley who was
concerned with these rates. Senator Donley requested the Division
of Legislative Finance to do a statewide study in order to compare
these indirect rates. Legislative Finance found that the rates
tended to range between 18 to 22 percent. The proposed CS before
the committee contains a much improved rate, considering the Senate
Community & Regional Affairs (CRA) Committee had a bill that
proposed a 15 percent cap. Mr. Bischoff noted that he had seen a
proposed CS, which has not yet been adopted, from the Senate CRA
committee which would mirror the rate in this proposed CS.
MR. BISCHOFF stated that the VPSO program is not handling their
indirect costs any different than other programs. He informed the
committee that city governments and other nonprofit organizations
have indirect cost recovery rates which fall in the ranges
determined by the Division of Legislative Finance. The reason for
that is as follows: there are direct program costs which are
intended to place VPSOs in the field; there are direct
administrative costs to hire, pay, and maintain accounting records
of staff; and there are indirect cost rates, including building,
space, and utilities, which are typically developed as a federal
formula. Mr. Bischoff explained that the VPSO program simply
accepted the federally approved rate rather than the state
establishing its own audit function and regulations regarding
indirect cost rates. The federally approved rate is audited and
approved by the federal agency every year. The auditors of the
nonprofits review those schedules and any questioned costs are
reported to the department and those are settled out. With regard
to the concern about accepting the federally approved formula, Mr.
Bischoff asked how much oversight and extra cost is desired from
the department in terms of administration of the program.
REPRESENTATIVE JOULE pointed out that in addition to the indirect
cost rate, the state troopers take a piece of the VPSO program.
Representative Joule believed that at least one trooper's salary,
administrative costs, and in some cases, the cost of an aircraft is
paid from the VPSO program. Therefore, he wondered if the state
troopers have some association with the program's indirect cost.
Is there an indirect rate that is applied to the state troopers?
Number 2495
MR. BISCHOFF informed the committee that the Department of Public
Safety, the Alaska State Troopers, does not have a federally
approved indirect cost recovery rate. The VPSO program
appropriation includes three components, one of which is the
contract component which would be impacted by this legislation.
Another component is the support component which provides some of
the oversight trooper funding, aircraft funding, and VPSO training.
The third component is administration which is the VPSO-Trooper
coordinator and clerical support which is treated as a direct cost.
No direct cost rate is applied because those are specifically
budgeted in the state's budget. Therefore, the department does not
apply an additional indirect rate to the administrative component.
REPRESENTATIVE JOULE pointed out that although there may not be an
indirect cost applied, the money specified for the VPSO program has
money taken from it for the trooper oversight. "Is that correct?"
MR. BISCHOFF clarified that money is not taken from the contract
component. The legislature approves a separate administrative
allocation within the appropriation. Contract funding is not used
for any administrative or overhead cost.
REPRESENTATIVE KOOKESH inquired as to where the savings under the
18 percent cap would go.
MR. GILL stated that the House Finance Committee's intent is that
the savings would go to the VPSO.
Number 2592
REPRESENTATIVE KOOKESH noted that nonprofit organizations are not
required to participate in this program. Would the Department of
Public Safety be forced to manage the VPSO program, if the
nonprofit organization declines? He indicated that in discussions
with nonprofits, the nonprofits have indicated they would decline
to participate. Representative Kookesh suggested that it may not
be a bad move for the state to take over the VPSO program because
then the VPSOs would be allowed to participate in PERS. Has that
been considered as a consequence of this legislation?
MR. GILL said that had been considered. The goal of the
legislation is not to take the program from the corporations. Mr.
Gill noted that he has had problems determining the breakdown on
the numbers which makes it difficult to determine how the
legislation will actually effect the program.
REPRESENTATIVE KOOKESH indicated that he could support this
legislation, but he was concerned with only addressing the VPSOs.
He preferred a bill that refers to all state agencies and state
administrative contracts. "Why target VPSOs which only are in
rural Alaska?"
REPRESENTATIVE DYSON asked what the overhead rates are for other
institutions around the state.
MR. BISCHOFF stated that he could only speak to the Legislative
Finance study done last year which reported that the overhead rates
fall between 18 and 22 percent. Mr. Bischoff informed the
committee that he worked for Legislative Budget and Audit for eight
years.
REPRESENTATIVE DYSON asked if there is a scale that would work
against and drive up the overhead costs of some of the small
nonprofit organizations.
MR. BISCHOFF acknowledged that there are some economies of scale.
REPRESENTATIVE DYSON asked if that should be taken into account.
MR. BISCHOFF offered to review that.
REPRESENTATIVE DYSON commented that in his experience with
nonprofits at the local government, every standard that was
established was reflected in the books without much real change.
He asked if the 18 percent overhead rate was unreasonable.
MR. BISCHOFF said that the question was probably not appropriate
for him to answer. However, there should be fairness and equity in
the handling of the program. Furthermore, expanding the cap
statewide would create general fund implications.
Number 2883
REPRESENTATIVE MURKOWSKI asked if Legislative Audit has conducted
an audit to determine the indirect costs and where the problem lies
specifically.
MR. BISCHOFF stated that he was not aware that Legislative Audit
has reviewed this statewide.
REPRESENTATIVE MURKOWSKI indicated that could provide some answers.
CO-CHAIRMAN HALCRO asked if Mr. Bischoff knew what is included in
the indirect costs.
MR. BISCHOFF said that there are village contributions which are
not part of the state funding.
TAPE 99-27, SIDE B
REPRESENTATIVE KOOKESH commented that if this legislation passes,
the money is returned to the VPSO program which does not save the
state any money.
MR. GILL indicated that the legislation is more of an attempt to
get "more bang for your buck" with state dollars.
REPRESENTATIVE KOOKESH reiterated the need then to determine the
Department of Public Safety's administrative overhead costs
Number 2870
MR. BISCHOFF informed the committee that the FY99 budget for the
contract component is $5,523,500. There are two other components.
The support component which includes the training funds, the
aircraft and some funding for oversight troopers. An important
aspect of the VPSO program is the daily communication with the
state troopers. Mr. Bischoff stated, "Based on the last decade of
how the budget has gone, that's overlapping clear into the trooper
detachment. And we have as many as 30 or 40 troopers from time to
time responding to VPSO support type issues." The support
component in FY99 is $1.7 million, in terms of administrative
costs, these are not indirect costs and no indirect rate is
charged. With regards to having a commander and clerical support
for the program to negotiate the contracts, to develop the budget
and keep the files, there is a FY99 budget of $271,200,000.
REPRESENTATIVE DYSON clarified that Representative Joule was asking
what percentage the Department of Public Safety takes from the VPSO
budget.
MR. BISCHOFF explained that he would add the contract budget,
$5,523,500, the support component, $1,702,700, and the
administration component, $271,200, which results in a total of
$7,497,400. As a percentage of the total, the administrative
component, $271,200, would be divided by the total of all the
components, $7,497,400, which would result in 3.6 percent.
CO-CHAIRMAN HALCRO referred to the VPSO Program Contracts
Comparison, FY99 spreadsheet. The new indirect cost would be the
18 percent cap if it were in effect.
MR. GILL agreed.
CO-CHAIRMAN HALCRO surmised then that with the 18 percent cap,
$69,120 would be saved which would place an estimated $820 into the
wallets of the VPSO.
MR. GILL said that was correct. He noted that there may be
portions of the administrative direct costs and the recovered
indirect costs that could be pulled out as direct costs such as
equipment. A break down on those numbers could result in more
accurate figures.
REPRESENTATIVE KOOKESH interjected that the number would change if
the nonprofit declined to participate and the Department of Public
Safety had to take over the VPSO program.
MR. GILL agreed.
Number 2600
MR. BISCHOFF explained that originally, the VPSO program was
established through a federal grant pilot in order to get local law
enforcement in the Bush. If the state was required to manage the
VPSO program, the program would be subject to state personnel rules
and hiring practices.
REPRESENTATIVE KOOKESH said that was exactly his point. If the
nonprofits decline to participate, the burden to the state would be
more than everyone realizes.
REPRESENTATIVE JOULE referred to the Northwest Arctic Borough which
has a total grant of $484,773 with an indirect cost recovery of
$91,871. He believed that trooper support includes the cost of a
trooper, aircraft, and administrative assistant which totals about
$128,000. That total is not three percent of that program.
MR. BISCHOFF stated that he was not sure of the comparison. He
pointed out that the trooper commander and the clerical support
comprise the $271,000 and all other costs are direct. He believed
that the nonprofit coordinators would support the notion that
trooper oversight should be provided in order not to leave the VPSO
in the field alone. The department views those as direct program
costs some of which are paid for from the VPSO support component
while many of them come indirectly from the state trooper budget
directly.
Number 2427
JOSIE STILES, Director, VPSO Program, KAWERAK, testified via
teleconference from Nome. Ms. Stiles opposed HB 193. She
emphasized the need to seek alternatives and consider adequate
funding levels within the VPSO program. Although each nonprofit
has different rates, the rates are the same in the sense that the
program is not being administered to make money. Whether it is a
for profit or a nonprofit, either must be able to pay the
administrative costs or it will not survive. Ms. Stiles stated
that HB 193 would limit the ability of a nonprofit organization to
recover its actual cost of doing business.
MS. STILES informed the committee that nonprofit indirect rates are
based on the actual cost of operating programs in a specific
locality. She pointed out that KAWERAK does not operate for profit
enterprises. KAWERAK provides services solely through federal and
state contracts and grants. Ms. Stiles said that the choice is to
either subsidize the VPSO program from other government programs or
to not operate the VPSO program at all.
MS. STILES said the primary concern is for the VPSOs who place
their lives on the line while their wages are 24 percent lower than
the average law enforcement officer in Alaska. Furthermore, the
state is mandated by PL280 to provide public safety services to
rural Alaska which consists of 220 villages. Only 81 villages have
VPSOs. She also pointed out that PL280 limits nonprofits from
federal funding, therefore nonprofits are forced to depend on the
state to provide this basic and critical service. Ms. Stiles noted
that in addition to state funding, nonprofits can seek other
funding sources. KAWERAK has been successfully operating the VPSO
program since 1979. She felt that Alaska has received quality
public safety services at the most cost effective rate. Ms. Stiles
requested that the indirect funding level be maintained.
CO-CHAIRMAN HALCRO asked Ms. Stiles for some examples of
administrative direct costs.
MS. STILES identified her salary, benefits, travel and per diem,
and office support as examples of administrative direct costs. She
noted that last year all those were included with the indirect
rates which created a hardship. This year she has not had any
travel money, office support, or telephone money. Furthermore,
Ms. Stiles informed the committee that she would have to take four
weeks leave without pay. Ms. Stiles said that she was happy to see
that the administrative direct costs were separated from the
indirect costs.
CO-CHAIRMAN HALCRO inquired as to examples of indirect costs.
LORETTA BULLARD, President, KAWERAK, testified via teleconference
from Nome. Ms. Bullard informed the committee that indirect costs
include the following: administrative salaries, audits, rent,
utilities, insurance, copying, postage, board expenses, training,
et cetera. Indirect costs are the general cost pool for all costs
which cannot be attributed by contract or grant to a particular
project or program.
Number 2118
STEVE GOMEZ, Director, VPSO Program, MANIILAQ Man Power (MANIILAQ
MP), testified via teleconference from Kotzebue. Mr. Gomez opposed
HB 193. He reiterated the state's responsibility to provide public
safety to all residents. The VPSO program has proven to be very
cost effective. The VPSOs provide many services besides law
enforcement to Alaska's rural communities. Mr. Gomez believed that
the VPSOs provide this service for about one-third of the cost of
what the state troopers could offer. With the elimination of
municipal assistance and revenue sharing, the VPSO program will
become more important. If HB 193 passes, the indirect rate a
nonprofit could charge the state would be limited which would be
disastrous to the program. The indirect rate the nonprofits charge
is established by the federal government. Currently, MANIILAQ MP
has a 24 percent indirect rate and if forced to utilize an 18
percent indirect rate, MANIILAQ MP would probably be forced to drop
the VPSO program. Mr. Gomez indicated that would probably be the
case for many of the nonprofits.
MR. GOMEZ commented that the state troopers do have the
administrative and the support end which is taken from the VPSO
Budget Request Unit (BRU). Mr. Gomez determined that the troopers'
charges for support and administration equals about 26.3 percent of
the total. In response to Co-Chairman Halcro, Mr. Gomez informed
the committee that he has 10 authorized VPSO positions of which
seven are funded. In further response to Co-Chairman Halcro, he
identified the following as his indirect costs: a portion of the
executive director and staff salaries and benefits; accounting,
auditing, and legal services; utilities; equipment rental and
maintenance; occupancy costs; administrative staff and board
travel; and telephone costs. Mr. Gomez identified the
administrative direct costs as his salary, travel, per diem, and
benefits.
REPRESENTATIVE JOULE asked if the indirect costs are audited and if
so, what are the results of the audit. Have there been any
discrepancies found?
MR. GOMEZ stated that the indirect costs are audited and the
auditors have never found any problems with the indirect costs.
Number 1748
REPRESENTATIVE KOOKESH asked Mr. Gomez to explain the 26.3 percent
to which he attributed to the troopers portion.
MR. GOMEZ explained that adding the contract component, $5,523,500,
the trooper support, $1,721,000, and the administration costs,
$253,500, would total $7,498,000. Therefore, taking the trooper
support and the administration costs and dividing that into the
total would result in the 26.3 percent which is the total that the
troopers keep. With regards to the comment that the troopers use
the $1.7 million to respond to the VPSOs, the troopers have to
respond regardless.
CO-CHAIRMAN HALCRO asked if Mr. Gomez was correct that the
Department of Public Safety uses $1.7 million to oversee the VPSO
program.
MR. GILL replied yes. He clarified that the figures come from the
contract line for the VPSO.
CO-CHAIRMAN HALCRO believed this is where the concern lies.
Co-Chairman Halcro determined that it takes the troopers $20,238
per VPSO to administer the program. In Mr. Gomez's area, the
troopers cost almost $22,000. All of that money is not getting
into the wallets of the individuals doing the work.
REPRESENTATIVE KOOKESH reiterated that if this is going to be taken
from the nonprofit then it should be taken from the troopers as
well.
MR. BISCHOFF stated that the money could be placed wherever.
However, the VPSOs receive about seven weeks of academy training.
The question is where that cost should be placed, in the contract
or the support component. Placing the cost in the contract
component, would not place more VPSOs on the street, if the same
level of training is maintained. With regard to oversight, Mr.
Bischoff asked if the desire is to have an aircraft for support or
not. Mr. Bischoff said, "Those are the trade-offs. And if you
choose to call those administrative, the troopers are skimming that
off the top; how are we supposed to respond? How are the troopers
supposed to respond to the field? ... Do we dig deeper into the
trooper's budget? You know, it's a legislative policy decision."
CO-CHAIRMAN HALCRO asked if the VPSO training occurs every year.
MR. BISCHOFF stressed that the VPSO program has tremendous
turnover. With the help of the legislature last year, VPSOs
received a 12 percent pay increase. He believed that the
Administration supports a 30 percent pay increase over time.
Although pay increases may not place another VPSO on the street,
the increase may retain a VPSO and reduce the turnover.
Additionally, turnover can be reduced through training and the
ability to receive support from the troopers. In further response
to Co-Chairman Halcro, Mr. Bischoff explained that the VPSO
training is provided by the academy and tailored to the VPSO
program. The VPSOs are not run through the trooper training. With
regards as to why the VPSOs do not receive trooper training, Mr.
Bischoff pointed out that VPSOs are unarmed and are not certified
police officers.
Number 1279
FRANK PETERSON, VPSO Coordinator, Kodiak Area Native Association,
testified via teleconference from Kodiak. Not including Kodiak,
there are six communities across Kodiak Island. Five of those
communities have funding for VPSOs. Mr. Peterson opposed HB 193.
Mr. Peterson inquired as to how many people were funded by the
Department of Public Safety's $271,200.
MR. BISCHOFF identified the following three positions in the
administrative component: a commissioned officer in charge of the
VPSO program, an accounting tech position, and a clerk.
MR. PETERSON asked then if the $271,200 pays for three positions.
CO-CHAIRMAN HARRIS said that was correct.
MR. PETERSON informed the committee that the Kodiak Area Native
Association indirect rate for the VPSO program is 26.7 percent. He
did not know what the 18 percent cap would mean in the Kodiak VPSO
program.
Number 1108
JIM KNOPKE, VPSO Coordinator, Tanana Chiefs Council, Incorporated
(TCC), testified via teleconference from Fairbanks. Mr. Knopke
favored giving the VPSOs more money, however HB 193 is not the
vehicle to achieve that. Mr. Knopke said that he would also like
to see more VPSOs in the field. He informed the committee that the
TCC includes 43 villages of which there are currently 10 funded
VPSO positions. Mr. Knopke receives calls daily from the other
villages that would like to participate in the VPSO program. He
noted that his indirect costs are derived from the cost of
communication, rent, and utilities. The administrative direct
costs are Mr. Knopke's salary, benefits, and travel. There is no
clerical support for the VPSO program. Mr. Knopke stated that the
TCC's indirect rate is reflective of its ability to manage all of
its programs efficiently. Mr. Knopke did not see how the savings
in HB 193 would be placed into the wallet of the VPSOs; how would
that be achieved?
CO-CHAIRMAN HALCRO explained that the intent would be that spending
less money on administrative overhead would result in more money
for those actually doing the work. Co-Chairman Halcro expressed
concern with the high overhead in relation to the salary of the
VPSO. He suggested that one way in which to stem the turnover
would be to ensure more money goes to the VPSO.
REPRESENTATIVE KOOKESH pointed out that the three positions funded
by the $271,000 results in $91,000 per position.
CO-CHAIRMAN HALCRO agreed.
Number 0670
TERRY HOEFFERLE, Bristol Bay Native Association (BBNA), testified
via teleconference from Dillingham. Mr. Hoefferle informed the
committee that the sponsor of HB 193 has told the BBNA that its
administrative costs are too high. Mr. Hoefferle asked, "Compared
to what?" He did not believe there is a solid answer. He compared
the BBNA VPSO program with the Dillingham Police Department. The
BBNA VPSO program has a budget of about $730,000 which employs 11
officers and one program manager spread over an area of 40,000
square miles. The City of Dillingham employs 5 officers and 1
police chief which costs $930,000 which does not include any of the
jail costs.
MR. HOEFFERLE informed the committee that by his calculations the
Department of Public Safety has a 39.478 percent overhead rate.
Mr. Hoefferle stated, "We have been arm wrestling with the State of
Alaska, the Department of Public Safety, for the last 15 years
trying to increase the wages that are paid to these VPSO officers
and I would like to welcome the support of our urban legislators in
helping us do this." Mr. Hoefferle did not believe that HB 193 was
directed at increasing the VPSO's wage.
MR. HOEFFERLE informed the committee that the BBNA has not had a
single questioned cost by the auditors in the last 10 years. The
BBNA's indirect cost is approved by the U.S. Department of Labor
and covers the actual costs. If the state does not pay its portion
of the BBNA's approved indirect cost rate, then the actual costs of
the program are being subsidized by other programs which are paid
for by other government agencies. At the proposed 18 percent rate,
Mr. Hoefferle indicated that it would problematic for the BBNA to
operate the VPSO program next year. Mr. Hoefferle stated that
ultimately the best thing for the VPSOs may be for the state to
take over this program. If the state takes over the VPSO program,
the VPSOs will have to be paid more than $12.50 per hour. He
believed that the minimum pay received by any officer in the
Department of Public Safety is about $17.00 per hour. The state
taking over the VPSO program could help address the high turn over
rate which Mr. Hoefferle believed to be the single greatest factor
contributing to the high administrative cost for the VPSO program.
Mr. Hoefferle urged the committee to review the program overall.
BRAD ANGASAN, Program Manager, VPSO Program, Bristol Bay Native
Association, testified via teleconference from Dillingham. He
reiterated Mr. Hoefferle's comments regarding the fact that if the
state has to take over the VPSO program, the state would have to
provide a comparable wage, differentials, and inclusion in the
PERS.
Number 0051
ROBIN LOWN, Program Manager, VPSO Program, Tlingit and Haida
Central Council, testified via teleconference from Anchorage. He
informed the committee that he is also the Chairman of the
Coordinators Committee which consists of all of the nonprofit VPSO
coordinators.
TAPE 99-28, SIDE A
MR. LOWN echoed previous testimony that some of the nonprofits
would probably drop the VPSO program if HB 193 does become law.
With regard to the comments about VPSOs becoming state employees,
Mr. Lown highlighted how expensive that would be and the higher
administrative costs that would result from the state
administrative procedures. Furthermore, the state would have to
deal with 80 separate communities. Mr. Lown also mentioned the
notion of putting the VPSO program out to competitive bid.
Currently, the VPSO is required to go through nonprofit regional
corporations per statute. Also the employees of security
companies, which Mr. Lown assumed would be those targeted for
competitive bid, are not peace officers under the law. Mr. Lown
noted that he had sent a letter discussing this matter.
MR. LOWN addressed the concern that nonprofits are making excessive
funds from indirect cost recovery. Nonprofits recover expenses
equally on all programs administered by the nonprofit. Mr. Lown
pointed out that the nonprofit recovery is similar to that received
by the University of Alaska which has a cost recovery ranging from
21.3 to 51.3 percent depending upon which facility is reviewed. He
reiterated that it is unknown what will happen with the VPSO
program if HB 193 is passed. Serious consideration should be given
to what HB 193 would do.
Number 0330
RICHARD KRAUSE, VPSO Coordinator, Aleutian Pribilof Island
Association, testified via teleconference from Anchorage. Mr.
Krause opposed HB 193. He suggested that the committee review the
overall program. He offered to discuss this with any member
interested. Mr. Krause noted that he had faxed each committee
member a letter. He reiterated Mr. Lown's comments regarding the
University of Alaska.
MR. KRAUSE pointed out that five of the nonprofits with VPSO
programs do not pay those VPSOs any overtime. Mr. Krause informed
the committee that he does not pay his VPSOs overtime because he
does have enough funding.
MR. GILL commented that information would continue to be gathered
on HB 193 in order to determine the exact direct and indirect
costs.
CO-CHAIRMAN HALCRO requested that Mr. Gill provide the committee
with a breakdown of the $1.7 million spent by the troopers.
CO-CHAIRMAN HARRIS announced that HB 193 would be held.
ADJOURNMENT
There being no further business before the committee, the House
Community & Regional Affairs Standing Committee meeting was
adjourned at 10:04 a.m.
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