Legislature(1999 - 2000)
02/01/1999 01:35 PM House FIN
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* first hearing in first committee of referral
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= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE FINANCE COMMITTEE
February 1, 1999
1:35 P.M.
TAPE HFC 99 - 13, Side 1.
TAPE HFC 99 - 13, Side 2.
TAPE HFC 99 - 14, Side 1.
CALL TO ORDER
Co-Chair Mulder called the House Finance Committee meeting
to order at 1:35 P.M.
PRESENT
Co-Chair Therriault Representative Foster
Co-Chair Mulder Representative Grussendorf
Representative Austerman Representative Kohring
Representative Bunde Representative Moses
Representative G. Davis Representative Williams
Representative J. Davies was not present for meeting.
ALSO PRESENT
Robert Poe, Commissioner, Department of Administration;
Janet Clarke, Director, Division of Administrative Services,
Department of Health and Social Services; Leo Lutchansky,
Manager, Information Systems, Division of Administrative
Services, Department of Transportation and Public
Facilities; Joe Reeves, Deputy Director/ASM, Division of
Administrative Services, Department of Corrections; Chris
Christensen, Administrative Staff Counsel, Alaska Court
System.
TELECONFERCE
Steve Smith, Interim Chief Information Officer, University
of Alaska; Mary Lou Burton, Statewide Coordinator,
University of Alaska; David Rohwer, University of Alaska.
SUMMARY
HB 64 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.
HB 64 was HELD in Committee for further
consideration.
HOUSE BILL NO. 64
"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,
referenced the handout, "Year 2000 Project Briefing and
Background Materials". [Copy on file]. He stressed that
Y2K is a "large management" problem for the State and beyond
that a large "risk-management" problem which needs to be
addressed. He advised that there is upcoming legislation
which will address the risk management issues of the State.
It has been estimated that the national clean-up costs for
Y2K will be between $300 and $400 billion dollars. The
estimated costs of the litigation which will follow will be
over $1 trillion dollars. Commissioner Poe advised that the
best defensive against Y2K litigation would be to take a
diligent approach to solving the problems which can be
solved. He outlined the proposed three front approach of
the State to address this concern.
1. The first step is to guarantee that the State is
addressing as many of it's own problems as
possible. It is important to recognize that the
State has neither the time nor the money to fix
all the systems.
2. The second step is to reach-out to local
governments for highly delivered services to
Alaskans.
3. The last step is reaching-out to small and medium
sized businesses. That needs results from Alaska's
diversified economy which rests largely on the
backs of the small and medium size business.
Commissioner Poe continued, explained that the Y2K problem
exists because many computer programs were written to
recognize the date using only the last two digits. Some
computers, when they encounter the "00", might not recognize
that as the year 2000 but rather mistakenly as 1900, which
would set off a myriad of problems for all systems.
Commissioner Poe listed numerous systems which could fail
with the lack of recognition of the date, such as medical
equipment. The year 2000 problem exists in chips, software,
and computers, making it very pervasive.
Commissioner Poe noted that the Alaska State government has
identified 200 performed functions, of which 89 have been
determined "critical". To make that determination, four
screening criteria were used:
? Life,
? Health,
? Safety, and
? Economic well being for Alaskans.
If a system had major impact on any of those factors, it was
then determined to be mission critical. Every system will
be covered by a contingency plan.
Attachment #1 contains the agency status readiness reports.
The report will be published, as well as being placed on a
State of Alaska home web site under the year 2000.
Commissioner Poe emphasized that the above listed activities
would require funding.
HB 64 lists all the projects being requested by the
Executive Branch, the University and the Alaska Court
System. Commissioner Poe explained that the Department of
Administration had established a budget review process. The
original request was approximately $29 million dollars. The
review panel narrowed that amount down to $17 million
dollars, at which time, a Medicaid consultant informed the
staff it would take $2.2 million dollars to finish an
important system. He added that for many of the State's
systems, the year 2000 comes on June 30, 1999.
Commissioner Poe suggested that some might ask: "Why should
we care?" He guaranteed that things will go wrong no matter
how much money is spent. There are 110 systems which the
State is not going to try to fix. Time and money are big
limitations. The important systems must be addressed. The
average state has spent about $74.1 million dollars in the
past two years. Alaska has spent nearly $791 thousand
dollars total.
Commissioner Poe continued, agencies could be negatively
impacted by failures such as the welfare, Medicaid, and
systems that State Troopers use. Part of HB 64 would repay
the Risk Management Fund which, to date, the State has been
using. That fund is normally used to settle litigation,
before they turn into big costs for the State. At this
time, $2.1 million dollars has been either spent or
committed from that fund. HB 64 would provide for the
repayment of each project. The State self-insures through
that fund which normally contains $5 million dollars.
Co-Chair Mulder asked for further explanation of the overall
ratings assigned to the color code used by the Department of
Administration in the handout. Commissioner Poe responded
that each of these eleven items are the "mission critical
systems":
? Procurement system
? Mental Health Trust Authority Grants
? Alaska Longevity Bonus Program
? Alaska Pioneer Homes
? Payroll
? Accounting
? Vehicle & Driver Licensing
? Public Guardian Trust Accounting Systems
? On-Line Personnel Recruitment
? Retiree Payroll
? Supplemental Benefits System Annuity Plan.
Commissioner Poe continued, $104 thousand dollars has been
requested to covert the Public Guardian system to Y2K
compliant with a more stable platform. Also, $250 thousand
dollars has been requested to assist with required testing
of the retirement system for additional remediation; $400
thousand dollars was requested to complete replacement of
the BENECALC system with a Y2K compliant version; $868.4
thousand dollars was requested for the Y2K Project
Administration position for 18 months.
Commissioner Poe noted that the Department of Administration
had been divided into two sections, with the above mentioned
group as the first piece and including the information
technology group which handles many computer related
functions. The second group has a total request for $2.126
million dollars, to be used for the State's mainframe
computer. Those mission critical systems would be:
? Computer services
? Network services
? Telephone services
? Telecommunications
? Alaska Public Communications Services
? Desktop LAN/WAN
Co-Chair Mulder questioned how the mainframe budget had been
determined. Commissioner Poe explained that figure was
determined by computing all the operating software needed
for that system to work. It is the software that allows all
the multi-user environments to happen on a mainframe
computer. He offered to provide that detail to Committee
members. Co-Chair Mulder restated that the Committee would
like the breakdown indicating software and personnel costs.
Commissioner Poe replied that there would be small personnel
costs associated with the price.
Co-Chair Mulder referenced the $868 thousand dollars for
project administration and questioned how many employees
that would cover. Commissioner Poe replied number that
would cover the costs of six people for a period of eighteen
months. Some of the positions are borrowed, one of which is
borrowed from Office of Management and Budget. Co-Chair
Mulder asked if that person's salary would be paid by that
budget. Commissioner Poe said that the request was
expensive, while emphasizing that the State can not afford
"not" to address it.
Representative Bunde spoke to the work of the Risk
Management Unit and how much they would receive. He
continued, previous publications had indicated that the
ferries would be Y2K compliant. Additionally, the recorder
office was requesting funding to become Y2K compliant.
Commissioner Poe responded to the ferry system concern. He
pointed out that four or five years ago, no one had
considered the magnitude of the Y2K problem. Designated
funding is to help guarantee that no Y2K problems occur.
Also, the recorder's office had hardware which was dedicated
to the SNA transmission protocol and will no longer be
supported under OS 390, the new Y2K operating system. That
equipment must be replaced.
Representative Austerman questioned the amount requested for
the Alaska ferry system and additionally, the value of the
mainframe. Commissioner Poe offered to provide that
information. Representative Austerman asked if the 18-month
request amount would pay for FY99 and into March FY2000.
Commissioner Poe stated that was correct, and pointed out
that he had been working on the problem since August 1998.
Before that time, a private contractor had been working with
the State.
Representative Austerman asked if those agencies not
requesting funds would be okay at the change. Commissioner
Poe replied that the other agencies had shifted their
resources within to reckon with the Y2K problem.
Co-Chair Therriault questioned the time-line on the work.
Commissioner Poe instructed that the overall changes would
be complete by March 2000. Co-Chair Therriault asked why the
capital projects lapse date extended for five years.
Commissioner Poe replied that it would cross fiscal years,
although, was amenable to make the changes necessary to make
it more acceptable.
Co-Chair Therriault requested more information on the $2.4
million dollars in federal receipts. Commissioner Poe
offered to provide that information. He noted that funding
would be through the Department of Transportation and Public
Facilities and the Department of Health and Social Services
Medicaid System.
JANET CLARKE, DIRECTOR, DIVISION OF ADMINISTRATIVE SERVICES,
DEPARTMENT OF HEALTH AND SOCIAL SERVICES, stated that the
Department was requesting $2.4 million dollars to complete
Y2K fixes for the Medicaid information system. Of that
request, $1.8 million dollars would be federal receipts,
used for systems development. The Department will receive
75% federal match, making the general fund request, $600
thousand dollars to match the $1.8 million dollars.
Co-Chair Therriault pointed out that "system development"
was fairly general. Ms. Clarke responded that it would be
used entirely to make the agency Y2K compliant. Co-Chair
Therriault requested back up information for that
determination.
Ms. Clarke advised that the Medicare match information
system is basically privatized through a company called
First Health Corporation with a mainframe located in
Richmond, Virginia. The requested amount is the figure
provided by the contractor to make that system Y2K ready.
The Medicaid system was put in place in the early 1980's,
using a cobalt base system, having one million lines of code
with many different dates involved. It is an old system and
should have been replaced a long time ago. The last
estimate made to replace the system was $30 million dollars.
That bid was rejected.
Co-Chair Mulder asked if the Department had previously spent
money to make the system Y2K compliant. Ms. Clarke
acknowledged that the Department had spent $1.2 million
dollars. In October, a number of staff with the First
Health Corporation stopped working there which affected
Alaska's status. At this time, the Department has its top
Medicaid manager spending two weeks a month overseeing work
currently being done in Virginia.
(Tape Change 99-13, Side 2).
Ms. Clarke explained some of the problems with the current
system. There are many edits in that system, which compare
eligibility with dates of service and claim dates. Co-Chair
Mulder asked how the $1.2 million dollars already expended
had been paid for. Ms. Clarke stated that those dollars had
been approved through the operating budget in the Health
Purchasing component in the Medical Assistance BRU.
Co-Chair Therriault requested further information on the $74
million dollar average spent by other states addressing the
Y2K concern. Commissioner Poe offered to provide a sheet
indicating each state and their costs.
In response to a question by Co-Chair Therriault,
Commissioner Poe pointed out that the Retirement System uses
an old language called "assembly". Programmers with that
knowledge are difficult to find, as the system is quite old.
Currently, internal programmers do much of needed work.
Co-Chair Therriault questioned the $110 thousand dollar
request being made to access the Alaska ferry system.
LEO LUTCHANSKY, MANAGER, INFORMATION SYSTEMS, DIVISION OF
ADMINISTRATIVE SERVICES, Y2K COORDINATOR, DEPARTMENT OF
TRANSPORTATION AND PUBLIC FACILITIES, spoke to Co-Chair
Therriault's concern. He pointed out that $110 thousand
dollars would be used to access all the main line ferries.
The estimated price for the Kendicott would be $26 thousand
dollars. There are estimates out, also, for the other
ferries. He noted that there has been a history of Y2K
requests declining, as people become more educated on the
problem. He emphasized that the Department owes the public,
full assurance that they will be able to travel and that
they will be able to move their commodities. Co-Chair
Therriault requested a full break down. Mr. Lutchansky
offered to provide that information to Committee members.
Co-Chair Mulder spoke to the remediation request of $600
thousand dollars. Mr. Lutchansky emphasized that was an
estimate and that no assessment had yet been made for the
nine vessels. Co-Chair Mulder remarked that the Department
indicates that they would budget only what is needed,
although, history has proved that the Department will budget
what they can receive. Mr. Lutchansky advised that
Commissioner Perkins has emphasized that the Department will
approach the Y2K concern with practical engineering and
caution.
Commissioner Poe added, all state agency appropriations
would go through the Department of Administration Y2K
project office which will be responsible for how those funds
are used, except those funds allocated to the University.
Co-Chair Therriault reminded Committee members that the
numbers proposed are speculative and if funding is
appropriated, a five-year lapse would make him
uncomfortable. Commissioner Poe explained that a five-year
lapse is shown, as there was no alternative way to indicate
a lapse during the following fiscal years.
Representative Grussendorf asked if there were on-shore
aspects to the Alaska Marine Highway System proposal which
need addressing. Mr. Lutchansky responded that would be
contained in a different component. The terminal buildings
are part of a larger effort that would be funded through HB
64 public facilities. The specialized operations will be
handled in-house. Commissioner Poe pointed out that the
Department of Transportation and Public Facilities had
assessed all public service facility connections and
airports. He applauded that Department for continually
reducing cost projections.
Representative G. Davis suggested that computer companies
should be responsible for technical computer generated
costs. He felt that each group of computer data processing
units should be responsible to check with each company to
determine how to make them compliant. Commissioner Poe
agreed the process is "mind boggling". There is not a
computer company that can "fix" the system. There are many
problems which vary with each system of embedded chips.
Finding embedded chips is a different process for each
device. The Department of Administration has attempted to
get the best information for establishing the Y2K criteria.
Representative Austerman asked at this time, how much has
been expended. Commissioner Poe replied that $791 thousand
dollars has been spent. Additionally, the Department of
Health and Social Services has spent $1.2 million dollars on
the Medicaid system of which 75% was federal fund
reimbursed.
Representative Bunde asked why the Department of
Environmental Conservation requested so much for Y2K
compliance. Commissioner Poe explained that costs reflect
expenses of replacing hardware at the lab.
Co-Chair Mulder suggested that it would be logical for the
system benefiting from the change to be responsible for
funding it. Commissioner Poe replied that all "benefit
systems" are currently doing that.
Co-Chair Therriault asked further clarification of making
changes for the "economic well-being" of the State.
Commissioner Poe replied that paying vendors would fall into
that class. "Economic well-being" was part of a screening
criteria used, an aspect which would guarantee the securing
of land record transaction material. There exists a
prioritized list that addresses the basic needs of
facilities. The Department has worked with Alaska Public
Utilities Commission (APUC) to guarantee that utilities are
Y2K prepared.
JOE REEVES, DEPUTY DIRECTOR/ASM, DIVISION OF ADMINISTRATIVE
SERVICES, DEPARTMENT OF CORRECTIONS, spoke to the $1 million
dollar request submitted by the Department of Corrections.
He pointed out that each of the twelve institutions across
the State has a centralized control room. Mr. Reeves
explained that the unit at Cook Inlet, which houses the most
dangerous inmates, has a system which needs to be replaced
in order to operate the facility safely. It will be
replaced with a new Y2K compliant system which will
incorporate all day to day programs necessary to safely
operate the facility. All other systems operate on an
electronic pulse system.
CHRISTOPHER CHRISTENSEN, ADMINISTRATIVE STAFF COUNSEL,
ALASKA COURT SYSTEM, spoke to the Court's request of $182.5
thousand dollars. He pointed out that the Judicial Branch
was the last of the three systems to become computerized,
which, for purposes of solving problems associated with Y2K,
has been beneficial. Five years ago, the Legislature gave
the Courts money to purchase and redesign some of the
accounting software making sure it was Y2K compliant.
The proposed request represents the telephone systems in
twenty-nine courthouses and security systems in five
courthouses. The telephone systems are designed to tie into
the court rooms, with the recording equipment and sounding
system so that the public defenders, attorney generals and
private litigants do not have to fly to a specified location
for a private hearing. Additionally, the security systems
in the five largest courthouses including Anchorage,
Fairbanks, Kenai and Palmer are not Y2K compliant.
STEVE SMITH, (TESTIFIED VIA TELECONFERENCE), DEPUTY
DIRECTOR/ASM, DIVISION OF ADMINISTRATIVE SERVICES, INTERIM
CHIEF INFORMATION OFFICIER, UNIVERSITY OF ALASKA, spoke to
the Y2K request for the University of Alaska. He referenced
Attachment #2, "Year 2000 Project Status Report-University
of Alaska". [Copy on file]. The request addresses six
major phases:
? Year 2000 awareness
? Inventory & assessment
? Remediation
? Testing & validation
? Implementation
? Contingency which overlaps the other phases.
Spending for Y2K will come to the statewide office and will
go through campus groups. Criteria for spending have been
established within the University and how the projects are
prioritized. Those funds will address needs with the
hardware and the actual applications. The first criteria
determined if the system would be life threatening. The
second component would be to determine if it were mission
critical.
(Tape Change, HFC 99 - 14, Side 1).
Mr. Smith addressed the contingency plan. The University
has no direct control of getting some services to needed
places. In some cases, there will be a dollar number
involved with those considerations. Part of the difficulty
of dealing with the University is the distributed nature of
the environment. After the mission critical criteria have
been addressed, there is additional concern that all of the
University's research material be secured. Some of the data
is critical to the State and for the University. The
University of Alaska is attempting to secure these systems.
Mr. Smith advised that NASA, NOA and the Department of
Defense have issued mandates to make sure that the systems
which they have funded, are Y2K compliant. In some cases,
there has been money fronted by those agencies to help
secure that safety.
Co-Chair Therriault questioned the status of the Fairbanks
campus electrical power plant. Mr. Smith replied that plant
has passed most of the inventory, yet needs a bit more
testing. University of Alaska anticipates a final report
from that agency soon.
Co-Chair Therriault asked if the campus would be able to run
without generating it's own power. Mr. Smith replied,
currently, there is back up with the Golden Valley system.
He added that heat could be an additional problem, currently
with no known back up.
Co-Chair Mulder asked if the $2 million dollars borrowed
from the Risk Management Fund would be in addition to the $2
million dollars borrowed by Department of Administration.
Commissioner Poe stated it was.
MARY LOU BURTON, (TESTIFIED VIA TELECONFERENCE), STATEWIDE
COORDINATOR, UNIVERSITY OF ALASKA, clarified that the $2
million dollars for the University was not in addition to
the $5 million dollars. The total cost is estimated at $5
million dollars.
Representative G. Davis asked if University of Alaska was
self-insured. Ms. Burton stated they are. Commissioner Poe
pointed out that for the State, it is a different matter, in
so much as they have a general liability policy and an
aviation policy. To date, the State has not accepted Y2K
riders.
Representative Austerman asked why the warranty orders
effective January 1999, were not issued prior to that time.
Mr. Smith reiterated that this has been an education process
for everyone. Y2K is not just an information technology
issue and is not clearly understood by government or
business in general, exactly what the problem is.
In response to Representative Austerman, Commissioner Poe
noted that Department of Administration has had requirements
on contracts for about one year for Y2K compliance. He
added that the Department of Administration had not
scrutinized the expenses requested by University of Alaska.
Representative Grussendorf recommended that the Commissioner
and the Committee should check all expenses. Commissioner
Poe advised that the University has handled their own effort
with Mr. Smith in the forefront.
Co-Chair Mulder asked if the University designated staff for
the Y2K project coordination concern would be borrowed or
new hire. Mr. Smith stated that it would be both. Co-Chair
Mulder asked if the borrowed person's spots could be left
unfilled and unfunded in the FY2000 budget. Mr. Smith
replied that in those positions, the person could have been
pulled from a particular duty now and would be filled around
the edges by other employees that may come on for a term
funded position.
Ms. Burton added that the University of Alaska has found
that if there is not staff specifically dedicated to tasks,
they are not getting addressed.
Representative Austerman requested a breakdown from both the
University of Alaska and Department of Administration
indicating all staff and which departments they have been
borrowed from, which are new and the dollar amount
associated with each position. Ms. Burton stated that info
would be provided.
Co-Chair Mulder pointed out that the State's coordination
efforts was requesting $800 thousand dollars, and that the
University was requesting $500 thousand dollars. He
suggested that these size projects were requesting a lot of
overhead. He acknowledged that distance factors could drive
up the costs.
HB 64 was HELD in Committee for further consideration.
ADJOURNMENT
The meeting adjourned at 3:25 P.M.
H.F.C. 11 2/01/99
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