Legislature(2011 - 2012)HOUSE FINANCE 519
03/01/2011 09:00 AM House FINANCE
| Audio | Topic |
|---|---|
| Start | |
| HB166 |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 166 | TELECONFERENCED | |
| + | TELECONFERENCED |
HOUSE FINANCE COMMITTEE
March 1, 2011
9:02 a.m.
9:02:53 AM
CALL TO ORDER
Co-Chair Stoltze called the House Finance Committee meeting
to order at 9:02 a.m.
MEMBERS PRESENT
Representative Bill Stoltze, Co-Chair
Representative Bill Thomas Jr., Co-Chair
Representative Anna Fairclough, Vice-Chair
Representative Mia Costello
Representative Mike Doogan
Representative Les Gara
Representative David Guttenberg
Representative Reggie Joule
Representative Mark Neuman
Representative Tammie Wilson
MEMBERS ABSENT
Representative Bryce Edgmon
ALSO PRESENT
Representative Alan Austerman; Representative Mike
Chenault, Sponsor; Sharon Kelly, Staff, Representative Mike
Chenault; Representative Mike Hawker, Chair, Legislative
Budget and Audit Committee; Pat Davidson, Legislative
Auditor, Division of Legislative Audit; Karen Rehfeld,
Director, Office of Management and Budget, Office of the
Governor.
SUMMARY
HB 166 STATE AGENCY PERFORMANCE AUDITS
HB 166 was HEARD and HELD in committee for
further consideration.
HOUSE BILL NO. 166
"An Act relating to performance reviews and audits of
executive branch agencies, the University of Alaska,
and the Alaska Court System; and providing for an
effective date."
9:03:14 AM
REPRESENTATIVE MIKE CHENAULT, SPONSOR, explained the
legislation as relating to agency performance reviews. He
provided history. As co-chair of the House Finance
Committee, he and others had asked how the state could
assure that it was in the best position possible as oil
revenues declined. House Bill 166 was a response to that
and also to House majority guiding principles related to
fiscal responsibility. He thought the bill included a
number of the criteria the majority was considering,
including transparency and accountability. The bill would
identify fiscal properties based on the current
legislation, would control budget growth by looking into
the base instead of the annual increments, and would
provide a plan for the state living within its fiscal means
if outflow surpassed income.
Representative Chenault informed the committee that from
the early 1980s to roughly 2004, budget growth was
controlled only by lack of money. The price of oil had
required the state to draw down the savings account and the
Constitutional Budget Reserve (CBR) to provide necessary
infrastructure and programs that Alaskans thought were
needed. The price of oil went to $35 per barrel in 2005 and
some people felt like there was a lot of money. As the
price grew to $80 per barrel and beyond, the general fund
spending doubled from about $2.5 billion to $5.5 billion.
Most people understood that the level of spending could not
be sustained, and that there was a need to consider the
efficiencies and effectiveness of current programs. He
noted that Alaska was in better shape than most other
states in the country; there were enough revenues to fund
current operations. However, there was a systemic problem
with declining revenues; the state's revenues would decline
as the throughput through the Trans Alaska Pipeline System
(TAPS) continued to decline. He believed the only thing
that had masked the problem had been the high price of oil,
which had just closed at $109 per barrel for Alaska North
Slope (ANS) crude oil.
Representative Chenault believed HB 166 could provide an
opportunity to consider the infrastructure, reduce costs,
and help identify and sunset programs that were not
necessary. He thought the bill would provide an
encompassing mechanism that would pull together and utilize
the good resources currently available in the state,
analyze agencies, and make appropriate recommendations to
the Finance Committees to guide their budget work. He felt
it was currently very difficult to responsibly review the
$5.5 billion budget in the roughly 45 days allowed, and to
do the job as the public would like it done. He pointed out
that the learning curve could be steep for new members on
the Finance Committees.
9:09:22 AM
Representative Chenault continued that the goal of the
legislation was to centralize state services and produce a
report that could identify and prioritize areas that could
be reduced if future cuts were needed. He also felt the
executive branch should buy into the independent objective
and unbiased review of the departments to assist the
legislature in making sure it does what Alaskans want.
SHARON KELLY, STAFF, REPRESENTATIVE MIKE CHENAULT, directed
attention to documentation regarding the bill. She reported
that she had studied the Texas Sunset Commission and
referred to the handout "Texas Sunset Frequently Asked
Questions Sheet" (2/3/2011, copy on file). She detailed
that Texas had been using the process for about 20 years.
The Texas Sunset Advisory Commission had a staff of 32,
including 8 senior analysts and 17 regular analysts. The
commission's budget was a little over $2 million per year,
plus reappropriations. The commission had eliminated 58
agencies and consolidated 12 others. The recommendations
from the commission had saved the state of Texas $783.7
million since it came into existence.
Ms. Kelly continued that Texas was currently looking at a
budget of $187 billion, and the budget review board was
recommending a 15 percent cut down to $158.7 billion,
reflecting an existing reality in the Lower 48. She pointed
out that a 15 percent cut in Alaska's budget would amount
to $75 million.
Ms. Kelly noted that according to the Legislative Audit
Division, the authority for sunset audits already existed
under AS 44.66, the area of statute that also includes the
authority for sunsets for boards and commissions. She
continued that unfortunately, the audits relating to the
agencies of the state included dates; the last date listed
was 1983. Since then, no termination audit had been
conducted, because there was no cycle date continuing the
process. Discussions about what might work for the state of
Alaska had resulted in the idea of a review team working
under the Legislative Budget and Audit Committee (BUD). The
team could use all existing information that was currently
being prepared to inform a performance review that would be
contracted out. She referred to University of Alaska
President Patrick Gamble's presentation of the Fisher
Report, which the sponsors thought was the kind of report
the legislature was interested in: an independent, outside,
unbiased contract review performed by an entity with
expertise in the area being reviewed.
Ms. Kelly stressed that HB 166 would not sunset or audit a
department; it would set up a process to conduct a
performance review. She noted that as the bill was put
together, Legislative Legal Services had to make amendments
to conform to what was already in state statute.
9:14:23 AM
Ms. Kelly provided a sectional analysis of the bill, noting
that Sections 2 and 3 were the heart of the bill.
· Section 1. Repeals references to agency programs in
existing law that give the legislative audit division
authority to audit and terminate agency programs.
Legislative audit division authority to audit and
terminate boards and commissions remains intact.
Ms. Kelly detailed that Section 1 was a conforming
amendment that addressed AS 24 (related to the duties of
the legislative audit division).
· Section 2. Adds a new section that requires the
Legislative Budget and Audit Committee to ensure that
every year a review team conducts an audit of the
agency program or programs listed; grants the
committee authority to contract with review team
members if it receives an appropriation; and sets a
schedule for agencies to provide specific information
to the review team.
Ms. Kelly detailed that the review team would consist of
two professionals and one assistant. Section 2 would set up
the time frames. The section listed each department and
outlined a ten-year cycle that would be repeated at the end
of the cycle. She noted that the list did not include the
legislature or the governor's office, but the committee
could decide to include them.
Representative Neuman read from page 3, line 31 to page 4,
line 6 of the bill:
(2) before April 1, provide to the review team a
list of programs or elements of programs, comprising
at least 10 percent of the general funds in the
agency's budget appropriated from the general fund
that
(A) do not serve the current need;
(B) are not authorized by the Constitution
of the State of Alaska or the Alaska Statutes; or
(C) are not essential;
Representative Neuman asked whether the language was an
attempt to reduce the agency budgets by at least 10
percent. Ms. Kelly acknowledged that the section might need
to be tightened. The sponsor was looking for each agency to
come forward and make recommendations about what could be
cut if the legislature asked for a 10 percent cut. She
thought there could be a need to identify and prioritize
essential and non-essential state services. She noted that
further down in the bill, the Finance Committees did not
have to approve the proposed reductions, but could consider
them and determine whether there was a need to provide a
service when there were the funds to do so. The idea was to
build resources in case there was a need to make cuts.
Representative Neuman queried the reference to "agency" and
assumed she meant that an outside agency would look at the
10 percent reduction and not the agencies within
departments. He thought it was good to have outside
perspective. He thought it could be difficult for
departments to scrutinize themselves. Ms. Kelly responded
that the bill was structured so that the review committee
could hire a performance audit team and that team would
conduct the performance review on the departments.
9:18:30 AM
Representative Costello questioned the performance
standards that would be used for the review process. She
wondered whether missions and measures would be used. Ms.
Kelly replied that Section 3 defined what would be reviewed
during the process. She explained that the team would look
at the good tools already available, such as the missions
and measures, the recommendations of the subcommittees, and
single audits done by the legislative auditor. The
information would be pulled together, along with best
practices available nationwide.
Representative Costello asked whether the missions and
measures of the departments would be changed after the
described process to better reflect what would be measured.
Ms. Kelly believed that during the course of the audit, the
review team might recommend that the missions and measures
be reconsidered.
Representative Costello asked whether the new process would
replace the subcommittee process or work in concert with
it. She queried the timing of the process. Ms. Kelly
responded that the review team would provide their report
in December through BUD; in January the report would be
provided to the Finance subcommittees. She believed the
team would work in concert with the committee to give them
valuable information to look at the budget effectively.
Co-Chair Stoltze asked whether she meant BUD or the
standing Finance Committee. Ms. Kelly explained that the
review team would bring the report to BUD in a confidential
manner in December, and the same information would be
provided to the Finance subcommittees in January.
9:21:26 AM
Representative Guttenberg asked whether the report given to
the subcommittees would be the same as the confidential one
presented to BUD or whether it would be edited. He queried
the intent. Ms. Kelly responded that the bill allowed for
the same courtesy that BUD currently got: a confidential
report; she did not believe the report would be changed in
any way when it was presented to the Finance Committees.
Representative Guttenberg understood that the legislature
and the governor were left out of the agency list, but he
wondered about the third branch, the court system. He
questioned whether there were things in the court system
budget that were up for program review, and whether the
courts should be included as well. Ms. Kelly responded that
the court system was included in the bill.
Representative Guttenberg understood, and wanted to find
out if there were things that could be micromanaged out of
the court system. He thought most things the courts did
were in other departments, and that the court was more than
the judges or clerks. He questioned the appropriateness of
having the court system as part of the bill. Ms. Kelly
answered that any element of state government could be
viewed through a new lens to see if anything could be
changed. The bill looked to statutory authority, which the
court system had to follow like any other an agency. She
added that it was possible to find that the courts were
underfunded; for example, a report might reveal that an
investment in new technology would provide savings later
on.
Co-Chair Stoltze reassured everyone that the legislative
branch still had the power to make appropriations.
Representative Doogan opined that the legislature seemed to
increase the budget when the state had money and decrease
the budget when it did not, and he thought the reviews were
a good idea. He referred to the list of departments that
would be audited, and asked whether every agency would be
covered once every ten years. Ms. Kelly replied in the
affirmative.
Representative Doogan wondered whether reviews should be
conducted more frequently. He questioned whether the
timeline was sufficient, as two or three governors could
cycle through in the time between an agency's ten-year
reviews.
9:25:41 AM
Representative Chenault replied that the legislature would
be free to determine the timeline; it might want to decide
whether ten years was often enough for the review. He
believed the audits would be in-depth and there may not
have to be any particular changes in any one particular
year. The legislature could set out the recommendations to
cover a period of time. He thought the proposed ten-year
timeline was a good place to start. The Finance Committee
could review departments each year; some could require no
changes and others could require major changes.
Representative Doogan asked how the review team would be
selected. He also wondered whether the same team would move
from agency to agency, or whether a new three-member team
would be assembled for each agency when its time in the
cycle came up. Ms. Kelly replied that the three people
would be hired by BUD and would be responsible to contract
for the services of the performance reviews. She assumed
BUD would look for well-qualified management professionals
to coordinate the audits and help accumulate the
information from tools already available.
Representative Doogan clarified that three people would be
hired specifically to oversee the contracts; they would
hire additional outside expertise depending on what was
needed for a particular agency. Ms. Kelly replied in the
affirmative.
Co-Chair Thomas surmised that BUD (through the contractors)
would conduct its overview of the department that was up in
the cycle and the Finance Committee would do the oversight
in the other nine years of the cycle. Ms. Kelly responded
yes; when the contractors' report was done, it would be
presented to BUD, and it would be done every ten years for
any given department.
9:28:54 AM
Representative Gara stated that he supported the bill and
had wanted to put together a similar bill earlier in the
session with Representative Doogan. He thought there was a
provision missing in the bill that may be implied but
perhaps should be stated directly in a committee
substitute. He wanted the auditors to identify efficiencies
recommended. Ms. Kelly replied that the bill stated that
the report would identify efficiencies.
Representative Gara pointed to page 6, Sections 14 and 15;
the bill would want the work done within the agencies and
then identify reductions and efficiencies consistent with
the principles of the bill, such as eliminating
duplications. He agreed with identifying the efficiencies.
However, he noted that on page 4, line 1, there was a
reference to a recommendation for a 10-percent reduction in
general funds. He questioned whether 10 percent was the
appropriate number in all cases and for all departments;
some cuts could slow down essential services such as
permitting or education. He thought the language on line 6
could offer protection (related to identifying all the
reductions possible that were consistent with the report).
He wondered whether the 10-percent reduction for each
agency was negotiable.
Co-Chair Stoltze suggested one option could be deeper
vertical cuts.
Ms. Kelly responded that the agencies would be asked to
come forward with proposals for 10-percent cuts, but the
review team could recommend larger cuts in their report.
Representative Gara asked what would happen if a 10-percent
reduction was not achievable. Ms. Kelly replied that the
Finance Committees were not mandated to take any of the
recommendations. The review could show that a department
needed more money and the legislature as the appropriating
body could decide to allocate more resources. She thought
the legislature was protected.
9:32:29 AM
Representative Gara suggested that page 6 [lines 12 to15],
(requesting the review team to recommend reductions for the
agency) could provide the needed flexibility. He questioned
whether it was necessary to specify the number 10 percent
on page 4. Ms. Kelly replied that an agency might not think
they should make cuts. The request was intended to get an
agency to think about what it really needed. An agency
might say it could not get to a 10-percent cut without
eliminating something essential to the state. She
maintained that the goal was to get an agency involved in
the process.
Representative Gara thought the legislature and the
governor's office should be added to the list and should
not be exempted.
Co-Chair Stoltze stated that he had frequently voted
against legislative council budget items. He agreed that
the legislature should not be exempt.
Vice-chair Fairclough queried the logic behind the order
chosen for the list of agencies in the ten-year review
cycle. Ms. Kelly responded that they had tried to look at
the departments and begin with those with significant
upcoming expenses; they chose the Department of Corrections
(DOC) first. The second year would cover three departments.
They felt that during the first year, the team would be
developing matrices and putting the process in place. She
thought the departments in which savings could be achieved
were the Departments of Health and Social Services and
Education and Early Development, so the first couple years
were selected with smaller agencies to make sure that the
process was working before moving on to the larger
departments.
Vice-chair Fairclough was concerned about the agencies that
were most expensive for state, including early education at
$1 billion, Health and Human Services at $1 billion, and
the University of Alaska at over $750 million. She
suggested grouping similar agencies together. She was
concerned about hiring contractors with expertise in
certain areas; she opined that the same contractor could be
kept for multiple years, and departments could be grouped
so that contractor expertise in a particular area could be
used for more than one year. She supported having the
university and K-12 reviewed during the same year, but she
supported grouping departments such as DOC with the
Department of Public Safety (DPS), the Department of Law
(DOL), and the Court System, as the departments impacted
each other.
9:37:59 AM
Co-Chair Stoltze noted that there were routine audits in
eight-year cycles, and some audits were every two years. He
asked whether audits would happen more often for agencies
with problems. Representative Chenault hoped that the
suggestions of the review team would be implemented at the
earliest convenience.
Vice-chair Fairclough questioned what the sponsor would say
to those who viewed HB 166 as a duplication of services
that were already in place. She thought the administration
was already supposed to conduct the reviews every year. Ms.
Kelly acknowledged that there were duplications in
services, but the sponsor wanted the executive branch to
engage in the process.
Representative Wilson reported that she read the 10-percent
stipulation as asking an agency to prioritize its projects.
She thought the exercise could prepare an agency to cut in
case there was a significant decline in revenue. Ms. Kelly
agreed; the provision would ask the head of an agency to
determine where cuts could be made that would least impact
Alaskans.
Representative Wilson referred to difficulties experienced
in the subcommittee process and asked whether there was a
mechanism in the bill that would allow auditors to check
the books of an agency or whether the process would be
completely dependent upon information given voluntarily by
the agencies. Ms. Kelly responded that the review team
should have the authority to go in and look at what they
wanted to see. She noted that some departments were
forthcoming with information for subcommittees, and others
were not. She referred to a section in the bill stipulating
that the review team could recommend a consequence for non-
participation by an agency, such as a reduction in the
budget to the commissioner's office.
9:42:00 AM
Representative Doogan queried whether the bill could
prevent an agency from mounting the "Washington Monument
defense" (i.e., putting items with the most public support
up for the 10 percent reduction). Ms. Kelly replied that
there was not a provision in the bill to tell an agency to
go back and look for a different 10 percent if the first
proposal was used as a tactic. She acknowledged the
described syndrome, which she called the "Motherhood and
Apple Pie Effect," where an agency put forward programs to
cut that would cause public outcry. She believed the review
team would be able to make recommendations to the finance
committee (such as a specific reduction) if the department
did not "play fair" and engage in the process.
Co-Chair Stoltze did not know how to make a statutory
requirement for leadership by the executive and legislative
branches.
Representative Doogan agreed, but did not think a system
should be set up that could be manipulated. He expected
that some commissioners would be tempted to "game" the
system in order to save their budgets.
Vice-chair Fairclough suggested that a Finance subcommittee
chair or member with knowledge of a department could serve
on the review team of the department so the system could
not be manipulated.
Representative Costello directed attention to page 2, item
6, related to the review team having access to all
confidential records. She referred to the example of a
royalty review, in which some of the information given was
confidential. She asked whether the review team would have
access to such information. Ms. Kelly thought the question
was a good one. She pointed out that the section referred
to had to do with the authority of the Legislative Audit
Division, which had to ability to look at confidential
information. Pat Davidson (legislative auditor) had asked
the sponsor whether they wanted the review team looking at
confidential information and going through the reporting.
She referred to page 5 [lines 5 to 7]: "(7) analysis and
summary of confidential information that the review team
may request, through the Legislative Budget and Audit
Committee, from the legislative audit division." She
explained that legislative audit had the system in place to
look at confidential information and could provide summary
reports for the review team.
Representative Costello asked whether the confidentiality
issues would preclude a Finance subcommittee member or
someone from legislative finance from being part of the
review team. She believed it would be beneficial for people
with budget experience to be involved in the review
process.
9:47:33 AM
Co-Chair Stoltze wondered whether the process could work if
the described members were not involved.
Ms. Kelly anticipated that the review team would look at
all available resources, including missions and measures,
audit findings, subcommittee recommendations, the ten-year
plan, the fiscal policy group work, University of Alaska
Institution of Social and Economic Research (ISER) reports,
studies funded by the departments, or any other tool that
the state had already paid for.
Representative Costello referenced the proposed 10-percent
reduction in the provision. She asked whether there would
be recognition of programs that generated more money in the
economy, such as the Department of Natural Resources (DNR)
processing permits and tourism marketing, which would
create additional income to the state. She thought programs
that created jobs should be furthered. Ms. Kelly replied
that there would be benefits to the state from activities
such as permitting. She believed the review team would take
a "common-sense approach" and that the legislature would
make good decisions.
Representative Costello noticed that the Department of
Administration (DOA) was in the middle of the 10-year
cycle. She thought DOA oversaw programs connected with many
other departments and that there could be benefit to
reviewing it earlier. Ms. Kelly responded that the
departments were put in order based on getting the process
in place, but thought there could be flexibility.
Co-Chair Stoltze noted that the Finance Committee was the
first committee of referral for HB 166 and would work
closely with sponsors on the process.
Representative Neuman noted a chart showing unrestricted
general funds from 1980 to 2005, which had stayed level,
while the size of government had doubled. He reported that
he had recommended that agencies consider advisory
committees, such as those the legislature used when passing
legislation costing a lot of money. He thought legislators
should examine what they do in state government. He pointed
to hard questions, such as agencies started through ballot
initiatives. He thought Alaska Natural Gas Development
Authority (ANGDA) was a good group that did good work, but
pointed out that there were already other groups
considering similar issues. He questioned whether services
were being duplicated. He queried a possible mechanism to
review costs.
9:52:53 AM
Representative Chenault agreed that there were large
programs that the legislature continued to fund without
evaluating the need for them. He stated that the proposal
in HB 166 would help the legislature examine which
direction the state should take. He agreed that the
pipeline issue was costing the state hundreds of millions
of dollars on at least two or three different options; he
believed the stated needed to decide whether the money was
being spent wisely. He also believed a lot had been done
for education since 2004. He did not see any department
returning money because a program was not working. Nor had
he seen any department returning the money it had claimed
would be saved if certain programs were funded. He claimed
the money kept getting used for year-to-year increases in
agency costs. He did not fault the departments; he blamed
"governmental creep" that he felt had to be curbed. He
argued that the state would be in trouble and have to spend
savings if the price of oil dropped to $50 per barrel.
Representative Chenault recommended being truthful about
the situation and coming up with a plan. He maintained that
if a plan was not in place, Alaska could end up being in
the position of other states that had to make huge cuts in
their budgets. At that point, there would not be the option
to take a little off here and there. He did not think the
agencies would be hurt by reconsidering their budgets.
Representative Neuman opined that the legislature had to
take a look at itself as well. He referred to advisory
committees that were hired instead of making the tough
decisions. Representative Chenault felt he had been charged
with representing his district on all issues, especially on
the day-to-day running of the government.
9:58:18 AM
Co-Chair Stoltze thought the discussion of the bill would
be extensive and important.
Ms. Kelly continued with the sectional analysis of HB 166:
· Section 3. Adds a new section that sets out the duties
of the review team including scheduling hearings,
collaborating with other agencies, consulting other
states and organizations, analyzing material relevant
to the performance review of the agency, and providing
preliminary and final reports to legislative
committees by specific dates. Tasks the Legislative
Budget and Audit Committee with tracking and
publishing actual reductions in state expenditures as
a result of the review team's audit. Allows the house
and senate finance committees to incorporate the
recommendations of the review team into the budget.
Ms. Kelly detailed that Section 3 outlined the duties of
the review team and stipulated that the confidential report
would be presented to BUD on December 16. She noted that
Section 3(d) listed the 18 elements of the final report and
Section 3(e) would track the cost savings to the state
because of the performance reviews. Section 3(f) would
allow the House and Senate Finance Committees to
incorporate the recommendations into the budget process as
they saw fit.
· Section 4. Repeals reference to agency programs in
existing law that set out the procedures for audit and
termination of agency programs. The procedure for
audit and termination of boards and commissions
remains the same.
· Section 5. Repeals references to agency programs to
conform with the changes in Section 1 and Section 5.
· Section 6. Amends definitions to include "agency" and
"review team" in AS 44.66.
· Section 7. Repeals AS 44.66.030 which currently sets
the procedures for designating programs subject to
review and termination. It is replaced by the new
section created in Section 2.
· Section 8. Provides for an effective date of July 1,
2011.
Ms. Kelly emphasized that the bill would authorize a
performance review, not an audit.
Co-Chair Stoltze surmised that the legislature would start
at zero and build the budget from the ground up through a
justification process of performance and measures instead
of going through an initial process where it considered a
proposed budget with increments and increase. Ms. Kelly
responded that the proposal did not represent a zero-based
budget; the only state agency operating in that manner was
the mental health trust. She thought the size of the
state's budget would make it too difficult to operate from
a zero base. The bill would provide for an independent
party providing feedback about what was working and what
was not working. She believed there would be good
information that would assist in the process of evaluating
the "abyss of the base" that never seemed to be addressed
in budget discussions.
10:01:44 AM
Vice-chair Fairclough queried whether BUD was ready to put
the review team together right away. Ms. Kelly provided a
synopsis of the proposed timeline. The review team could be
hired in the months after the effective date (July 1, 2011)
and could put together the process in the next six months,
including working with the National Conference of State
Legislators (NCSL) and performance contractors in other
states. The first department reviewed would be DOC in 2012;
the review team would be provided authority in January 2012
and the 10-percent cut lists from the agency would be due
in March 2012. The team would then have from April to
November 2012 to put the report together. The legislature
would see the results from the provision for the first time
in January 2013.
Vice-chair Fairclough wondered whether regulations would be
needed.
Representative Doogan asked whether there had been
consideration of having the Finance Committee conduct the
budget review during the interim. Representative Chenault
responded that they had considered that, but realized that
committee members would have difficulty because of their
own employment situations outside of the legislature. In
addition, the fact that the members could change every
election would mean that each new group would have to be
trained. He thought having a review team would be
efficient, consistent, and long-term.
Representative Doogan had researched the composition of the
legislature ten years earlier to get an idea of member
continuity. He described the composition of the legislature
at the time: only five current members of the House of
Representatives were in the House ten years ago; five
current members of the House were in the Senate ten years
ago; and four members of the Senate were still there.
Co-Chair Thomas asked whether the BUD chair would be
required to have Finance Committee experience.
10:07:31 AM
Representative Chenault responded that once the program was
in place, there would be a pool to pull from. Normally, the
BUD position was someone who had been in the legislature,
although not necessarily on the Finance Committee. He
pointed out that the two co-chairs of the Finance committee
sat on BUD.
Co-Chair Thomas commented that the membership could change.
REPRESENTATIVE MIKE HAWKER, CHAIR, LEGISLATIVE BUDGET AND
AUDIT COMMITTEE, noted his experience and familiarity with
the state's operating budget process. He believed the
committees and legislative audit could do anything that
they set their minds to and were committed to and
passionate about accomplishing. He was troubled that HB 166
even had to be brought before the legislature. He believed
the Finance Committee, as elected representatives of the
public, was charged with bringing forward the state's
annual appropriations, with making tough decisions, and
with the review of the various agencies. He acknowledged
the difficulty of the decisions that had to be made. He
expressed grave concerns about passing off the
responsibility of managing the state appropriation process
to outside consultants, even if the team was under the
direction of BUD.
10:12:24 AM
Representative Hawker thought HB 166 was well crafted, if
the legislature chose to take the approach. He questioned
how the review process would be set up, who would be
reported to, who the team would be directly accountable to,
and how it would be accountable to the legislature and
ultimately to the people of Alaska. He thought the answer
to the questions was critically important.
Representative Hawker stressed that BUD was a statutory
committee; every two years the chair vacillated between the
House and the Senate. He believed continuity of management
would be ultimately critical to execute the proposed
legislation, which was why the legislature had established
the Legislative Audit Division and vested it with vast,
tremendous powers. He argued that continuity rested in the
division, which was a professional agency with the skill
set to manage the activity and the continuity of on-going
management.
Representative Hawker felt the process outlined in HB 166
should be the job of legislative audit. The Legislative
Budget and Audit Committee in turn had to approve all
contracts that the Legislative Audit Division entered into.
He noted that there was a currently an extensive amount of
subcontract auditing for the various agencies. He wanted it
to be very clear that, in his opinion, the process would be
done through the professional offices of the Legislative
Audit Division, as opposed to being a more political
activity (reporting to an elected official). He believed
the legislature needed to carefully consider where the bill
vested power.
Co-Chair Stoltze commented that he shared Representative
Hawker's position and pointed out that the project would be
discussed over time. He welcomed Representative Hawker's
input. He was glad the discussion was being taken up by
House members and committees. He referred to controversy
related to the Senate's involvement in the issue.
10:16:38 AM
Representative Doogan appreciated the opportunity to have a
philosophical discussion about the issue. He opined that
there was only one option available beyond the system
described in HB 166: The minority and majority could become
united on the issue, which was not typically the way the
House of Representatives functioned. However, the system
would require every majority member to create two brand-new
budgets each year, raising the problem caused by members
cycling through the legislature. New members have to start
from scratch on the budgets. He stressed that the political
system in place militated against the system being
workable. On the other hand, he was not convinced that the
system outlined in HB 166 was the best approach either. He
could imagine supporting a system in which the majority
party would divide the numbers up, but the majority
changes, and there were sometimes more and sometimes less
members to carry the load.
Co-Chair Stoltze pointed to the bi-partisan nature of some
majorities.
Representative Doogan did not believe a new system for
working on the budget could be embarked upon without
acknowledging the facts of the existing political system.
10:19:52 AM
Representative Hawker referred to a premise that there were
two budget processes that would be occurring
simultaneously. He did not think the characterization was
appropriate as he read it. He stated that there would be
one budget; HB 166 would add a significant tool and extend
the budget process beyond the short time allowed in
session. He pointed out that the House had 45 days to
review and pass a $9 billion budget. The process proposed
in HB 166 would provide additional resources to expand in a
cyclic nature over the course of an entire year and delve
more deeply and efficiently into various government
operations. He questioned whether contracting out the
responsibility was the best means.
Representative Doogan clarified that he did not mean to say
there were two separate budgets. He meant that each member
would get two agencies if there were eight members and
sixteen agencies.
PAT DAVIDSON, LEGISLATIVE AUDITOR, DIVISION OF LEGISLATIVE
AUDIT, explained that in HB 166, legislative audit would
only play a role when work was delegated to the division
through BUD. In the current version, the division would
play a limited role.
Ms. Davidson pointed out that the sponsors were clear in
drafting the legislation that they wanted to describe the
review team's activity as performance reviews and not as
audits. She detailed that audits get wrapped up in
professional requirements, which add to the expense.
Co-Chair Stoltze asked whether legislative audit had been
consulted by the agency that developed the fiscal note. Ms.
Davidson reported that the Legislative Affairs Agency had
been asked to prepare the fiscal note; she had recommended
not using the language "audit" or "auditors," and to
instead put in "review" and "review team." She added that
she had not been consulted about the costs.
Co-Chair Stoltze stated that she was invited and expected
to provide information about costs.
Ms. Davidson opined that the fiscal note would depend on
the committee's expectation of the level of assurance. She
stressed that audits provided high levels of assurance that
what the audit contained was true, supported, and well-
documented. The state would get a lower level of detail in
terms of review and support from hired consultants than
from an audit. The review could still have great value, but
the level of assurance would impact the cost.
10:25:26 AM
Co-Chair Stoltze thought the committee would prepare its
own fiscal note with help from legislative audit.
Representative Hawker referred the committee to the
disclosure analysis attached to the current fiscal note,
which stated that "House leadership has determined that
these audits will have the following fiscal impact to the
state of Alaska." He read the language as meaning that
House leadership had met to prepare the fiscal note.
Co-Chair Stoltze replied that some things said were more
fiction than non-fiction.
Representative Hawker thought a thorough review of the
fiscal note was needed.
KAREN REHFELD, DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET,
OFFICE OF THE GOVERNOR, believed the purpose of HB 166
would be to authorize agency performance reviews to provide
a greater level of scrutiny of statutes, regulations,
accountability, effectiveness, and efficiency of state
programs and services, and to recommend changes to improve
or eliminate programs or functions. She agreed that the
general concept of the bill was good; an unbiased
assessment and fresh review would be of value.
Ms. Rehfeld reviewed questions that she and her staff had.
Specifically, she had questions about the composition of
the review team and its responsibilities. She thought the
objectives and expression of the 10-percent reduction in
agencies needed to be discussed and strengthened. She
thought how the review work plan would be accomplished
would dictate what would happen during the time frame. She
felt the calendar year process envisioned in the
legislation relied heavily on a great deal of information
that was already available.
Ms. Rehfeld informed the committee that the Office of
Management and Budget (OMB) had prepared a zero fiscal note
based on some initial assumptions that the additional
resources that would be required for the review teams would
come from outside the executive branch. She had also
assumed that state agencies would not be charged a fee to
pay for the cost of their reviews, and that the state would
be relying on its current level of resources, systems, and
information to support the review team.
10:29:12 AM
Ms. Rehfeld pointed to items that were specifically
required from OMB for the review team: the 10-year growth
and projections of agencies by funding sources and some
personnel information (including organizational charts and
personal services transfers). She had assumed that OMB
would be able to provide the review team with the requested
information through the current detail provided to the
legislature.
Ms. Rehfeld assumed that some level of effort would be
required on the part of OMB staff and agency staff to help
with the review team process, although she had not assumed
increased costs for additional staffing to support the
effort. She acknowledged that changes to the fiscal note
might be needed as discussions progressed. She thought the
details of the review work plans would be important for OMB
to be able to predict the fiscal impact.
Co-Chair Stoltze referred to the process of determining
costs. He believed there would be continuing discussion and
that all staff would work on the process. He encouraged
open discussion.
Representative Wilson spoke in support of the legislation.
She did not think the current way of approaching the budget
was working. She thought getting information from agencies
was difficult and tedious. She felt the issues needed to be
considered during the interim. Coming into the legislature
and the budget process as a new person had been difficult
and she thought a third party would provide resource. She
did not see the review team as a duplication of services.
She queried OMB's view of the current budget process. Ms.
Rehfeld acknowledged that any process could be improved;
agencies should be able to articulate to a budget
subcommittee what their constitutional, statutory, and
regulatory responsibilities were, what their core services
were, and how well they were performing. She thought the
proposal could have value to the extent that the agencies
had not been able to communicate effectively or to the
extent than an external process could help the legislature
on the annual budget process.
Representative Wilson echoed Representative Hawker's
question about whether the legislature was giving up a task
that was supposed to be theirs. She opined that the
legislature was doing a disservice to the public because of
the inability to get into the agencies as far as their
books and details about how programs were working. She did
not think there was enough time to do what was needed, and
that trained consultants would be able to get the
information more efficiently and with less political
maneuvering.
10:34:00 AM
Co-Chair Stoltze appreciated Ms. Rehfeld's reference to
looking at statutes and regulations, as the excuse used for
so much of the state's spending was the need to implement
regulations and statutes.
Vice-chair Fairclough referred to statements about the cost
associated with levels of assurance. She maintained that
her experience had shown that audits were informative, but
the assurances could be used as disclaimers; audits could
offer assurance about numbers but not take responsibility
for numbers that did not work. She wanted the language of
"review team" and was not opposed to support from the
Legislative Audit Division. She thought essential,
statutorily required services were good. She recommended
separating federal mandates. She felt that review teams
should consist of people with expertise and could be sought
more globally. The teams should also look nationally and
internationally to review how other agencies were dealing
with similar challenges.
HB 166 was HEARD and HELD in committee for further
consideration.
Co-Chair Thomas notified the committee of the schedule for
public testimony for the operating budget.
ADJOURNMENT
The meeting was adjourned at 10:37 AM.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB166 Sponsor Statement Sunset.doc |
HFIN 3/1/2011 9:00:00 AM |
|
| Sectional Analysis HB 166.doc |
HFIN 3/1/2011 9:00:00 AM |
HB 166 |
| HB166 Texas Info.pdf |
HFIN 3/1/2011 9:00:00 AM |
HB 166 |
| HB166 Budget Growth Slides PDF.pdf |
HFIN 3/1/2011 9:00:00 AM |
HB 166 |
| HB166 Sponsor Statement Sunset.doc |
HFIN 3/1/2011 9:00:00 AM |
HB 166 |
| HB 166 NEW FN Legislature.pdf |
HFIN 3/1/2011 9:00:00 AM |
HB 166 |
| HB166 NEW FN-GOV-OMB-02-26-11.pdf |
HFIN 3/1/2011 9:00:00 AM |
HB 166 |