Legislature(2015 - 2016)HOUSE FINANCE 519
02/05/2016 01:30 PM House FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| HB256 || HB257 || HB255 | |
| Fy 17 Budget Overview: Department of Commerce, Community and Economic Development | |
| Fy 17 Budget Overview: Department of Administration | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 256 | TELECONFERENCED | |
| += | HB 257 | TELECONFERENCED | |
| += | HB 255 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| + | TELECONFERENCED |
HOUSE FINANCE COMMITTEE
February 5, 2016
1:34 p.m.
1:34:07 PM
CALL TO ORDER
Co-Chair Neuman called the House Finance Committee meeting
to order at 1:34 p.m.
MEMBERS PRESENT
Representative Mark Neuman, Co-Chair
Representative Steve Thompson, Co-Chair
Representative Dan Saddler, Vice-Chair
Representative Bryce Edgmon
Representative Les Gara
Representative Lynn Gattis
Representative David Guttenberg
Representative Scott Kawasaki
Representative Cathy Munoz
Representative Lance Pruitt
Representative Tammie Wilson
MEMBERS ABSENT
None
ALSO PRESENT
Chris Hladick, Commissioner, Department of Commerce,
Community, and Economic Development; Catherine Reardon,
Director, Division of Administrative Services, Department
of Commerce, Community and Economic Development; Sheldon
Fisher, Commissioner, Department of Administration.
SUMMARY
HB 256 APPROP: OPERATING BUDGET/LOANS/FUNDS
HB 256 was HEARD and HELD in committee for
further consideration.
HB 257 APPROP: MENTAL HEALTH BUDGET
HB 257 was HEARD and HELD in committee for
further consideration.
HB 255 BUDGET: CAPITAL
HB 255 was HEARD and HELD in committee for
further consideration.
FY 17 BUDGET OVERVIEWS:
DEPARTMENT OF COMMERCE, COMMUNITY AND ECONOMIC DEVELOPMENT
DEPARTMENT OF ADMINISTRATION
HOUSE BILL NO. 256
"An Act making appropriations for the operating and
loan program expenses of state government and for
certain programs, capitalizing funds, making
reappropriations, making supplemental appropriations,
and making appropriations under art. IX, sec. 17(c),
Constitution of the State of Alaska, from the
constitutional budget reserve fund; and providing for
an effective date."
HOUSE BILL NO. 257
"An Act making appropriations for the operating and
capital expenses of the state's integrated
comprehensive mental health program; and providing for
an effective date."
HOUSE BILL NO. 255
"An Act making appropriations, including capital
appropriations, reappropriations, and other
appropriations; making appropriations to capitalize
funds; and providing for an effective date."
1:34:45 PM
Co-Chair Neuman reviewed the agenda for the meeting. He
directed members to hold their questions until the end of
each presentation.
^FY 17 BUDGET OVERVIEW: DEPARTMENT OF COMMERCE, COMMUNITY
AND ECONOMIC DEVELOPMENT
1:34:47 PM
CHRIS HLADICK, COMMISSIONER, DEPARTMENT OF COMMERCE,
COMMUNITY, AND ECONOMIC DEVELOPMENT, introduced himself and
thanked members for the opportunity to come before the
House Finance Committee. He relayed that the department's
FY 17 request was $194 million of which $21.9 million was
undesignated general funds (UGF). The department spent less
than 3 percent of the state's total UGF and contributed $80
million to the general fund (GF). He continued that the
state's economic goals were to have plentiful good jobs for
Alaskans presently and into the future. The department was
strongly identified with marketing and business assistance,
but had a much more comprehensive role in supporting
Alaska's development. The Department of Commerce, Community
and Economic Development (DCCED) provided services
essential to fostering a strong economy. The department
provided a dependable financial system through a regulation
of banks, securities, and insurance corporations. It also
provided capital through Alaska Industrial Development and
Export Authority (AIDEA), commercial fishing, and other
loan programs. It provided energy programs and a
consistently regulated utility system through Alaska Energy
Authority (AEA) and Regulatory Commission of Alaska (RCA).
It also provided certification of qualified professionals
needed throughout the economy. The department supported
effective, functioning local governments without which
economic growth was almost impossible. Whether through
participation in the department's loan program,
professional licensure, or support to local government,
DCCED touched the lives of many Alaskans. He introduced the
PowerPoint presentation: "Department of Commerce, Community
and Economic Development Department Overview."
1:36:29 PM
Commissioner Hladick began with slide 2: "Department
Organization." He highlighted the six divisions and seven
corporate entities within the division. The department had
549 permanent full-time positions not including positions
at the railroad. The railroad was a special organization
unto itself. The other corporate entities within the
department included AEA, the Alaska Gasline Development
Corporation (AGDC), the Alaska Seafood Marketing Institute
(ASMI), the Alcohol and Marijuana Control Board, and the
Regulatory Commission of Alaska.
Commissioner Hladick turned to slide 3: "Department
Makeup." The slide split the corporations from the core
divisions. He reported 62 percent of the department's
spending was for the corporations, of which about $40
million was for Power Cost Equalization (PCE) distribution
payments to communities.
Commissioner Hladick discussed slide 4: "Mission and Core
Services." The department's mission was to promote a
healthy economy and strong communities and to protect
consumers in Alaska. Its core services were consumer
protection, economic growth, strong communities, and
affordable energy.
1:37:31 PM
Commissioner Hladick scrolled to slide 5: "Budget by Core
Services." The slide depicted the department's budget by
core services broken out by UGF, designated general funds
(DGF), other, and federal. He noted that UGF was shown in
blue. The total department spend was $194 million and the
break out by fund type was shown.
Commissioner Hladick advanced to slide 6: "Fund Groups &
Self-Supported Agencies." He offered that in FY 17 the
department was requesting $194 million; DGF was $83
million, other was $69, etc. He pointed out the self-
supported programs that contributed to the GF. He reviewed
the list: Banking and Securities; Corporations, Business
and Professional Licensing; Insurance; Alcoholic Beverage
Control Board; RCA; and AIDEA. He noted that the largest
self-supporting program was the Division of Insurance which
equaled $62 million.
Commissioner Hladick continued to slide 7: "Unrestricted
General Funds." He indicated that the UGF was broken out by
division or corporation. The Division of Community and
Regional Affairs totaled 33 percent, etc. The department
had reduced UGF by 45.9 percent since FY 15, from $40.5
million down to $21.9 million. He noted there was a further
break out of various activities.
1:38:59 PM
Commissioner Hladick moved to slide 8: "Consumer
Protection." He would be discussing each one of the core
services by division or corporation. He began by stating
that the Division of Banking and Securities, the Division
of Corporations, Business and Professional Licensing, and
the Division of Insurance were all self-supporting with no
UGF.
Commissioner Hladick continued to slide 9: "Consumer
Protection." He noted that the Alcohol and Marijuana
Control Office was not self-supporting. There was a budget
request of $1.5 million to support. It was difficult to
gauge when it would be self-supporting with the fees that
had been set. The department thought it would happen
between FY 18 and FY 20 but had no idea how many people
would enter into the business. The Regulatory Commission of
Alaska was self-supported, as well.
Commissioner Hladick discussed slide 10: "Economic Growth."
He relayed that the Division of Economic Development was
split into three sections. There were 11 positions within
the economic development section and 2 positions within
tourism and marketing. The investment section housed 37
positions and was self-supporting. However, the economic
development and tourism marketing sections were supported
by UGF.
1:40:12 PM
Commissioner Hladick continued to talk about economic
growth on slide 11: "Economic Growth." The Alaska Seafood
Marketing Institute's budget totaled $24 million of which
the UGF request was $3.4 million. The Alaska Industrial
Development and Export Authority showed 103 positions but
it also included AEA's employees as well (he two divisions
shared employees). He noted that AIDEA did not require UGF.
Commissioner Hladick scrolled to slide 12: "Affordable
Energy." He stated that AEA had a total budget request of
$13 million, of which only $2 million was UGF. Power Cost
Equalization was housed within AEA and the total budget
request was $40.3 million in DGF. He reported that there
was no request for UGF in FY 17 for AGDC, but there had
been UGF requests in previous years.
Commissioner Hladick advanced to slide 13: "Strong
Communities." He noted that the Division of Community and
Regional Affairs appeared under strong communities. He
pointed to the fisheries taxes, national forest receipts,
and payment in lieu of taxes. He explained that the
fisheries taxes distribution was an existing business
fisheries tax that had been in place for many years. The
national forest receipts and payment in lieu of taxes were
from the federal government. He continued that community
revenue sharing was proposed at $50 million as the
distribution to communities; however, the amount was up to
the legislature.
Commissioner Hladick continued to slide 14: "Department-
Wide Services." He reported that the Division of
Administrative services had a total budget request of $4.9
million, of which $711,000 in UGF. The Commissioner's
office had a request of $73,000 in UGF.
1:43:07 PM
Commissioner Hladick moved to slide 15: "FY2015-FY2017
Priorities." He reviewed the list on slide:
· Maintain services to communities
· Maintain revenue-generating and self-funded programs
at current levels of service
· Continue effectively marketing Alaska's industries
with reduced state support
· Ensure marijuana is safely and effectively regulated
in Alaska
Commissioner Hladick turned to slide 16: "Status of FY2016
Reductions":
($9,976.0) UGF Reduction in FY2016 -24.7%
· $13,041.2 total reduction -6.1%
· Eliminated 27 positions totaling $2.0 million;
$528.4 UGF.
· Communications Coordinator, Grants Administrator,
support for Alaska Native Language Preservation
Council, 4 Analyst/Programmers, Business
Registration Examiner, 2 Development Specialists
(film & general), Planner, loan issuance and support
positions, utility analysts
Removed multiple named recipient grants
· ($300.0) Alaska Native Arts Marketing (UGF)
· ($300.0) Ilisagvik College (UGF)
· ($600.0) Marine Exchange of Alaska (CPV Tax)
Contracts and marketing efforts reduced
· ($6,810.6) Tourism Marketing
· ($1,863.9) Alaska Seafood Marketing Institute
· Marketing activities occur in advance of Alaska
visitation and seafood sales; the full effect of
these reductions is not yet known
· Continued UGF reductions in FY2017
Commissioner Hladick discussed slide 17: "Status of FY2016
Reductions & Additions":
Unallocated Reductions
· ($161.5) UGF/DGF Unallocated travel reduction was
reallocated to divisions based on average travel
costs over three years (same methodology as LFD).
· ($1,100.0) UGF Executive Branch-wide unallocated
reduction was allocated to multiple divisions
· ($600.0 Tourism marketing, $400.0 seafood
marketing, $50.0 Alaska Energy Authority,
$38.9 Commissioner's Office, $11.1 FY2016
COLA over-appropriation)
Regulation of marijuana is on-going
· FY2015: $785.7
· FY2016: $1,574.4
· FY2017 request: $1,574.4
· General funds will be incrementally replaced with
program receipts as they are reliably collected
· Anticipated to be fully funded by license
receipts by FY2020
1:44:30 PM
Commissioner Hladick reviewed slide 18: "FY2017 Budget
Highlights":
· Reduced Commissioner's Office staff from 7 to 5 in
FY2017, and reduced UGF support in Executive
Administration by 49.6% from FY2015
· Reduce UGF support for large marketing contracts
· Shift from state-managed to industry-managed
Tourism Marketing
· Shift from state UGF support to industry support
for seafood marketing
· Coordinate with DMV to preserve reduced level of
visitor center assistance in Tok
· Reorganize Community and Regional Affairs to improve
operations and community support
· On track to ensure marijuana is regulated and
licensed
1:45:16 PM
Commissioner Hladick scrolled to slide 19: "FY2017 Budget
by Core Service." He indicated that the slide reflected a
budget summary by core services that was previously
reviewed but was shown all on one slide. He pointed to the
department's total reduction of $8.2 million in the lower
right-hand corner.
Co-Chair Neuman asked if there were any other items the
commissioner wanted to point out on the slide including
differences. Commissioner Hladick asked if Co-Chair Neuman
was referring to differences from the FY 16 Management
Plan.
Co-Chair Neuman responded in the affirmative. He wondered
if Commissioner Hladick had any comments on the changes.
Commissioner Hladick did not have any comments.
Co-Chair Neuman suggested that the committee may [have
comments] when Commissioner Hladick was finished.
Commissioner Hladick advanced to slide 20: "Summary of
FY2017 Budget." He explained that the slide showed the
summary of the department's budget. The summary showed line
item reductions and was another way of looking at the
previous slide with more detail about the changes and
corresponding line items. He also noted the percentages
listed at the bottom of the slide.
Commissioner Hladick continued to slide 21: "Summary of
FY2017 Budget." He offered that the slide showed two
different metrics. The slide at the top showed how many
communities were holding public meetings, doing their
financial disclosures, and having elections, etcetera. as
tracked by DCCED. The bottom chart showed that AIDEA
created 1,300 jobs for the economy in FY 15.
Commissioner Hladick asked the chair if he should go
through any of the legislative lookbacks.
Co-Chair Neuman replied affirmatively if there was any
significant information the commissioner wanted to point
out.
Commissioner Hladick reviewed the LFD slide 23: "Department
of Commerce, Community and Economic Development Share of
Total Agency Operations (GF Only)." He explained that the
slide showed a combination of UGF and DGF. He noted the
downward trend and the fact that the department spent only
2.17 percent of the total agency budgets.
Commissioner Hladick scrolled to slide 24: "Department of
Commerce, Community and Economic Development Salary
Adjustment Increases and Personal Services Costs (All
Funds)." He reported that the slide showed the total
salaries including fringe benefits and employer costs. He
noted the summary on the right-hand side and mentioned that
the department largely did not have control of the
salaries.
Commissioner Hladick turned to slide 25: "Appropriations
within the Department of Commerce, Community and Economic
Development (GF Only)." He indicated that the slide showed
the fluctuations and changes which were either structural
or program changes (additions or subtractions) over time.
He added that the slide reflected GF only.
1:48:29 PM
Commissioner Hladick advanced to the final presentation
slide 26: "Appropriations within the Department of
Commerce, Community and Economic Development (All Funds)."
He thought the slide provided good information and noted
that it reflected all fund types.
Co-Chair Neuman mentioned having discussions with the
commissioner in the past about continuing to reduce the
amount of money going to some of the programs within the
department or to reduce the programs altogether to avoid
inefficient government. He specifically noted their
conversations regarding AEA. He had asked the commissioner
about the opportunity to fold AEA into AIDEA. He wondered
if it was possible to do so and whether it would save the
state money in administrative costs.
Commissioner Hladick thought that considering the [state's]
budget problems, everything was on the table for
discussion. He would be taking a hard look at the idea.
1:49:52 PM
Co-Chair Neuman spoke of the cost of setting up the
Marijuana Board. He noted that the cost would be
approximately $1.5 million. He thought it was the
expectation that when the state began to receive money
associated with marijuana that $1.5 million would be
repaid. He wondered if the commissioner had the same
understanding.
Commissioner Hladick believed that the fees were set based
on the anticipated costs for one year. Presently, he was
unable to determine how many people would sign up. Some of
the fees were $5000 for a license. There were some fairly
hefty fees, but he had not spoken directly to the board
about the expectation that they would repay what had been
spent in GF.
Co-Chair Neuman commented that the state's intent was that
when funds began to be received the money would be repaid
to the GF. He added that all the costs would be covered by
industry receipts.
1:51:02 PM
Representative Gara did not understand slide 7. The slide
indicated that since 2015 the UGF had decreased by 45.9
percent. He asked if the items listed on the slide
represented reductions or the FY 17 proposal. Commissioner
Hladick answered that the slide reflected the department's
request for FY 17.
Representative Gara asked if AEA and AIDEA were housed in
the same building in Anchorage. Commissioner Hladick
answered, "Correct."
Representative Gara asked if the deputy director position
had been eliminated leaving just a director in place.
Commissioner Hladick responded that Representative Gara was
correct.
Representative Gara understood that a fair portion of cuts
had been cuts to tourism marketing and ASMI. He wondered
that with a 45.9 percent cut already if there were things
the department was not doing that the commissioner felt he
should be doing but lacked money. He posed his question in
another way. He asked if the commissioner had cut anything
that he thought served the community well that was not
available anymore.
Commissioner Hladick responded that the department was
given targets to meet and instructed to continue to try to
meet the services. He supposed it was possible that the
services would not be met as well as they had been four or
five years earlier. The department was looking for as many
efficiencies as possible.
1:53:08 PM
Representative Gara asked if there were things the
department was no longer doing because of the prior two
years of reductions that he felt were important state
functions. Commissioner Hladick replied that he had not
spent much time thinking about the specific question but
had focused on meeting the department's targets and doing
what he had been asked to do.
Representative Gara commented that he wanted to see a
government that was doing the things it was supposed to do
as efficiently as possible. However, he did not want to
budget only based on meeting monetary targets. He opined
that if legislators were just automatons, then a monkey
could cut the budget. He wanted to know what was being done
and what was not being done. He suggested that anyone could
come up with a number. However, monkeys did not read
numbers very well. He stated the commissioner's answer did
not help him very much.
Co-Chair Neuman rebuked that the state was just trying to
hit monetary numbers. He countered that the legislature was
trying to create a budget to ensure the state's survival
amidst $30/bbl oil prices. The budget had been based on
$100/bbl oil and dramatic reductions had to be made or many
other taxes would be increased. He disagreed with
Representative Gara's comments.
Representative Gara clarified that he was only referring to
the commissioner's answer. The answer was that the
department was trying to meet targets. The answer did not
help him.
Co-Chair Neuman interjected, "That was his answer."
Representative Gara concurred.
1:55:11 PM
Co-Chair Thompson reported that he had received complaints
from more than one board member about a couple of different
issues. Some members indicated they had been told how much
to pay for their licenses to cover their expenses which
were sometimes inflated due to department investigations.
He continued that when fines were issued the money did not
get reimbursed to offset the investigations but went into
the GF. A particular board would look at it because they
needed to meet in person to review applications for
professional licensing and continuing education. The board
paid dues, its own travel costs, and covered the cost of
travel for a board member to attend a national conference
in order to ensure that the State of Alaska was keeping up
with other states and their rules. Board members were
paying more than what was determined by the state. He
reported that three of the boards had received letters from
the commissioner's office and the governor's office stating
that travel would not be authorized. It sounded like
members were paying for their own travel but the
commissioner would not let them. He thought it was like
stealing their money. He was upset and wanted a reply. He
also asked about AEA and AIDEA just put out a Request for
Proposal (RFP) so they could relocate their offices. He
asked what was going on and whether there would be an
increase.
Commissioner Hladick was not aware of the RFP for a change
in facilities but would look into the matter. He was aware
of the travel issue and had been dealing with it. The
orders were that there would be no UGF travel. The state
had gone back and allowed travel for those boards that were
paying for themselves. There was some confusion when the
order first came out. He thought the issue had been worked
out with the administration. If the situation was not
sorted out he would appreciate the details and would look
into it.
1:58:13 PM
Vice-Chair Saddler echoed that for many years a number of
boards and commissions had experienced a difficult time
getting access to the records of what they were being
charged for travel, administration, and investigation. He
thought the real estate board in particular would like to
know what they were being charged for and was having great
difficulty in finding access to that information. He asked
the commissioner to encourage the division directors to
make the information available. He referred to slide 25. He
asked about the lookback relating to PCE and noted there
was a big spike in FY 09 when there was legislation passed.
It had crept up again since then about $10 million. He
asked for more information as to the increase in the
ceiling on reimbursable PCE costs.
Commissioner Hladick asked if Vice-Chair Saddler was
talking about UGF.
Vice-Chair Saddler again referred to slide 25. Commissioner
Hladick would look into it and would follow up.
Vice-Chair Saddler stated that it appeared there had been a
large reduction in the first year but it had crept back up.
He anticipated that the last down tick was due to the price
of fuel. He wanted to know more about the $10 million
increase.
Vice-Chair Saddler referred to slide 21 which showed the
summary of the FY 17 budget. He pointed to the chart
concerning the percentage of local governments providing
essential public services. He thought the increase was
significant. He wondered if it was due to additional
funding to the function or something else.
Commissioner Hladick would follow up with an answer.
Vice-Chair Saddler referred to slide 13 and asked why the
figures were broken out. He asked if they were under the
same division. He did not understand the slide.
Commissioner Hladick responded that it was split out
because the fisheries taxes were collected and distributed
by the state. He added that the forest receipts and the
payments in lieu of taxes were federal receipts. He added
that the Community Revenue Sharing was distributed by the
Division of Community and Regional Affairs. It was shown
separately because it was sort of a separate function.
Vice-Chair Saddler asked if the $14.1 million was DGF.
Commissioner Hladick indicated UGF was zero.
CATHERINE REARDON, DIRECTOR, DIVISION OF ADMINISTRATIVE
SERVICES, DEPARTMENT OF COMMERCE, COMMUNITY AND ECONOMIC
DEVELOPMENT, answered that some of the money would be
federal receipts. There would be a variety of categories.
She explained that the reason there were two breakouts for
the Division of Community and Regional Affairs was because
one was money the division was spending to run a program
and the other was money the division was just passing out.
She repeated that the top of the slide reflected the
activities of the division itself to provide services. The
bottom of the slide reflected the division passing out
money, hence the distinction. Some of the money was federal
funds being distributed and some was state community
revenue sharing dollars. She added that distribution of
community revenue sharing correlated to seeing more
functional communities on the chart he last referred to
[slide 21]. She noted the rise in communities meeting their
basic activity needs.
Vice-Chair Saddler referred to slide 10 and wanted to
better understand the revolving loan fund under the last
section under investments. He wondered if there was any
overlap between what AIDEA, AHFC, or any other entities and
asked about the unique functions of DCCED.
Commissioner Hladick responded that the investment programs
were alternative energy conservation, commercial fishing,
rural development initiative fund, Alaska Capstone
Avionics, Community Quota Entity, Mari culture, Commercial
Charter Fisheries, fisheries enhancement, Alaska Micro
Loan, and small business economic development.
Vice-Chair Saddler saw some potential overlaps with
commercial fishing and energy. He assumed that the
subcommittees would look at duplication and possibly
economies of scale by lumping them together. He wished the
commissioner good luck in trying to find savings.
2:05:05 PM
Co-Chair Thompson noted that he had misspoken earlier. He
had stated that there was an RFP from AEA and AIDEA for a
remodel/rehab rather than for relocation. He opined that it
was still a sizable amount of money to spend when the state
did not have any.
Co-Chair Neuman commented that they might have to use the
same old chairs.
2:05:31 PM
Representative Gattis appreciated the commissioner's
succinct presentation. She commented about loan servicing.
She mentioned that the state had loans in other different
agencies and departments. She asked if the department
serviced loans.
Commissioner Hladick responded affirmatively.
Representative Gattis asked if he thought his department
could service other loans. She wondered if the state could
save some money by placing other loans within his
department. She assumed it could be done more cost
effectively if all loans were place in one area.
Commissioner Hladick was not familiar with the other loans
but assumed it was a possibility. He would have to better
understand the circumstances.
Co-Chair Neuman commented that both questions of whether it
could be done cheaper and whether it could be done better
had to be answered.
2:07:13 PM
Representative Edgmon referred to slide 25 regarding PCE.
In answer to Vice-Chair Saddler's question, he explained
that the rise and fall of the line related to the PCE
outlays - as high as $45 million - was built into statute.
In statute PCE was based on the average between the utility
costs of Anchorage, Fairbanks, and Juneau. The line really
tracked the rise and fall of oil prices. He noted the spike
in FY 08 and the decrease in FY 17. He mentioned the
possibility of oil prices going down further. He
highlighted the commissioner's background in local
government as the city manager of Galena, Dillingham, and
Unalaska for more than 20 years. He supposed that the
commissioner had been in his current position long enough
to understand the important role his department played in
fostering a healthy local government. He recognized the
department providing technical assistance to smaller
communities, working with the Alaska Municipal League, and
handling pass-through monies.
Representative Edgmon moved on to emphasize the importance
of reducing the budget because of the state's fiscal
crisis. However, he wanted to avoid making cuts that would
actually increase costs somewhere else in state government
or shift costs in a way that was counterproductive to
smaller communities. He wanted to give the commissioner an
opportunity to expand on his comments. He had prefaced his
comments with the fact that the legislature had to reduce
the budget. He asked Commissioner Hladick to comment and
potentially weave revenue sharing into his response. He
also wanted him to talk about why it was important for the
department to maintain constitutional responsibilities for
local government services and the broader services provided
by DCCED.
2:09:57 PM
Co-Chair Neuman requested that the commissioner put on his
former hat as a city administrator to provide a
perspective.
Commissioner Hladick explained that he had been a city
manager for 26 years and reported that when he started the
services provided by DCCED were very important. There had
been a number of problems at the City of Galena but there
was training available. He had never talked to an attorney,
drafted a budget before; many individuals had helped him
through the process. The department provided some basic
training that was critically important to the smaller
Alaska communities. He was concerned about the loss of
revenue sharing and what might happen. Municipal bankruptcy
was not an option in Alaska. Even if a municipality could
not make payroll they could not file for bankruptcy. If a
community could no longer provide water, sewer, and
electric, it would likely toss in the keys leaving the
state to take over. He suggested that any funding that
would help to forestall such a scenario would be money well
spent. He lauded the Division of Community and Regional
Affairs for keeping the pulse on communities in rural
Alaska. He would hate to see revenue sharing go away, but
understood the fiscal situation and recommended ramping it
down gradually if it had to come to an end.
Representative Edgmon thought the commissioner had
encapsulated the importance of a department that, outside
of the Department of Fish and Game, was as near and dear to
his heart as any of the agencies given the relationship
amongst so many of the facets of DCCED to the well-being of
all of Alaska, not just rural Alaska.
2:12:34 PM
Representative Kawasaki referred to slide 24. He asked
about the growth line between the FY 17 Management Plan to
the present day. He wondered why it seemed so steep in
comparison to many of the other agencies.
Commissioner Hladick could not explain it, as it occurred
before his tenure started with the department.
Ms. Reardon remarked that she did not entirely understand
the question.
Representative Kawasaki asked for justification for the
growth in personal services between FY 07 and FY 17. He
realized the graph was a LFD graph. It appeared that the
growth was not due to salary increases.
Ms. Reardon pointed to the lower right and detailed that
about half of the increase reflected increased personal
services versus salary increases. She explained that the
department had several programs that entered and exited the
department. For example, at one point AGDC entered with 38
positions, which in a department that has about 500
positions, was a significant percentage. As the department
expanded in the number of professions and the volume of
professionals requesting licensure increased, so did the
department's position control number (PCN) count even
though the division was self-funded. The division had had a
dramatic increase in the number of license applications
over the years. She could provide additional information.
Representative Kawasaki recognized the increase for AGDC
and for marijuana. However, the graph increased
significantly even before FY 15 and FY 16. He wondered if
some of the increase had to do with the disposal of grants
through the department when the state had much larger
budgets. He was not sure if there was staff affiliated with
specific grants.
Ms. Reardon responded that there was an increase over time
of three grant administrators. She would be happy to
provide more of a breakdown year-by-year of what
constituted the changes.
Co-Chair Neuman suggested that Ms. Reardon provide the
information for distribution to the committee.
Representative Kawasaki thought that the slide from the
previous day reflecting PCN counts would help members of
the committee understand how the department had been
impacted by recent budget cuts.
2:16:27 PM
Representative Kawasaki asked Ms. Reardon to explain the
change to travel and tourism marketing. He wondered what
was envisioned for the future.
Commissioner Hladick responded that historically tourism
marketing had gone back and forth between the state and
industry. The industry had approached the department
requesting to take it back over which was what the
department was currently facilitating. He reported being on
the ASMI board. The board was very cognizant of the
situation the state was in and was working diligently to
reduce the budget and to take on more responsibility for
the budget as the state dollars depleted. He reported
having been asked whether ASMI should plan for no state
funding within two years. The commissioner concurred with
the idea given the state's fiscal situation and the price
of oil.
Representative Kawasaki asked about the expectations of
industry to participate in funding certain programs such as
tourism marketing and seafood marketing. He asked if the
administration was pursuing negotiations specifically with
the old Alaska Travel Industry Association (ATIA) and ASMI.
He wondered what it would look like.
Commissioner Hladick answered that it was ATIA that came
forward with a proposal. He believed the administration had
talked to ATIA on the matter. The department had been
working with the administration and the Office of
Management and Budget to facilitate. He continued that
regarding ASMI the expectations were that there would be
less funding. They were not going to raise fishermen's
fees, as it was not a good year to do so. He mentioned that
the sentiment of the board was to buckle down and
persevere.
Co-Chair Neuman recognized former House Representative Mary
Sattler in the audience.
2:19:13 PM
Representative Gara wanted to clarify his previous
questions. He wanted to better understand about the cuts
being made to the department. He wondered if the cuts were
reasonable or whether the department was being cut to or
past the bone. He commented that it would be difficult to
paint an accurate picture for the legislature to know what
services remained in place that were necessary and what
services were not. He hoped the subcommittee would decide
what was important to the agency, to the state, and to
Alaska's communities. He was not getting the information
currently. He did not think a monkey could do the
commissioner's job. However, when the commissioner's answer
was that the department was meeting goals, it did not help
him understand what was being cut. He referred to slides 19
and 20 and remarked that there were some very important
functions DCCED performed.
Co-Chair Neuman was certain the commissioner would be
willing to talk to him any time he wanted.
Representative Gara commented that it would be nice to get
answers in committee also.
Co-Chair Neuman stated, "We'll get you the schedule."
Representative Gara countered that the state could also
raise revenue to deal with the budget gap. He continued to
slide 19 and he compared UGF in the FY 16 Management Plan
to the FY 17 Governor's Plan. He noted an $8.5 million
proposed reduction from $30.4 million to $21.9 million.
Next he referred to slide 20 and pointed out that the UGF
governor's decrements added up to $5.4 million. He wanted
to know which number was accurate in UGF cuts.
Ms. Reardon asked about the $5 million Representative Gara
was referring to.
Representative Gara responded that on page 20 under FY 17
governor's decrements the UGF reductions equaled $5.402
million. Whereas, the decrement looked like $8.5 million in
UGF cuts. He wanted to understand the difference in the
numbers
Ms. Reardon acknowledged there was a difference. She
explained that the $8.2 million number was the correct
amount. The difference was that one was compared to the
adjusted base and one to management plan. It was a starting
point for the comparison.
Representative Gara referred to slide 19 and observed there
was a $3.4 million difference from $25.3 million to $21.9
million when compared to the adjusted base. On slide 20 the
UGF cut was $5.4 million. There were three different UGF
numbers from FY 16 to FY 17: $3.3 million, $5.4 million,
and $8.2 million. He expressed confusion over the
discrepancies.
Ms. Reardon was confident of the accuracy of the charts but
was having difficulty following Representative Gara's
comparisons.
Representative Gara pointed to the FY 17 governor's
decrements of $5.402 million UGF on slide 20. On slide 19
comparing the UGF from the management plan the decrement
was over $8 million. When comparing UGF between the
governor's plan and the adjusted base the cuts were $3.4
million. He continued to review the numbers on the slide
for clarity.
Ms. Reardon mentioned that the substantial difference
between management plan and adjusted base had to do with
marijuana. It looked large because marijuana funding was
done for FY 15 and FY 16 as a one-time-only [increment] for
the adjusted base. The $2 million swing that Representative
Gara was seeing had to do with having to remove the
marijuana money and reinserting it as an increment in order
for the budget to be the same as the previous budget (due
to a two-year funding of marijuana in FY 15 and FY 16. It
was in the capital budget as an operating item. There was
something unusual looking. She was confused because of his
comment regarding $3 million. She offered to sit down with
the representative to review the numbers.
Co-Chair Neuman clarified that she had backed out the $1.5
million for FY 16 and placed it into FY 17 for a difference
of $3 million.
2:26:15 PM
Representative Gara asked for the most accurate number for
the department's budget cuts between the FY 16 management
and the governor's proposal. Ms. Reardon responded $8.272
million in UGF.
Co-Chair Neuman asked the commissioner's staff to look at
the numbers and provide an answer to Representative Gara's
question.
2:27:02 PM
Representative Guttenberg referred to water problems in
Flint, Michigan and suggested it was an example of a local
community taking care of its own problems. He highlighted
the RCA and the Division of Insurance and did not see
either division living up to its mission and
responsibilities. He mentioned that there was a broadband
taskforce that came out with a report with languish.
Connect Alaska, a federal program, had also come out with a
broadband report. He remarked on the report's expansive
size and believed it was an absolute waste of time. In
speaking with individuals and all entities about economic
development, broadband was the common thing that everyone
agreed was lacking. He opined that providing proper
broadband was the one thing that would help to expand
commerce and diversify the state. He was aware the RCA was
going to Washington DC to encourage the Federal Elections
Commission to implement "The Alaska Plan" which would
provide the industry to plan for the future. He suggested
that no one was drawing entities together to help to move
Alaska to the next level. He argued that Alaska was on the
verge of not being able to communicate because the speeds
have to be three times faster every day. He expressed his
concerns about the state not taking the issue seriously and
not moving fast enough. He spoke to former Governor Walter
Hickel's comment, "A budget built on cuts alone is no
vision at all." He suggested that as the legislature cut
the budget and contracted government the legislators should
be looking for places to create opportunities. He asked if
the department was doing anything or if the governor's
office had any vision.
Commissioner Hladick had read the report Representative
Guttenberg had referred to. His observation was that the
price tag surprised several people. He mentioned the
Quintillion broadband project which he thought was a great
idea. He did not know how far along the project was. The
department whole heartedly supported them. He added that
the state did not have the money to make broadband possible
at present. He agreed the state should be doing something.
Representative Guttenberg communicated he had some ideas
and would be talking about them.
2:31:05 PM
Representative Guttenberg segued into discussing his
concerns about the Division of Insurance. He spoke to the
increase in medical and insurance rates for the state. He
thought a key to the increase was the cost of medicine and
how it was billed to insurance. He opined that the state
needed to get control of medical costs. He believed the
Division of Insurance was a key to doing so. He wondered if
there was a plan to facilitate a billing database that
would allow the state to compare rates and costs in order
to negotiate better rates for the state. It was his
understanding that the state was only able to insure within
the state. He noted some entities grouping together to
negotiate terms. He thought the same concept could be
applied to the state. A medical executive had recommended
that Alaska begin to practice tourist medicine. The concept
behind tourist medicine was to send people outside to shake
things up. It was something he had objected to because of
what it might do to the medical industry. He emphasized
that the administration needed to consider the cost
differentials inside of Alaska and Alaska and other places.
He asked the commissioner to comment.
Commissioner Hladick replied that it was a long
conversation that was also political. He thought the state
owed it to the people who had spent time and money setting
up their businesses to talk to them about the cost of
healthcare before sending them out of state. He felt that
it was important to have the discussion with several
people.
2:33:56 PM
Representative Guttenberg mentioned the possibility of
having a cost database. The state would have a better
picture of the cost differentials and know who to talk to.
He wondered if it had been discussed within the department.
Commissioner Hladick replied that he had not talked to
anyone specifically about the database issue and could not
comment.
Co-Chair Neuman suggested that Representative Guttenberg
was thinking of the All Payer Database.
Representative Guttenberg responded in the affirmative.
Co-Chair Neuman explained that the All Payer Database was a
place where hospitals would be required to post the costs
of medical procedures online to facilitate people shopping
and perhaps bringing down costs with competition in the
marketplace. He had spoken with Department of Health and
Social Services Commissioner Valerie Davidson about the
issue and recommended asking her when she came to the
table.
Representative Guttenberg noted that sometimes it was
difficult to determine who to speak to about the issue. He
suggested having all the parties involved sitting at the
table.
Representative Wilson pointed to $2.05 million UGF under
economic development on slide 10. She wondered what
portions were comprised of grants and salaries. She also
wanted to know who the state was granting the money to. She
also highlighted $4.5 million UGF under tourism marketing.
She was fairly certain that state statute indicated a 50/50
split. She stressed that the amount was not 50/50. She
clarified that the budget for tourism marketing totaled
$8.103 million of which $4.5 million was UGF.
Ms. Reardon replied in the affirmative.
Representative Wilson asked about ASMI. She noted that its
budget was $24 million and the state was only contributing
$3.4 million. She asked if she was correct. Ms. Reardon
answered positively.
Representative Wilson noted there was a large percentage
between the two amounts and asked if there was a reason for
the disparity. Commissioner Hladick replied that in part
ASMI was supported through a small tax to fishermen and
also federal dollars. He believed the largest portion of
dollars going to ASMI were the fisheries dollars. He would
supply the breakdown.
Representative Wilson asked for the same information
related to tourism. Commissioner Hladick replied in the
affirmative.
Representative Wilson pointed to slide 13 under the
Division of Community and Regional Affairs. She asked if
the department could provide the breakdown of UGF dollars
in the amount of $7.2 million.
2:38:20 PM
Commissioner Hladick replied positively.
Representative Gattis spoke about broadband. The co-
chairman had directed her to delve deeply into the issue of
broadband at the subcommittee level. She agreed with
Representative Guttenberg's comments about the importance
of technology as a tool to be used to make things more
affordable. She remarked that the broadband report
indicated that Alaska's technology was old and outdated.
She indicated that her subcommittee was looking at
combining the education, library, and health broadband to
be more efficient. She was also working on the issue with
the federal delegation.
Co-Chair Neuman mentioned the commissioner working with the
Division of Insurance. Recently he had been notified that
the state was not allowing Moda insurance to practice in
the state; the state currently had one insurance provider,
Premera. He wondered how the commissioner saw that
influencing the cost and availability of insurance for
Alaskans.
Commissioner Hladick replied that the order of impairment
was issued that stopped Moda from writing new policies or
renewals. Moda still had a certificate to operate in
Alaska. The administration had been negotiating with the
company for the previous 7 days, 10 to 12 hours per day. He
thought there was going to be an agreed upon solution
shortly. He hoped to have a positive press release by the
following Monday.
Co-Chair Neuman noted he had had constituents calling his
office asking for information. He referenced individuals
with current Moda contracts and asked if their policies
would be honored.
Commissioner Hladick replied in the affirmative. He stated
that if a person had a policy with Moda they should
continue to go to the doctor and submit their claims. The
state was working diligently to ensure that claims were
honored.
Co-Chair Neuman asked if information was going to be
released on the following Monday. Commissioner Hladick
replied in the affirmative.
Representative Gara clarified that Moda would continue to
honor the claims for people who had gone to the doctor from
the present day and in the past. He also wondered if
policies would continue into the future.
Commissioner Hladick replied that the department was
working hard to make sure it was into the future.
Representative Gara spoke to the state's small population
and the lack of diversity in insurance pools making things
more difficult for costs and insurance. If Alaska was able
to pool with other states, it might drive down the cost of
insurance. He had been told that under the Affordable Care
Act the director of the insurance division could take steps
to pool with other states. He asked if anything had been
done on the issue.
Commissioner Hladick would look into the matter.
Co-Chair Neuman asked if the department had any information
on Representative Gara's prior questions.
2:43:07 PM
Ms. Reardon replied in the affirmative. She indicated that
the numbers were reflected the same on both slides 19 and
20. She thought part of the confusion may have been in
reading down and adding without following it cumulatively.
She began with looking at slide 19 at the FY 16 management
plan UGF total of $30 million. She flipped to slide 20 and
pointed to the top line that also reflected the FY 16
management plan UGF total of $30 million. She continued
reading down following the FY 17 adjusted base backing out
items to get the adjusted base total UGF of $25 million.
Referring back to slide 19 the FY 17 adjusted base equaled
$25 million. She switched again to slide 20 and continued
reading down the UGF column. She reported that the FY 17
governor's increments returned marijuana money that had
been removed as one time money and unallocated cuts
totaling $1.9 million UGF. She moved on to highlight the FY
17 governor decrements totaling $5.4 million. By adding the
increments and subtracting the decrements from the FY 17
adjusted base totaled $21 million. She returned to slide 19
reading from left to right. The FY 16 management plan
reflected a total of $30 million, the FY 17 adjusted base
totaled $25 million, and the FY 17 governor's plan totaled
$21 million.
2:46:27 PM
Representative Gara stated that the only discrepancy he
noticed was that Ms. Reardon had been talking about an $8.2
million cut from FY 16 management plan UGF to the
governor's proposal but it looked like an $8.5 million cut.
Ms. Reardon replied that the $8.2 million reflected "all
funds" and $8.5 million reflected UGF.
Vice-Chair Saddler commented that he had seen the tourism
marketing costs decline. He had heard the tourism industry
ask questions and protest. He wondered what would happen if
the entire state support for tourism marketing went away
leaving the burden to private industry which received much
of the benefit. He was not advocating for it but was just
asking the question.
Commissioner Hladick responded that in 2006 the state
provided about $5 million. The funding levels were
returning to the FY 05 and FY 06 levels. He relayed that he
had not spoken with anyone about what would happen if state
funding for the tourism industry was discontinued.
Co-Chair Neuman indicated that the committee would move to
the next budget overview with the Department of
Administration (DOA).
2:48:44 PM
AT EASE
2:50:54 PM
RECONVENED
^FY 17 BUDGET OVERVIEW: DEPARTMENT OF ADMINISTRATION
2:51:13 PM
SHELDON FISHER, COMMISSIONER, DEPARTMENT OF ADMINISTRATION,
introduced himself and his colleagues. He moved to the
PowerPoint Presentation: "Alaska Department of
Administration Department Overview."
Commissioner Fisher began with slide 2: "DOA Mission and
Organization." He relayed that he would attempt to move
quickly through the slides.
Co-Chair Neuman asked the commissioner to review the
numbers for the benefit of all who were listening.
Commissioner Fisher explained that the mission of the
Department of Administration was to provide consistent and
efficient support services to other agencies. The
department also had a material set of services that it
provided to the public. The services provided to other
state agencies fell within specific divisions. The Division
of Finance provided accounting and finance functions of the
state. The Division of General Services provided leasing
and purchasing services for the state. The Division of Risk
Management provided the risk management and insurance
functions for the state. The enterprise technology Services
provided the information technology functions. Lastly, he
noted the Division of Personnel and Labor Relations was
self-explanatory.
Commissioner Fisher continued that in terms of services to
the public the Division of Motor Vehicles and the Division
of Retirement and Benefits were housed within DOA. The
department also had two legal and advocacy functions which
were the Public Defender Agency (PDA) and the Office of
Public Advocacy (OPA). There were also four commissions
that were quasi-independent that the department
administered including the Oil and Gas Conservation
Commission, the Violent Crimes Compensation Board, the
Alaska Public Offices Commission, and the Alaska Public
Broadcasting Commission.
2:53:06 PM
Commissioner Fisher discussed slide 3: "DOA Budget
Reductions by Component." He explained that the slide
reflected the department's General Fund reductions that had
occurred or planned to happen in the current budget that
had been submitted. The funds were broken down by core
services which were at the top of the list including
hearings, general services, the Public Offices Commission
etc. The department separated out OPA and PDA. He noted
that the administration's legal and advocacy services
accounted for 65 percent of the general funds within the
department. They were critical functions to Alaska's most
needed and vulnerable members of society. The department
had attempted in budget cuts over the past few years to
minimize the impact on those organizations. Although it is
displayed that over the past two years the department
reduced UGF spending by 34 percent. In the legal and
advocacy functions the department had reduced its spending
by a little over 5 percent. He highlighted the funding for
Public Broadcasting and AIRRES [Alaska Information Radio
Reading and Education Service] which was down by 32 percent
over a period of two years. He also noted that the special
system under the formula program referred to the Elected
Public Officer's Retirement System was down 10 percent.
There was not much the state could do to reduce it because
it was a general funded retirement system and was driven by
mortality rate.
Commissioner Fisher continued that some of the drivers for
the department non-formula core services reductions
included furloughs, layoffs, and an increased vacancy
factor. There were reductions to travel, support contracts,
and cell phone usage. The department had renegotiated cell
phone contracts, reduced subscriptions, reduced building
services and other janitorial services. He suggested that
much of the department was supported through rates which
had not been increased for other agencies. The department's
Enterprise Technology Services group had also cut rates by
a little over $1.6 million to other agencies in addition to
a reduction of 34 percent. He advocated that the department
was doing its best to try to not only reduce its budget but
to reduce the budget to other divisions that it supported.
Commissioner Fisher reported that the department's
procurement arm reached out to virtually every vendor that
was funded by GF in the past year seeking concessions in
contracts and was able to reduce procurement by about $5
million in existing contracts across the state. He added
that the savings did not just impact DOA's budget. He spoke
to some of the measures OPA took to help reduce the budget.
He noted that the division had previously used contract
lawyers in certain instances and have hired additional
lawyers bringing the work in house and reducing the budget
by about $640,000. Both agencies had aggressively used
furloughs over the current year. Also the Public Defender
Agency had been centralizing a number of functions that
were previous completed in each office improving
efficiencies. All of the divisions were using vacancies and
teleconferencing to minimize costs.
2:57:58 PM
Commissioner Fisher turned to slide 4: "DOA FY 17 Budget
INCS, DECS." The slide showed the FY 17 increments and
decrements from the budget submitted by the department. He
pointed to the largest increment associated with third
party administrator costs of $2.4 million. The money was
associated with the state's AETNA contract. He knew that
the number was an obviously significant number. He
indicated that there would be further discussion about
healthcare and AETNA. He thought it was important to
recognize that in the request for proposal the department
had initiated a couple of years prior the focus was to
drive network savings. He believed the department had seen
a fairly substantial decrease in network savings across
both the retiree and active plans to the extent of over $40
million in savings over the network the state had used
previously. He added that while the state was paying a
third-party administrator more than before, the
administrator was aggressively working with the state to
build a more cost effective network of which the state was
enjoying substantial savings overall.
Commissioner Fisher moved down the slide to point out a
decrement that eliminated a subsidy to the Linny Pacillo
Parking Garage and the Nome State Office Building in
Anchorage in the amount of $292,000. The decrement impacted
other agencies, but the department had been working
aggressively to replace the revenue with other revenue and
had found tenants and the public to lease the garage. He
thought the revenue would be replaced largely with third-
party receipts from non-state users. The department would
be able to offset the decrease in revenue.
Commissioner Fisher indicated the reduced funding for
Elected Public Officers was associated with mortality in
the group. The following two line items reflected
maintenance and operations and the maintenance contract
work completed by the Enterprise Technology group, which
had been done to reduce contracts and maintenance costs.
There was a funding reduction to Public Radio. The
department proposed a fairly material reduction, although
it was in line on a percentage basis with the other
reductions that have been submitted for other parts of the
department's core operations. He reviewed the $644, 000
reduction for bringing more legal work in house resulting
in more efficiencies. He noted that at the bottom of the
page there were a couple of increments associated with OPA
and PDA of increased receipts for appointed council and
public guardian fees. He explained that it was in effort to
collect more from clients. There was a process where the
court determined that a person could contribute to the cost
of their defense, although not 100 percent. In past years
there had been lapses and DOA wanted to collect to the full
extent. The department was also assessing whether a fee
increase was appropriate. He additionally reported that the
public guardian fees had not increased for many years. The
department intended to apply an inflation factor and
increase public guardian fees to offset some of the
decreases that OPA had received.
3:02:06 PM
Co-Chair Neuman wanted to allow for questions at the end of
the presentation and time was limited.
Commissioner Fisher mentioned some of the supplemental
requests which included an increase of $200,000 due to
Legislative Audit increasing its fees to the department.
Also, the Office of Public Advocacy provided defense for
one of the defendants in "The Fairbanks Four." The
department incurred some unexpected charges which were
reflected in the supplemental budget.
Commissioner Fisher skipped the following four pages to
slide 9: "Core Initiatives and Challenges." He reported
that when he had presented in the previous session he had
discussed five core initiatives within DOA. They had to do
with labor which was both wages as well as productivity,
healthcare costs, IT consolidation, purchasing, and
facilities management. The department was describing and
talking about the initiatives in a different way. The
department was also approaching them in a slightly
different way - a more mature way. All of the prior areas
of focus were included in the presentation. He also
mentioned talking about challenges having to do with OPA
and PDA. He noted that there would be a specific
subcommittee meeting regarding Alaska Land Mobile Radio
(ALMR).
3:04:17 PM
Commissioner Fisher moved to slide 11: "Bargaining Unit
(BU) Detail." Labor negotiations were currently beginning
with four bargaining units representing approximately 78
percent of DOA's employees. Typically the non-union
employees followed the arrangements the department made
with the bargained employees. In effect 86 percent of the
department's employees would be impacted by the current
round of negotiations.
Commissioner Fisher advanced to slide 12: "DOPLR - Current
Status of Contracts." In June of 2014, the department
reached a tentative agreement with Marine Engineer's
Beneficial Association (MEBA). The agreement included a
number of terms including a cost of living adjustment
(COLA) of 0 percent in 2014, 1 percent in 2015, and 2
percent in 2016. The legislature had approved the contract
and MEBA had not sent it to its members for a vote. The
Marine Engineer's Beneficial Association felt that there
was a misunderstanding and the department was looking at
mediation to resolve the issue. The department had also
reached a tentative agreement with the Teacher's Education
Association of Mt. Edgecombe (TEAME) that did not include
COLAs. He reported that an agreement (not on the slide) had
been reached the previous evening with Alaska State
Employees Association (ASEA) often times referred to as the
general governmental unit (GGA) which was the largest
bargaining unit that the department negotiated with.
3:06:20 PM
Commissioner Fisher continued to slide 14: "Status of
Alaskacare Health Plan." He reported that the state spent
between its active employees and its retirees between an
excess of $600 million on healthcare. Between $120,000 and
$130,000 of that was associated with active employees and
the rest was associated with state retirees. In looking at
the chart in 2010 the department had started seeing a
dramatic increase in healthcare spending. He reported a 16
percent increase between FY 10 and FY 11 and a 13 percent
increase between FY 11 and FY 12. As he mentioned the prior
administration went out for an RFP aggressively seeking to
find an administrator that could bring a more cost-
effective network of providers for member to use. After
that a leveling out and a flattening of healthcare costs
could be seen. He continued that between FY 14 and FY 16
there was a dip in the amount the department budgeted for
healthcare costs on a per-employee basis. A spike occurred
in the state's healthcare costs when the state started
discussing temporarily furloughing or laying off its
workers. Typically when workers felt threatened with the
possibility of being laid off or losing their position they
tend to consume more healthcare than they would in ordinary
times. The department was currently seeing a spike. As a
result, the department believed that the rate of $13.46
million for FY 17 was too low and it was in the process of
evaluating its strategies and tools around how to deal with
the circumstances.
Commissioner Fisher scrolled to slide 15: "Mitigation
Measures." He spoke to four primary levers the state could
manipulate as the state thought about how to mitigate
increased costs. The first was that the department could
negotiate better rates with providers. He informed the
committee that the department was in current negotiations
with Alaska Regional Hospital and Providence Medical Center
and also working to improve rates with other providers. He
added that employees could contribute more to their plan
which was included as a topic in bargaining discussions. He
suggested that the state could also change the plan design.
Deductibles, co-payments, and other things could be
increased. The state could also make an increased
contribution. The department was exploring all options and
expected that all of them would be necessary to close the
fiscal gap. The department was also doing an audit of
dependents to ensure everyone on the plan was eligible.
3:10:14 PM
Commissioner Fisher discussed slide 17: "Current state:
Decentralized." He explained that one of the core
strategies that the department was developing was the
notion of centralizing services in an affective was to
reduce costs. The diagram represented the recognition that
many of the back office functions were decentralized. He
prefaced that shared services would never touch what might
be considered a mission critical function. The idea was
intended to provide a more efficient and effective way to
deliver the common administrative tasks. A number of the
tasks included, fiscal, human resources, procurement, IT,
and facilities. Currently every department had some
function on the list. The state was aggressively looking at
how to centralize functions and drive efficiency. He noted
that DOA would be making a detailed presentation on the
subject on the following Thursday to the House Finance
Committee.
Commissioner Fisher reviewed slide 18: "IT Consolidation:
Cross-Agency IT Projects." He reported that there were four
initiatives underway to improve the state's IT services. He
mentioned the rural broadband initiative. The state was
redesigning its network to rural Alaska. It would improve
the level of service and decrease costs. He indicated that
it required that the state rebuild the network and purchase
new equipment. The department did not seek an appropriation
for that purchase but rather took a modest amount of
funding that it had from the operating budget, took a first
location, purchased the equipment, and as the costs reduced
would take the savings to then fund the purchase for each
successive location. He reported that the department was
about 50 percent of the way through the rollout of the
network. He thought that when it was fully deployed the
state would see a savings of about $800,000.
Commissioner Fisher turned to slide 19: "IT Consolidation -
Procurement." He explained the department had initiated an
IT spend review board. Any purchase of IT equipment in any
department that came to a centralized board. The board was
made up of individuals from the department as well as from
the other departments. The board reviewed purchases to
ensure that spending was efficient and that the state's
purchasing capacity was being leveraged properly.
3:13:17 PM
Commissioner Fisher moved to slide 21: "DGS - office space
Portfolio." He emphasized that DOA was trying to reduce
lease costs. The department had been working with both
buildings the state owned and managed and working with
lessors to reduce the scope of janitorial expenses,
cleaning, and window washing. In the process of renewing
leases the department had been looking to negotiate more
aggressively, recognizing the state's fiscal challenge as
well as the challenge of the market as a whole. The
Department of Administration saw opportunities to reduce
leases and was trying to leverage those. He pointed to the
bottom of the chart noting the Linny Pacillo Parking
Garage. The department had made a large effort to bring a
tenant in to provide some revenue opportunity.
3:14:11 PM
Commissioner Fisher advanced to slide 23: "OPA Caseloads."
He reported a trend of increased caseloads in both OPA and
PDA. The Office of Public Advocacy had three primary
functions. They provided a guardian ad litem function for
juveniles, a guardian function for adult wards that were no
longer able to take care of themselves and needed
assistance, and legal functions in cases which the public
defended had a conflict of interest. He pointed to the
chart which showed the caseload had increased dramatically
in the previous year driven primarily due to child in need
of aid cases or CINA cases). It had been driven by a change
in the way the Office of Children's Services was
administering the program combined with increasing issues
of heroin and other drug abuse. In the past year alone
there had been 1,000 more appointments than the prior year
and the trend was continuing.
3:15:48 PM
Commissioner Fisher continued to slide 24: "PDA Historical
Caseload Growth." He noted a similar grow in civil cases.
The child-in-need-of-aid cases were civil cases that had
had a 43 percent increase year over year within PDA. It had
been somewhat offset with downward trends in post-
conviction cases, felony cases, and misdemeanor case.
Overall PDA's caseload was up. Both organizations were
meeting deadlines, their constitutional obligations, and
working diligently to control costs in the face of a
growing caseload.
Vice-Chair Saddler asked to what extent the department was
trying to embrace the missions and measures results-based
budgeting effort.
Commissioner Fisher reported that the department was in the
process of establishing missions and measures. He did not
feel that the missions and measures inherited by the prior
administration really represented the core functions of the
department; the items had referred to things like family
services. He detailed that some of the numbers seen were
included "in that." He viewed missions and measures as
another way of setting smart goals. The department was
developing smart goals, which were specific measurable
goals to drive the department. He would be happy to come
back to present on the topic.
Vice-Chair Saddler thought they were very effective tools
for advocating for and defending reductions. He asked about
the funding for public broadcasting and ARRIES. He referred
to slide 3 that listed a 32 percent reduction in Alaska
public broadcasting and ARRIES. He wondered if the cut
applied to just ARRIES or if it pertained to the entire
public broadcasting service.
Commissioner Fisher replied that it was both. He noted that
ARRIES was a fairly modest portion. He thought the ARRIES
portion of the reduction was about $50,000.
3:18:33 PM
Co-Chair Neuman asked about the potential savings of nearly
$67 million per year having to do with the consolidation of
IT and other areas. He asked about the status.
Commissioner Fisher indicated that the department continued
to push forward. He had highlighted some of the
initiatives. He suggested taking a copy of the spending
review. The department was hoping to achieve a savings of
millions of dollars. He had shared that there were four
core initiatives that the department was looking at to see
a material savings. The department would continue the
consolidation process. The department had a three-year
goal.
Co-Chair Neuman asked for an update as soon as possible.
Commissioner Fisher responded in the affirmative.
Co-Chair Neuman asked about the previous administration's
space standards initiative to save money. He wondered if
the effort had ceased.
Commissioner Fisher reported that the department had paused
the effort for a couple of reasons. He indicated that the
effort was viewed as counter-productive in some regards by
other departments. He suggested that just because it was
not popular did not mean the department would not implement
it. However, there was feedback that it was actually
reducing productivity. Therefore, the department had paused
the project. He furthered that to rebuild and leverage
space standards required the state to make an investment.
In the current fiscal climate it was important to determine
what government would look like on the back end. He
wondered if there would be substantial reductions and
whether functions be impacted more or less than others. He
wanted to allow the process to happen in order to know
where the state was at.
3:20:46 PM
Representative Wilson referred to slide 23. She asked about
the number of cases of each guardian ad litem.
Commissioner Fisher responded that he had the information
related to guardians but not guardian ad litems. He would
have to provide the information. He reported that the
guardians in Alaska had 86 wards, while the recommended
maximum caseload was 40.
Representative Wilson asked if the commissioner had stated
64 or 86. Commissioner Fisher replied, "86."
Representative Wilson asked how many cases each of the
public defenders had. Commissioner Fisher answered that he
did not have the figure on hand.
Representative Wilson asked how many cases each of the
conflict attorneys had. She referred to OCS's estimate that
the number of children in state custody would increase by
19 percent and asked how the increase would impact DOA's
agencies.
Commissioner Fisher answered that there was no question
that OPA and PDA were stretched. He hoped the members
recognized that was why the department had largely
protected them in the budget cuts. The department was
working with them to try to drive as much efficiency as
possible but the offices were stretched.
Representative Wilson mentioned silos. She did not believe
the department could solve the issue on its own. She also
asked about driver's licenses. She understood that the
group running the safer driver's license program had been
sold to an international company. She wondered how it would
impact Alaskans and how privacy would be maintained. She
did not believe the state was saving money by placing it in
the hands of another company. She was aware that it would
run out in the following year. She wondered if the
department intended to renew and what privacy policies
would be put into place.
3:23:49 PM
Representative Guttenberg asked if the commissioner would
have the person running the rural broadband initiative get
in touch with him. Commissioner Fisher replied, "Yes."
Representative Gattis read from a list of questions from
one of her constituents:
· What employees are currently being furloughed?
· Are any union employees being furloughed?
· What would it take to furlough a public employee?
· Are the unions willing to sign a letter of agreement
on the furlough?
Representative Gattis asked the commissioner to walk her
through the process of downsizing and to discuss the
challenges for DOA in doing so.
Commissioner Fisher answered that regarding furlough it was
a subject of bargaining. In FY 16 many departments utilized
furloughs as a cost savings measure. However, it had been
utilized by non-covered employees largely on a voluntary
basis. A number of employees had taken a furlough for two
to five days as a way of saving costs. In terms of the
state's covered employees, it required bargaining and was
an element that the department had been discussing with the
unions. The agreement the department reached with the GGU
union the previous evening included mandatory furloughs for
those employees. The department would continue its
conversations relating to furloughs. Specifically, the
ability to furlough a union employee required bargaining.
3:26:32 PM
Representative Gattis wanted to make sure that the process
was on record. She stated that many in private industry
were taking reductions and were adamantly vocalizing that
public employees should participate in the same process.
Representative Kawasaki referred to slide 17. He mentioned
redundancy and appreciated the commissioner's work on
centralizing some of the internal core functions. He wanted
hear more about how DOA was working with municipal
governments, school districts, village councils, and tribal
governments in terms of centralizing some functions that
the entities all share. He would wait for the
commissioner's response on the following Thursday. He noted
that leasing was done through the General Services
Division. Members had heard a presentation by the
Department of Transportation and Public Facilities about
the 800 facilities that the department worked with
directly. He wondered if there was any sharing between the
two agencies.
Commissioner Fisher responded that he would address
Representative Kawasaki's question when the department met
to talk about shared services. There were other agencies in
addition to DOT and DOA doing their own building
maintenance. One of DOA's projects was to consolidate all
of the building maintenance into a single organization.
Co-Chair Neuman asked the commissioner to look at the
possibility of providing maintenance to some of the smaller
schools when considering shared services for maintenance.
3:29:20 PM
Representative Gara referred to slide 23. He asked for
verification that guardian ad litems were responsible for
advocating for children, including their placement and
ensuring proper care. Commissioner Fisher concurred.
Representative Gara assumed that in FY 16 the division
would likely break the record in terms of caseloads for the
guardian ad litems. He asked if he was accurate.
Commissioner Fisher agreed.
Representative Gara mentioned that from FY 12 through FY 15
caseloads had roughly doubled. He asked if the number of
guardian ad litems had increased. Commissioner Fisher
replied, "It has not."
Representative Gara asked if it was fair to assume that by
FY 16 caseloads had more than doubled. Commissioner Fisher
thought it was fair but did not have a figure with him.
However, he confirmed the trend was continuing.
Representative Gara asked if the commissioner had spent any
time with the guardian ad litems to see if they were able
to adequately help the children they were assigned.
Commissioner Fisher responded that there was no question
that the organization was under stress. The department had
strived to minimize any impact on the particular group
because of the very issues Representative Gara highlighted.
He added that there was no question that DOA was challenged
with OPA.
Representative Gara asked if the children were being fairly
and adequately represented in court to ensure promoting
their interests and improving outcomes. Commissioner Fisher
believed that through diligent efforts and hard work DOA
was meeting the needs of the children and also meeting the
state's constitutional obligations.
3:32:03 PM
Representative Gara asked if he was aware whether guardian
ad litems were spending time with their clients or just
opening the children's case files the night prior to a
court hearing.
Commissioner Fisher reported having conversations with the
director of the group. He could not speak to any specific
case. However, it was a mix depending on the circumstances.
Representative Gara asked if the state had the highest
guardian ad litem caseloads in the nation.
Commissioner Fisher would provide the information. He was
aware that the state's guardian caseload was the highest in
the nation. However, he did not know specifically about the
guardian ad litem caseload.
Representative Gara requested that the commissioner let him
know where the state ranked.
3:33:15 PM
Vice-Chair Saddler commented that the state had had some
success in recent years in getting legislation through to
mandate the private insurers in the state cover autism
therapies. The legislature had thought that the next step
would be for the State of Alaska's employee insurance to
cover it and the previous administration had begun
evaluating the possibility and potential cost benefit of
doing so. He wondered if the commissioner had any update on
the status of that effort in his department.
Commissioner Fisher did not have an update but would
provide the information.
Vice-Chair Saddler communicated his intent to speak to the
commissioner offline.
HB 255 was HEARD and HELD in committee for further
consideration.
HB 256 was HEARD and HELD in committee for further
consideration.
HB 257 was HEARD and HELD in committee for further
consideration.
Co-Chair Neuman reviewed the agenda for the following
Monday. The committee would be hearing FY 17 budget
overviews for the University of Alaska and the Department
of Military and Veterans Affairs.
ADJOURNMENT
3:34:01 PM
The meeting was adjourned at 3:34 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| DCCED FY17 HFC Overview.pdf |
HFIN 2/5/2016 1:30:00 PM |
|
| DOA-HFIN_DeptOverview FINAL 2.5.16.pdf |
HFIN 2/5/2016 1:30:00 PM |