Legislature(1997 - 1998)

04/29/1998 08:25 AM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
           HOUSE FINANCE COMMITTEE                                             
              APRIL 29, 1998                                                   
                 8:25 A.M.                                                     
                                                                               
TAPE HFC 98 - 132, Side 1                                                      
TAPE HFC 98 - 132, Side 2                                                      
                                                                               
CALL TO ORDER                                                                  
                                                                               
Co-Chair Gene Therriault called the House Finance Committee                    
meeting to order at 8:25 a.m.                                                  
                                                                               
PRESENT                                                                        
                                                                               
Co-Chair Therriault   Representative Kohring                                   
Representative Davies  Representative Martin                                   
Representative Davis   Representative Moses                                    
Representative Foster  Representative Mulder                                   
Representative Grussendorf                                                     
Representative Kelly                                                           
                                                                               
Co-Chair Hanley                                                                
                                                                               
ALSO PRESENT                                                                   
                                                                               
Lamar Cotten, Deputy Director, Department of Community and                     
Regional Affairs; Remond Henderson, Director, Division of                      
Administrative Services, Department of Community and                           
Regional Affairs; Jeff Bush, Deputy Commissioner, Department                   
of Commerce and Economic Development; Mike Krieber, Staff,                     
Representative Kohring; Kevin Ritchie, Executive Director,                     
Alaska Municipal League; Keith Gerken, Division of General                     
Services, Department of Administration; Tom Lawson,                            
Director, Administrative Services Division, Department of                      
Commerce and Economic Development.                                             
                                                                               
SUMMARY                                                                        
                                                                               
HB 400 "An Act combining parts of the Department of                            
Commerce and Economic Development and parts of the                             
Department of Community and Regional Affairs by                                
transferring some of their duties to a new                                     
Department of Commerce and Rural Development;                                  
transferring some of the duties of the Department                              
of Commerce and Economic Development and the                                   
Department of Community and Regional Affairs to                                
other existing agencies; eliminating the                                       
Department of Commerce and Economic Development                                
and the Department of Community and Regional                                   
Affairs; relating to the Department of Commerce                                
and Rural Development; adjusting the membership of                             
certain multi-member bodies to reflect the                                     
transfer of duties among departments and the                                   
elimination of departments; and providing for an                               
effective date."                                                               
                                                                               
 HB 400 was HELD in Committee for further                                      
consideration.                                                                 
HOUSE BILL NO. 400                                                             
                                                                               
"An Act combining parts of the Department of Commerce                          
and Economic Development and parts of the Department of                        
Community and Regional Affairs by transferring some of                         
their duties to a new Department of Commerce and Rural                         
Development; transferring some of the duties of the                            
Department of Commerce and Economic Development and the                        
Department of Community and Regional Affairs to other                          
existing agencies; eliminating the Department of                               
Commerce and Economic Development and the Department of                        
Community and Regional Affairs; relating to the                                
Department of Commerce and Rural Development; adjusting                        
the membership of certain multi-member bodies to                               
reflect the transfer of duties among departments and                           
the elimination of departments; and providing for an                           
effective date."                                                               
                                                                               
Representative Kohring, Sponsor, spoke in support of HB 400.                   
He maintained that HB 400 would save the state money by                        
merging the Department of Community and Regional Affairs and                   
the Department of Commerce and Economic Development.  He                       
emphasized that both departments are related to economic                       
development.  He stressed that the legislation represents a                    
reengineering of government.  He maintained that the                           
legislation would deliver programs with greater efficiency                     
and less dollars.  The existing program structure would be                     
retained.  Upper management would be reduced.                                  
                                                                               
He provided members with information showing overlapping                       
functions of the two departments and a chart demonstrating                     
how the new Department of Commerce and Rural Development                       
would be setup (copy on file).   There would be four                           
Divisions: Rural Affairs Division, Statewide Economic                          
Development Division, Division of Administration, and                          
Independent Agencies.                                                          
                                                                               
Representative Kohring explained that childcare programs                       
would be transferred to the Department of Health and Social                    
Services.  Job related programs would be transferred to the                    
Department of Labor.                                                           
                                                                               
The merger would eliminate one of the commissioner's                           
offices. He stated that the legislation would save                             
approximately $1,054 million dollars and cost $194.4                           
thousand dollars to implement.                                                 
                                                                               
Representative Kohring observed that the Department would be                   
named the Department of Commerce and Rural Development.  He                    
stressed that the Department of Community and Regional                         
Affairs would be retained as a division.  He pointed out                       
support for the legislation.  He noted that HB 400 was based                   
on legislation sponsored by Representative Kelly during a                      
previous session.                                                              
                                                                               
Representative Davies maintained that savings would be                         
accompanied by a reduction in services.  He pointed out that                   
the mission of the Department of Community and Regional                        
Affairs is not just rural development.  It is also the                         
department of municipal government.  He did not think that                     
the legislation was consistent with constitutional intent.                     
                                                                               
Representative Kelly suggested that a lot of the                               
Department's functions are outside of their mission                            
statement.                                                                     
                                                                               
Representative Kohring maintained that the majority of the                     
Department's programs are designed to help develop the                         
economy of rural Alaska.  He noted that the new department                     
would be the 4th smallest agency.                                              
                                                                               
MIKE KRIEBER, STAFF, REPRESENTATIVE KOHRING noted that the                     
merged department would have approximately 416 employees.                      
                                                                               
Representative Kohring stressed that it is better to reduce                    
upper level personnel than to cut programs.                                    
                                                                               
Representative Davies felt that the issue should be                            
discussed in a budget subcommittee.  He read from Gordon                       
Harrison's work on the Constitution.   The Constitution                        
states that "an agency shall be established by law in the                      
executive branch of the state government to advised and                        
assist local governments.  It shall review their activities,                   
collect and publish local government information, and                          
perform other duties prescribed by law."  Representative                       
Davies observed that it is the only agency mandated by the                     
Constitution.  Mr. Harrison concluded that its presence                        
symbolizes the importance of local government and the state                    
interest in fostering strong local self-government.  He                        
spoke against the legislation.                                                 
                                                                               
Mr. Krieber stressed that the new department would still be                    
focused on rural issues.  Local government assistance and                      
economic development would still occur in the new                              
department.  He maintained that the removal of job training                    
and childcare would help the focus on local government and                     
assistance.  Representative Davies pointed out that not all                    
local governments are in rural Alaska.                                         
                                                                               
Representative Kohring asserted that programs would remain                     
intact under a new management structure.                                       
                                                                               
Representative Davies expressed concern that local                             
governmental affairs will be missed from the mission                           
statement.                                                                     
                                                                               
LAMAR COTTEN, DEPUTY DIRECTOR, DEPARTMENT OF COMMUNITY AND                     
REGIONAL AFFAIRS spoke in opposition to the legislation.  He                   
stated that the Department does not think that the                             
legislation achieves any discernible goals in efficiency or                    
effectiveness.  He observed that the new department would                      
combine international trade, occupational licensing, local                     
boundary commission, state assessor, and coastal management.                   
He did not think that there is a duplication of services.                      
He emphasized that there is coordination of effort.  He did                    
not believe that the estimated cost savings would be                           
realized.  He asserted that the two departments work                           
together.  He maintained that the core mission would be                        
diluted.                                                                       
                                                                               
JEFF BUSH, DEPUTY COMMISSIONER, DEPARTMENT OF COMMERCE AND                     
ECONOMIC DEVELOPMENT agreed that the Department's mission                      
and services would be diluted.  He pointed out that the                        
legislation would eliminate one of the state of Alaska's two                   
seats on the Coastal Policy Council.  He maintained that                       
personnel would have to be moved to truly coordinate                           
efforts.  If personnel are not moved the only result would                     
be the elimination of a commissioner's office and a doubling                   
of work for the other commissioner.                                            
                                                                               
KEVIN RITCHIE, EXECUTIVE DIRECTOR, ALASKA MUNICIPAL LEAGUE                     
agreed that duplication should be addressed where it exists.                   
He stressed that Alaska has a progressive structure for                        
state government.  He maintained that Alaska's local                           
government is the best in the nation.  He stressed that the                    
system is still evolving.  As funding shrinks a strong local                   
government system becomes more important.  He noted the                        
importance given local government in the Constitution.                         
                                                                               
Representative Kohring reiterated that the legislation would                   
save approximately $1,054 million dollars.  He noted that                      
positions would be cut in the commissioner's office.                           
                                                                               
Mr. Krieber discussed the sponsor fiscal note (copy on                         
file).  He emphasized that relocation costs were reduced due                   
to a duplication of computer costs.  The cost of relocation                    
was calculated at $444 hundred dollars per employee.  He                       
noted that the legislation would move fewer employees then                     
prior legislation that was proposed by Representative Kelly.                   
He maintained that cost savings would be incurred from the                     
consolidation of job service and childcare programs.                           
                                                                               
(Tape Change, HFC 98 - 133, Side 2)                                            
                                                                               
Representative Kohring discussed the sponsor fiscal note.                      
He emphasized that there will be a minimum of relocation.                      
He maintained that the Department's relocation costs were                      
inflated.                                                                      
                                                                               
Representative Davies stated that either there is a real                       
reason for merging the departments and there is real overlap                   
or there is no point in the discussion.  He disagreed that                     
administrative positions can be eliminated without paying                      
attention to their function.  He asserted that                                 
administrative personnel are productive and necessary.  He                     
stressed that duplication in management has not been                           
demonstrated.                                                                  
                                                                               
Mr. Krieber observed that the Department of Commerce and                       
Economic Development is in seven different locations.  He                      
emphasized that location is not the same as management                         
direction.  Location in different structures does not                          
necessarily impede their interaction and synergy.  He                          
observed that email can be used for communication.                             
                                                                               
TOM LAWSON, DIRECTOR, ADMINISTRATIVE SERVICES DIVISION,                        
DEPARTMENT OF COMMERCE AND ECONOMIC DEVELOPMENT discussed                      
the Department's fiscal note (copy on file).  He discussed                     
page 2 of the fiscal note.  The fiscal note would retain                       
administrative staff for the first 24 months.  He observed                     
that workloads would increase while computer systems,                          
financial information and personnel costs were merged.  The                    
fiscal note recommends that one commissioner and one                           
secretary are eliminated and one administrative services                       
directors be downgraded.  Personnel rules require that when                    
a downgraded occurs that the salaries must be matched or                       
frozen for two years.  He discussed moving costs.  Moving                      
costs were estimated at $1,658.4 million dollars.  At total                    
of 253 employees would be moved.  He discussed page 4 of the                   
Department of Commerce and Economic Development's fiscal                       
note.  Staff for the independent agencies would not be                         
moved.  He maintained that there was no duplication on the                     
computer costs.  A halftime position was included to help                      
with leasing issues.                                                           
                                                                               
KEITH GERKEN, DIVISION OF GENERAL SERVICES, DEPARTMENT OF                      
ADMINISTRATION explained that the estimated moving cost of                     
$6,100 thousand dollars per employee was based an average of                   
actual moves.  He explained that funding is included in this                   
amount for a wire to the desktop that connects back to where                   
a server is located.                                                           
                                                                               
Mr. Lawson clarified that the $125 thousand dollar computer                    
estimate is a net after the cabling costs have been backed                     
out.                                                                           
                                                                               
Representative Davies spoke in support of the Department of                    
Commerce and Economic Development's fiscal note.                               
                                                                               
Mr. Gerken clarified that personnel of the Department of                       
Community and Regional Affairs would not fit in the Bank of                    
America Building.  Funding has been included in the Bank of                    
America purchase for relocation of Department of Commerce                      
and Economic Development personnel currently located in the                    
Frontier Building.                                                             
                                                                               
Representative Kohring disagreed that personnel would need                     
to be moved.  He felt that the relocation cost of $6,100                       
thousand dollars per employee is inflated.                                     
                                                                               
Representative Kelly did not dispute the Department's                          
estimates.  He felt that savings would come in future years.                   
He emphasized that the merger would provide a more                             
streamlined and efficient vehicle.                                             
                                                                               
Representative Kohring acknowledged that the true cost would                   
probably fall between the amount estimated by the sponsor                      
fiscal note and the Department of Commerce and Economic                        
Development's fiscal note.  He stressed that savings would                     
come from trimming upper management.  He pointed out that                      
relocation costs are one time costs.                                           
                                                                               
REMOND HENDERSON, DIRECTOR, DIVISION OF ADMINISTRATIVE                         
SERVICES, DEPARTMENT OF COMMUNITY AND REGIONAL AFFAIRS                         
maintained that positions cannot be eliminated without                         
programs suffering.  He pointed out that there is no deputy                    
director for administrative services in the Department of                      
Community and Regional Affairs.  The Department of Community                   
and Regional Affairs already merged administrative positions                   
to eliminate an Accountant IV position.  This merger has                       
created a bottleneck.  The Department of Community and                         
Regional Affairs processes over $18.0 thousand dollars in                      
invoices and warrants of over $100 million dollars.  Only                      
the Department of Health and Social Services, Department of                    
Education and the Department of Transportation and Public                      
Facilities have a higher volume of business.  He maintained                    
that budget analyst positions are busy 100 percent of the                      
time.  A secretary position was reclassified to assist with                    
budget work.  He maintained that one budget analyst could                      
not take over the workload for both departments.  He noted                     
that one of the special assistants that would be eliminated                    
under the sponsor fiscal note is not funded through general                    
funds.  It is funded through interagency and federal funds.                    
                                                                               
Representative Grussendorf spoke against the legislation.                      
He maintained that it is not the legislature's function to                     
set management structure.                                                      
                                                                               
Representative Kelly suggested that the policy call to merge                   
the departments be made.  He anticipated that the                              
Administration would conclude that there are efficiencies                      
that can be obtained from the new model.                                       
                                                                               
Representative Kohring spoke in support of the legislation.                    
                                                                               
Representative Mulder MOVED to report HCS HB 400 (L&C) out                     
of Committee with the Department of Commerce and Economic                      
Development's fiscal note.                                                     
                                                                               
A roll call vote was taken on the motion.                                      
                                                                               
IN FAVOR: Davis, Kelly, Kohring, Martin, Mulder, Therriault                    
OPPOSED: Davies, Grussendorf, Moses                                            
                                                                               
Co-Chair Hanley and Representative Foster were absent from                     
the vote.                                                                      
                                                                               
The MOTION PASSED (6-3).                                                       
ADJOURNMENT                                                                    
                                                                               
The meeting adjourned at 10:05 a.m.                                            
House Finance Committee 7 4/29/98 a.m.                                         

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