Legislature(1997 - 1998)
04/29/1998 08:25 AM FIN
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
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.