Legislature(1995 - 1996)
02/28/1996 02:40 PM House FIN
| Audio | Topic |
|---|
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE FINANCE COMMITTEE
FEBRUARY 28, 1996
2:40 P.M.
TAPE HFC 96 - 53, Side 1, #000 - end.
TAPE HFC 96 - 53, Side 2, #000 - end.
TAPE HFC 96 - 54, Side 1, #000 - end.
TAPE HFC 96 - 54, Side 2, #000 - #526.
CALL TO ORDER
Co-Chair Mark Hanley called the House Finance Committee
meeting to order at 2:40 P.M.
PRESENT
Co-Chair Hanley Representative Martin
Co-Chair Foster Representative Mulder
Representative Brown Representative Navarre
Representative Grussendorf Representative Parnell
Representative Kelly Representative Therriault
Representative Kohring
ALSO PRESENT
Jerry Shriner, Special Assistant, Office of the
Commissioner, Department of Corrections; Pat Smutz, Alaska
State Legislative Director, AFL-CIO; Denny DeWitt, Aid,
Representative Eldon Mulder.
SUMMARY
HB 428 An Act giving notice of and approving a
lease-purchase agreement for construction and
operation of a correctional facility in the Third
Judicial District, and setting conditions and
limitations on the facility's construction and
operation.
CS HB 428 (FIN) was reported out of Committee with
a "do pass" recommendation and with a fiscal note
by the Department of Corrections and a zero
fiscal note by the Department of Revenue
dated 2/05/96.
HOUSE BILL 428
"An Act giving notice of and approving a lease-purchase
agreement for construction and operation of a
correctional facility in the Third Judicial District,
and setting conditions and limitations on the
1
facility's construction and operation."
Representative Mulder MOVED that work draft #9-LS1338\U,
Chenoweth, 2/13/96, be the version before the Committee.
There being NO OBJECTION, it was so ordered.
Representative Mulder explained the differences between the
original version and the committee substitute including
those recommendations proposed by the Commissioner of
Corrections:
1. The committee substitute would remove the
requirement that contract facilities abide by
court orders.
2. The restriction on maximum security housing was
removed.
3. The Department recommended that the accreditation
language be removed; it was.
4. The inclusion of "design" listed in the total
construction costs.
Representative Mulder acknowledged that the bill was
"permissive". It was not a mandate ordering the Department
to build the facility. He pointed out the inconsistency
between statute and the Alaska Administrative Code. The
bill would allow the Commissioner of Corrections appropriate
authority. Representative Mulder reported that the needed
projected bed space by 2002 would be 1000 additional beds.
Representative Mulder reemphasized that it was essential for
the State to explore creative ways of saving revenue. He
pointed out that the Department of Corrections budget has
grown exponentially. He thought those costs could be cut
through privatization. The proposed legislation would
provide the Department an allowance to explore an additional
alternative.
Representative Martin voiced concern with inclusion of
Alaska Housing Finance Corporation (AHFC) or Alaska Import &
Export Authority (AIDEA) money being used for the project.
Representative Mulder noted that at this time, there is no
state commitment for funding, pointing out that a
lease/purchase option was written into the bill.
Representative Brown questioned if the Subcommittee had
considered broadening the legislation in order that the
Department could use it as a tool to expand their own plan.
That plan includes expansion and regionalization of current
facilities. Representative Mulder responded that the
2
Subcommittee did not give consideration to the State's plan,
as that plan has not yet been released.
He concluded, the proposed legislation would focus on the
lease/purchase aspect of the package. Representative Brown
inquired why that option was being considered for only the
Third Judicial District. Representative Mulder advised that
area has had the highest criminal traffic and involvement.
Representative Brown recommended that the "context" of the
problems should be considered, including the draft plan to
be distributed by the Department. Representative Brown
noted Page 2, Lines 25 -27, questioning the effect that
language would have on the community residential centers.
Representative Mulder said the language would broaden the
Commissioner of Corrections capabilities to research private
half-way houses.
Representative Brown disagreed, explaining that the language
would create a limitation between contracts with private
agencies. Representative Mulder noted inclusion of "only",
which would not allow the Commissioner to "focus the intent
down", thus making it less cost effective.
Representative Navarre pointed out that if the facility was
owned by the private sector and paid for by the State, taxes
would be paid for by the State, benefiting the local
municipality. He recommended that action on the bill be
postponed, until the Department had distributed their plan.
Representative Mulder reputed that the plan was not
available at this time. He added that the proposal would
include a 400 bed facility. That facility would cost
approximately $104 million dollars to build, whereas,
private industry could build a 1000 bed facility for
approximately $65 million dollars. He emphasized the
disparity, and the State's need to save money.
Co-Chair Hanley reiterated that the legislation was
"permissive" and that the Commissioner would not be required
to implement it, echoing that the Department's plan was not
available at this time as promised. Representative Navarre
emphasized that the Commissioner of Corrections has promised
that the plan would be available by March 4, 1996, stressing
that a "plan" exists and that it will be released.
Representative Therriault referenced Section 3, Page 7,
language regarding the construction of the correctional
facility under the Project Labor Agreement (PLA) and what
determination would be used for a "hire through the local
union hall". Representative Mulder noted that "local union
hall" would reflect the entire State, thus intending to
maximize Alaska hire.
3
Representative Therriault questioned the description of the
facility expansion. Representative Mulder reiterated that
determination of an allowance for expansion would be decided
if money could be saved given the economy at scale and
centralization.
Representative Therriault stressed that local communities
want jobs established within their boundaries. Those
communities would not want to see the expansion isolated to
one area. Representative Mulder replied that small, remote
prisons are expensive. The legislation focuses on ways to
address incarceration efficiently. Decisions should be
driven by cost.
Representative Therriault asked if the operator would be
self insured. Representative Mulder replied that currently,
private corporations operating throughout the country have
their own insurance coverage.
Representative Brown explained Amendment #1. [Attachment
"maximum hire" of Alaska State residents in the building and
operations of the facility. Co-Chair Hanley questioned if
the language was constitutionally correct. Representative
Brown responded that legal sources have stated that the
language "may be" unconstitutional, although it would be
good policy. Co-Chair Hanley asked if Representative Brown
could imagine that option being required in all State
agencies.
Representative Brown requested to hold the amendment, in
order to "clean up" the language, making it constitutionally
correct. Amendment #1 was HELD in Committee.
Representative Brown MOVED to adopt Amendment #2.
[Attachment #2]. She explained that Amendment #2 would
address construction of the correctional facility as a
public project. Adoption of the amendment would require
that the project be subject to prevailing wage standards and
would then apply existing public construction law.
Representative Mulder OBJECTED, pointing out that the
private facility would be built under the Project Labor
Agreement (PLA).
(Tape Change, HFC 96-53, Side 2).
Representative Mulder indicated that prevailing wage would
be determined between the contractor and the union hall.
Representative Brown questioned why the bill stated that
prevailing wages would be paid, suggesting the application
4
of existing law to the proposed project. Representative
Mulder replied that public officials should not dictate the
terms between the union hall and the contractor.
Representative Therriault observed that the provisions of
the amendment could weaken protection in the bill to hire
union employees. Representative Brown disagreed, noting
that the amendment would guarantee that prevailing wage
would be paid to the union employee involved.
Representative Navarre added, it was already required under
existing statutes, and recommended including it in the
legislation to guarantee that operations are legally
correct. He inquired if a construction company was
contracted from out-of-State, would they then be able to
bring employees from out-of-state.
PAT SMUTZ, ALASKA STATE LEGISLATIVE DIRECTOR, AFL-CIO,
replied that if it was a local building trade agreement,
local hire would be required. The out-of-state contractor
would have to go through local hiring halls and unions.
A roll call was taken on the MOTION to adopt Amendment #2.
IN FAVOR: Brown.
OPPOSED: Kelly, Kohring, Martin, Mulder, Parnell,
Therriault, Hanley, Foster.
Representatives Grussendorf and Navarre were not present for
the vote.
The MOTION FAILED (1-8).
Representative Brown MOVED to adopt Amendment #3.
[Attachment #3]. Representative Mulder OBJECTED.
Representative Brown explained that Amendment #3 would
require a feasibility study to examine the various methods
available to the State to relieve prison over- crowding.
JERRY SHRINER, SPECIAL ASSISTANT, OFFICE OF THE
COMMISSIONER, DEPARTMENT OF CORRECTIONS, explained that it
would be assumed that labor contracts would require a
feasibility study when closing facilities. He noted that
the Department's plan addresses a variety of locations, and
would take into consideration correctional populations. He
advised that the outcomes recommended would change by
locating all bed needs in one location.
Co-Chair Hanley asked if a cost-ratio benefit comparison had
been provided under the Department's plan. Mr. Shriner
noted that the Department has not provided a cost-benefit
with regard to private prisons. Mr. Shriner added that a
400 bed facility was part of the plan.
5
Mr. Shriner informed members that the Department, in
determining a plan, established where the greatest
population needs are located and are most extreme.
Representative Martin and Mr. Shriner discussed the
feasibility study and the cost benefit analysis.
Representative Brown confirmed that other states which have
incorporated privatization, have incorporated safeguards for
guaranteeing that the state government would be receiving
the "best deal". She felt that Amendment #3 would provide a
minimal safeguard.
A roll call was taken on the MOTION to adopt Amendment #3.
IN FAVOR: Navarre, Brown.
OPPOSED: Kohring, Martin, Mulder, Parnell,
Therriault, Foster, Hanley.
Representatives Grussendorf and Kelly were not present for
the vote.
The MOTION FAILED (2-7).
Representative Brown MOVED to adopt Amendment #4.
[Attachment #4]. Representative Mulder OBJECTED.
Representative Brown briefed the Committee that Amendment #4
would require evidence that a cost savings of at least 5% in
construction costs be met before the project was begun. She
indicated that other states have this statutory requirement.
Co-Chair Hanley asked if Project Labor Agreements would
always be required on state construction projects. Mr.
Shriner did not know. Co-Chair Hanley noted that type of
agreement would not save money. Representative Therriault
added that the amendment would prevent operational savings.
Representative Brown asked to WITHDRAW Amendment #4 in order
to refine the language. There being NO OBJECTION, it was
withdrawn.
Representative Brown addressed Amendment #5. [Attachment
operating cost savings. Representative Mulder noted that he
would concur with the amendment, if Representative Brown
would include the addendum that it be compared to the
average daily per diem rate of $107 dollars per day.
Representative Brown reminded Representative Mulder that the
Department could become more efficient, which would then
lower those costs. Representative Mulder warned that was an
arbitrary concept.
6
Representative Martin requested a friendly amendment to
Amendment #5, adding language to follow Line 8, "as of FY97
Department of Corrections budget". Following discussion,
Representative Martin withdrew the proposed amendment to
Amendment #5.
Mr. Shriner commented that other states have dealt with the
situation through statute. Most states establish that the
cost must be at least equal to, and if it is not, they then
must establish a bench mark for the costs of the facilities
proposed to be built.
Representative Therriault suggested that the amendment
language was to "simplistic". Representative Brown stated
that the Commissioner would need to make written analysis
and findings. She stressed that savings must be insured
before the undertaking. Discussion continued among
Committee members regarding the planning process required to
achieve the guaranteed savings.
Representative Brown advised that it would make sense to
have the cost comparison done after the bids, although noted
that she would be more comfortable having the feasibility
study provided before the process. Amendment #5 was HELD.
(Tape Change, HFC 96-54, Side 2).
Representative Brown MOVED to adopt Amendment #6.
[Attachment #6]. Representative Mulder OBJECTED.
Representative Therriault noted that the costs associated
with operating a facility was a direct link to how the
facility was constructed. He thought that efficiency would
be lost in not combining the two. Representative Navarre
explained that the amendment would not preclude that from
happening.
Mr. Shriner commented that the Department would prefer that
the two issues be separated. DOC would not want to be tied
to a facility, and consequently tied to the operator for 20
years, until they (the Department) owned the building. He
suggested that the process should be separated; an RFP for
construction and a separate RFP for operations.
Representative Navarre noted language on Page 4, Section 4,
and asked if persons employed by the Department of
Corrections could become the contractors of a facility.
Representative Mulder replied that a collective group of
employees, bidding on a project would not be precluded.
Representative Navarre recommended that language be changed.
Representative Brown asked if an Internal Revenue Service
7
(IRS) law existed which would prohibit the State from
entering into a contract longer than a specified period of
time.
DENNY DEWITT, AID, REPRESENTATIVE ELDON MULDER, responded
that their office had been advised through a variety of
bonding counsels that the lease/purchase of a facility would
need to be a separate contract from the operational portion
of the activity. The operational portion would need to be
rebid at the end of five years.
A roll call was taken on the MOTION to adopt Amendment #6.
IN FAVOR: Navarre, Brown, Grussendorf.
OPPOSED: Kelly, Kohring, Mulder, Parnell,
Therriault, Foster.
Representatives Hanley and Martin were not present for the
vote.
The MOTION FAILED (3-6).
Representative Brown MOVED to adopt Amendment #7.
[Attachment #7]. Representative Mulder OBJECTED.
Representative Brown explained that the amendment would
allow the State to temporarily take over operations if they
could do it for less costs. Representative Mulder argued
that if the State could operate the facility for less, they
would be entitled to come back to the Legislature to request
that.
Representative Therriault asked if the amendment would
affect the bidding rates. Representative Brown offered a
scenario in which the contractor hyped up the costs; at that
time, a provision would need to be included to address those
operational concerns. Without the amendment, options would
be limited. Representative Mulder disclosed that in the
"lower 48", contract bids were lower than those received by
state governments. If a breech existed, the state would
temporarily take it over.
Representative Navarre pointed out to Committee members that
the amendment would provide a check on the competitive bid
process. The State could not arbitrarily take over the
project and violate the terms of the contract. Discussion
followed among Committee members regarding options available
during the competitive bid process.
Representative Navarre MOVED a friendly amendment to Page 3,
Line 23, deletion of "temporarily". He thought that would
technically address the problem. There was NO OBJECTION to
the deletion of the language.
8
A roll call was taken on the MOTION to adopt Amendment #7.
IN FAVOR: Navarre, Brown, Grussendorf.
OPPOSED: Kohring, Martin, Mulder, Parnell,
Therriault, Kelly, Hanley.
Representative Hanley was not present for the vote.
The MOTION FAILED (3-7).
Representative Brown MOVED to adopt Amendment #8.
[Attachment #8]. Representative Mulder OBJECTED.
Representative Brown explained that the amendment would
address concerns in establishing limits for operation.
Representative Mulder was more comfortable with the
limitation being made through a policy call by the
Legislature than one made by the Administration.
Representative Brown reminded Representative Mulder that
getting action done through the Legislature was not an easy
or timely option. She concluded, the amendment would
provide for temporary operations. Representative Mulder
suggested that Page 3, Line 27, adequately addressed that
concern.
Co-Chair Hanley stated that the amendment language was too
"broad". Representative Brown offered to redraft the
amendment. Following discussion that it was the Chair's
intent to move the legislation, Representative Brown MOVED
to adopt Amendment #8 as drafted.
A roll call was taken on the MOTION.
IN FAVOR: Navarre, Brown, Grussendorf.
OPPOSED: Martin, Mulder, Parnell, Therriault,
Kelly, Kohring, Hanley, Foster.
The MOTION FAILED (3-8).
Representative Brown MOVED to adopt Amendment #9.
[Attachment #9]. Representative Mulder OBJECTED.
(Tape Change, HFC 96-54, Side 2).
Representative Brown questioned that in the event of a
default, why the facility would be operated by the State
only "temporarily". Representative Mulder responded that
the intent of the legislation was to keep it private.
A roll call was taken on the MOTION to adopt Amendment #9.
IN FAVOR: Navarre, Brown, Grussendorf.
9
OPPOSED: Mulder, Parnell, Therriault, Kelly,
Kohring, Martin, Foster, Hanley.
The MOTION FAILED (3-8).
Representative Brown MOVED to adopt Amendment #10.
[Attachment #10]. Representative Mulder OBJECTED.
Representative Brown noted that the amendment would insure
that correctional officers and other staff are properly
trained to work with incarcerated felons. Representative
Mulder commented that concern was addressed on Page 3, Line
31 and Page 4, Lines 1 & 2. He added that record and
background checks would be a part of the contract language.
He concluded, that the concern would be handled between the
Commissioner of Corrections and the private contractor.
Representative Brown WITHDREW Amendment #10, agreeing that
it had been addressed. There being NO OBJECTION, Amendment
Representative Brown MOVED to adopt Amendment #11.
[Attachment #11]. Representative Mulder OBJECTED.
Representative Brown explained that Amendment #11 contains
standard language used by the Department of Administration
(DOA) in contracts to deal with non-performance on the part
of the contractor. Representative Mulder stated that
information should be specified in the contracts.
Representative Brown suggested that by placing the language
in statute, would automatically place it in "any" contract
entered into.
Representative Parnell thought that "resulting excess costs"
would be standard language. Representative Navarre MOVED a
"friendly" amendment to Amendment #11, removing the language
"for any reason whatsoever" and "any resulting excess" and
inserting "reasonable". The language would clarify that if
a default by a contractor should occur, the State would then
continue the operations, charting back the costs.
Representative Mulder advised that concern had been
addressed in the procurement statutes. There being NO
OBJECTION to Representative Navarre's "friendly" amendment,
the language was changed.
A roll call was taken on the MOTION to adopt Amendment #11
as changed.
IN FAVOR: Navarre, Parnell, Brown, Grussendorf.
OPPOSED: Therriault, Kelly, Kohring, Martin,
Mulder, Hanley, Foster.
The MOTION FAILED (4-7).
10
Representative Brown MOVED to adopt Amendment #12.
[Attachment #12]. Representative Mulder OBJECTED.
Representative Brown noted that the amendment would provide
that the facility could be built in a district other than
the Third Judicial District.
Representative Brown MOVED a language change to Page 3,
Lines 9 and 10, which would read "related costs to
establishing correctional facilities may not exceed $100
million dollars". Representative Martin OBJECTED to the
conceptual amendment. Representative Mulder identified that
the Third Judicial District had been specified because the
pressure and expansion needs within the correctional system
are located within that district. He reiterated that in
order to maximize the efficiency through centralization and
size, building a facility in that area would avoid some
transportation and other hidden costs.
Representative Brown MOVED TO WITHDREW Amendment #12. There
being NO OBJECTION, it was withdrawn.
Representative Brown MOVED to adopt Amendment #5.
[Attachment #5]. Representative Mulder OBJECTED.
Representative Brown noted that Amendment #5 would require a
5% operational savings.
A roll call was taken on the MOTION to adopt Amendment #5.
IN FAVOR: Navarre, Brown, Grussendorf.
OPPOSED: Kohring, Martin, Mulder, Parnell,
Therriault, Kelly, Foster.
Co-Chair Hanley was not present for the vote.
The MOTION FAILED (3-7).
Representative Mulder recommended adopting a $300 thousand
dollar fiscal note in lieu of the other fiscal notes
submitted. He believed that the costs incurred by the
Department of Transportation and Public Facilities (DOTPF)
and the Department of Administration (DOA) could be rolled
into the cost of financing. The Department of Corrections
would require only a $300 thousand dollar allocation in
order to prepare the Request For Proposal (RFP) and
determine staffing operational requirements.
Representative Navarre recommended that each Department be
consulted to provide testimony regarding the fiscal impacts.
Mr. Shriner addressed the fiscal differences to that
Department. The Department of Corrections (DOC) would
11
receive the total allocation and then each of the other
departments would receive funds through an RSA from DOC. He
thought some costs could be capitalized through bonding.
Bonding costs should remain in the fiscal note. Mr. Shriner
warned that $300 thousand dollars would not cover all
necessary costs.
Representative Mulder disagreed, noting that the
Commissioner of Corrections had projected cost needs for a
thorough analysis of the entire proposal. He suggested that
was a "smoke screen" to delay the legislative process, and
emphasized that the $300 thousand dollars would be
sufficient in providing for staff and comparison time and
the design expertise for the RFP. Representative Martin
suggested that more money would require more time.
Representative Grussendorf questioned inclusion of the
maintenance concern. Representative Mulder replied that
maintenance should be required by the private contractors,
and that the contractor would be required to return the
facility to the "same condition" it was in before occupancy.
Representative Mulder reiterated that would be a contractual
item. Representative Martin added that private enterprise
always includes maintenance as part of the operating costs.
Representative Mulder MOVED the $300 thousand dollar fiscal
note for the Department of Corrections. Representative
Navarre OBJECTED to the fiscal note. Following discussion,
Representative Navarre WITHDREW the objection to the fiscal
note, noting his objection to the legislation moving from
Committee before overviewing the Department of Corrections
long term plan.
Representative Mulder MOVED to adopt CS HB 428 (FIN) with
the individual recommendations and with the accompanying
fiscal notes. Representative Navarre OBJECTED.
Representative Navarre stated that he does not oppose
privatization and that with appropriate safeguards,
privatization could save the State money. He emphasized the
need for safeguards. He reminded members that the savings
and loans industry was a private industry which ultimately
caused the tax payers billions of dollars.
Representative Navarre advised that the legislation
established "no constraints". Once the facility is built,
the cost of operations would be out of their hands, except
through the RFP process. He suspected that major
maintenance would be deferred for the first five years.
Representative Navarre summarized that constraints must be
12
added to the bill. Privatization is not good at any cost.
Privatization is only good when constraints and
constrictions are added to save money. He reiterated that
the Department of Corrections plan should be considered
along with the proposed legislation.
A roll call was taken on the MOTION to MOVE the bill from
Committee.
IN FAVOR: Martin, Mulder. Parnell, Therriault,
Kelly, Kohring, Foster.
OPPOSED: Navarre, Brown, Grussendorf.
Co-Chair Hanley was not present for the vote.
The MOTION PASSED (7-3).
CS HB 428 (FIN) was reported out of Committee with a "do
pass" recommendation and with a fiscal note by the
Department of Corrections and a zero fiscal note by the
Department of Revenue dated 2/05/96.
ADJOURNMENT
The meeting adjourned at 5:20 P.M.
HOUSE FINANCE COMMITTEE
FEBRUARY 28, 1996
2:40 P.M.
TAPE HFC 96 - 53, Side 1, #000 - end.
TAPE HFC 96 - 53, Side 2, #000 - end.
TAPE HFC 96 - 54, Side 1, #000 - end.
TAPE HFC 96 - 54, Side 2, #000 - #526.
CALL TO ORDER
Co-Chair Mark Hanley called the House Finance Committee
meeting to order at 2:40 P.M.
PRESENT
Co-Chair Hanley Representative Martin
Co-Chair Foster Representative Mulder
Representative Brown Representative Navarre
Representative Grussendorf Representative Parnell
Representative Kelly Representative Therriault
Representative Kohring
ALSO PRESENT
13
Jerry Shriner, Special Assistant, Office of the
Commissioner, Department of Corrections; Pat Smutz, Alaska
State Legislative Director, AFL-CIO; Denny DeWitt, Aid,
Representative Eldon Mulder.
SUMMARY
HB 428 An Act giving notice of and approving a
lease-purchase agreement for construction and
operation of a correctional facility in the Third
Judicial District, and setting conditions and
limitations on the facility's construction and
operation.
CS HB 428 (FIN) was reported out of Committee with
a "do pass" recommendation and with a fiscal note
by the Department of Corrections and a zero
fiscal note by the Department of Revenue
dated 2/05/96.
HOUSE BILL 428
"An Act giving notice of and approving a lease-purchase
agreement for construction and operation of a
correctional facility in the Third Judicial District,
and setting conditions and limitations on the
facility's construction and operation."
Representative Mulder MOVED that work draft #9-LS1338\U,
Chenoweth, 2/13/96, be the version before the Committee.
There being NO OBJECTION, it was so ordered.
Representative Mulder explained the differences between the
original version and the committee substitute including
those recommendations proposed by the Commissioner of
Corrections:
1. The committee substitute would remove the
requirement that contract facilities abide by
court orders.
2. The restriction on maximum security housing was
removed.
3. The Department recommended that the accreditation
language be removed; it was.
4. The inclusion of "design" listed in the total
construction costs.
Representative Mulder acknowledged that the bill was
"permissive". It was not a mandate ordering the Department
14
to build the facility. He pointed out the inconsistency
between statute and the Alaska Administrative Code. The
bill would allow the Commissioner of Corrections appropriate
authority. Representative Mulder reported that the needed
projected bed space by 2002 would be 1000 additional beds.
Representative Mulder reemphasized that it was essential for
the State to explore creative ways of saving revenue. He
pointed out that the Department of Corrections budget has
grown exponentially. He thought those costs could be cut
through privatization. The proposed legislation would
provide the Department an allowance to explore an additional
alternative.
Representative Martin voiced concern with inclusion of
Alaska Housing Finance Corporation (AHFC) or Alaska Import &
Export Authority (AIDEA) money being used for the project.
Representative Mulder noted that at this time, there is no
state commitment for funding, pointing out that a
lease/purchase option was written into the bill.
Representative Brown questioned if the Subcommittee had
considered broadening the legislation in order that the
Department could use it as a tool to expand their own plan.
That plan includes expansion and regionalization of current
facilities. Representative Mulder responded that the
Subcommittee did not give consideration to the State's plan,
as that plan has not yet been released.
He concluded, the proposed legislation would focus on the
lease/purchase aspect of the package. Representative Brown
inquired why that option was being considered for only the
Third Judicial District. Representative Mulder advised that
area has had the highest criminal traffic and involvement.
Representative Brown recommended that the "context" of the
problems should be considered, including the draft plan to
be distributed by the Department. Representative Brown
noted Page 2, Lines 25 -27, questioning the effect that
language would have on the community residential centers.
Representative Mulder said the language would broaden the
Commissioner of Corrections capabilities to research private
half-way houses.
Representative Brown disagreed, explaining that the language
would create a limitation between contracts with private
agencies. Representative Mulder noted inclusion of "only",
which would not allow the Commissioner to "focus the intent
down", thus making it less cost effective.
Representative Navarre pointed out that if the facility was
owned by the private sector and paid for by the State, taxes
15
would be paid for by the State, benefiting the local
municipality. He recommended that action on the bill be
postponed, until the Department had distributed their plan.
Representative Mulder reputed that the plan was not
available at this time. He added that the proposal would
include a 400 bed facility. That facility would cost
approximately $104 million dollars to build, whereas,
private industry could build a 1000 bed facility for
approximately $65 million dollars. He emphasized the
disparity, and the State's need to save money.
Co-Chair Hanley reiterated that the legislation was
"permissive" and that the Commissioner would not be required
to implement it, echoing that the Department's plan was not
available at this time as promised. Representative Navarre
emphasized that the Commissioner of Corrections has promised
that the plan would be available by March 4, 1996, stressing
that a "plan" exists and that it will be released.
Representative Therriault referenced Section 3, Page 7,
language regarding the construction of the correctional
facility under the Project Labor Agreement (PLA) and what
determination would be used for a "hire through the local
union hall". Representative Mulder noted that "local union
hall" would reflect the entire State, thus intending to
maximize Alaska hire.
Representative Therriault questioned the description of the
facility expansion. Representative Mulder reiterated that
determination of an allowance for expansion would be decided
if money could be saved given the economy at scale and
centralization.
Representative Therriault stressed that local communities
want jobs established within their boundaries. Those
communities would not want to see the expansion isolated to
one area. Representative Mulder replied that small, remote
prisons are expensive. The legislation focuses on ways to
address incarceration efficiently. Decisions should be
driven by cost.
Representative Therriault asked if the operator would be
self insured. Representative Mulder replied that currently,
private corporations operating throughout the country have
their own insurance coverage.
Representative Brown explained Amendment #1. [Attachment
"maximum hire" of Alaska State residents in the building and
operations of the facility. Co-Chair Hanley questioned if
the language was constitutionally correct. Representative
Brown responded that legal sources have stated that the
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language "may be" unconstitutional, although it would be
good policy. Co-Chair Hanley asked if Representative Brown
could imagine that option being required in all State
agencies.
Representative Brown requested to hold the amendment, in
order to "clean up" the language, making it constitutionally
correct. Amendment #1 was HELD in Committee.
Representative Brown MOVED to adopt Amendment #2.
[Attachment #2]. She explained that Amendment #2 would
address construction of the correctional facility as a
public project. Adoption of the amendment would require
that the project be subject to prevailing wage standards and
would then apply existing public construction law.
Representative Mulder OBJECTED, pointing out that the
private facility would be built under the Project Labor
Agreement (PLA).
(Tape Change, HFC 96-53, Side 2).
Representative Mulder indicated that prevailing wage would
be determined between the contractor and the union hall.
Representative Brown questioned why the bill stated that
prevailing wages would be paid, suggesting the application
of existing law to the proposed project. Representative
Mulder replied that public officials should not dictate the
terms between the union hall and the contractor.
Representative Therriault observed that the provisions of
the amendment could weaken protection in the bill to hire
union employees. Representative Brown disagreed, noting
that the amendment would guarantee that prevailing wage
would be paid to the union employee involved.
Representative Navarre added, it was already required under
existing statutes, and recommended including it in the
legislation to guarantee that operations are legally
correct. He inquired if a construction company was
contracted from out-of-State, would they then be able to
bring employees from out-of-state.
PAT SMUTZ, ALASKA STATE LEGISLATIVE DIRECTOR, AFL-CIO,
replied that if it was a local building trade agreement,
local hire would be required. The out-of-state contractor
would have to go through local hiring halls and unions.
A roll call was taken on the MOTION to adopt Amendment #2.
IN FAVOR: Brown.
OPPOSED: Kelly, Kohring, Martin, Mulder, Parnell,
Therriault, Hanley, Foster.
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Representatives Grussendorf and Navarre were not present for
the vote.
The MOTION FAILED (1-8).
Representative Brown MOVED to adopt Amendment #3.
[Attachment #3]. Representative Mulder OBJECTED.
Representative Brown explained that Amendment #3 would
require a feasibility study to examine the various methods
available to the State to relieve prison over- crowding.
JERRY SHRINER, SPECIAL ASSISTANT, OFFICE OF THE
COMMISSIONER, DEPARTMENT OF CORRECTIONS, explained that it
would be assumed that labor contracts would require a
feasibility study when closing facilities. He noted that
the Department's plan addresses a variety of locations, and
would take into consideration correctional populations. He
advised that the outcomes recommended would change by
locating all bed needs in one location.
Co-Chair Hanley asked if a cost-ratio benefit comparison had
been provided under the Department's plan. Mr. Shriner
noted that the Department has not provided a cost-benefit
with regard to private prisons. Mr. Shriner added that a
400 bed facility was part of the plan.
Mr. Shriner informed members that the Department, in
determining a plan, established where the greatest
population needs are located and are most extreme.
Representative Martin and Mr. Shriner discussed the
feasibility study and the cost benefit analysis.
Representative Brown confirmed that other states which have
incorporated privatization, have incorporated safeguards for
guaranteeing that the state government would be receiving
the "best deal". She felt that Amendment #3 would provide a
minimal safeguard.
A roll call was taken on the MOTION to adopt Amendment #3.
IN FAVOR: Navarre, Brown.
OPPOSED: Kohring, Martin, Mulder, Parnell,
Therriault, Foster, Hanley.
Representatives Grussendorf and Kelly were not present for
the vote.
The MOTION FAILED (2-7).
Representative Brown MOVED to adopt Amendment #4.
[Attachment #4]. Representative Mulder OBJECTED.
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Representative Brown briefed the Committee that Amendment #4
would require evidence that a cost savings of at least 5% in
construction costs be met before the project was begun. She
indicated that other states have this statutory requirement.
Co-Chair Hanley asked if Project Labor Agreements would
always be required on state construction projects. Mr.
Shriner did not know. Co-Chair Hanley noted that type of
agreement would not save money. Representative Therriault
added that the amendment would prevent operational savings.
Representative Brown asked to WITHDRAW Amendment #4 in order
to refine the language. There being NO OBJECTION, it was
withdrawn.
Representative Brown addressed Amendment #5. [Attachment
operating cost savings. Representative Mulder noted that he
would concur with the amendment, if Representative Brown
would include the addendum that it be compared to the
average daily per diem rate of $107 dollars per day.
Representative Brown reminded Representative Mulder that the
Department could become more efficient, which would then
lower those costs. Representative Mulder warned that was an
arbitrary concept.
Representative Martin requested a friendly amendment to
Amendment #5, adding language to follow Line 8, "as of FY97
Department of Corrections budget". Following discussion,
Representative Martin withdrew the proposed amendment to
Amendment #5.
Mr. Shriner commented that other states have dealt with the
situation through statute. Most states establish that the
cost must be at least equal to, and if it is not, they then
must establish a bench mark for the costs of the facilities
proposed to be built.
Representative Therriault suggested that the amendment
language was to "simplistic". Representative Brown stated
that the Commissioner would need to make written analysis
and findings. She stressed that savings must be insured
before the undertaking. Discussion continued among
Committee members regarding the planning process required to
achieve the guaranteed savings.
Representative Brown advised that it would make sense to
have the cost comparison done after the bids, although noted
that she would be more comfortable having the feasibility
study provided before the process. Amendment #5 was HELD.
(Tape Change, HFC 96-54, Side 2).
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Representative Brown MOVED to adopt Amendment #6.
[Attachment #6]. Representative Mulder OBJECTED.
Representative Therriault noted that the costs associated
with operating a facility was a direct link to how the
facility was constructed. He thought that efficiency would
be lost in not combining the two. Representative Navarre
explained that the amendment would not preclude that from
happening.
Mr. Shriner commented that the Department would prefer that
the two issues be separated. DOC would not want to be tied
to a facility, and consequently tied to the operator for 20
years, until they (the Department) owned the building. He
suggested that the process should be separated; an RFP for
construction and a separate RFP for operations.
Representative Navarre noted language on Page 4, Section 4,
and asked if persons employed by the Department of
Corrections could become the contractors of a facility.
Representative Mulder replied that a collective group of
employees, bidding on a project would not be precluded.
Representative Navarre recommended that language be changed.
Representative Brown asked if an Internal Revenue Service
(IRS) law existed which would prohibit the State from
entering into a contract longer than a specified period of
time.
DENNY DEWITT, AID, REPRESENTATIVE ELDON MULDER, responded
that their office had been advised through a variety of
bonding counsels that the lease/purchase of a facility would
need to be a separate contract from the operational portion
of the activity. The operational portion would need to be
rebid at the end of five years.
A roll call was taken on the MOTION to adopt Amendment #6.
IN FAVOR: Navarre, Brown, Grussendorf.
OPPOSED: Kelly, Kohring, Mulder, Parnell,
Therriault, Foster.
Representatives Hanley and Martin were not present for the
vote.
The MOTION FAILED (3-6).
Representative Brown MOVED to adopt Amendment #7.
[Attachment #7]. Representative Mulder OBJECTED.
Representative Brown explained that the amendment would
allow the State to temporarily take over operations if they
20
could do it for less costs. Representative Mulder argued
that if the State could operate the facility for less, they
would be entitled to come back to the Legislature to request
that.
Representative Therriault asked if the amendment would
affect the bidding rates. Representative Brown offered a
scenario in which the contractor hyped up the costs; at that
time, a provision would need to be included to address those
operational concerns. Without the amendment, options would
be limited. Representative Mulder disclosed that in the
"lower 48", contract bids were lower than those received by
state governments. If a breech existed, the state would
temporarily take it over.
Representative Navarre pointed out to Committee members that
the amendment would provide a check on the competitive bid
process. The State could not arbitrarily take over the
project and violate the terms of the contract. Discussion
followed among Committee members regarding options available
during the competitive bid process.
Representative Navarre MOVED a friendly amendment to Page 3,
Line 23, deletion of "temporarily". He thought that would
technically address the problem. There was NO OBJECTION to
the deletion of the language.
A roll call was taken on the MOTION to adopt Amendment #7.
IN FAVOR: Navarre, Brown, Grussendorf.
OPPOSED: Kohring, Martin, Mulder, Parnell,
Therriault, Kelly, Hanley.
Representative Hanley was not present for the vote.
The MOTION FAILED (3-7).
Representative Brown MOVED to adopt Amendment #8.
[Attachment #8]. Representative Mulder OBJECTED.
Representative Brown explained that the amendment would
address concerns in establishing limits for operation.
Representative Mulder was more comfortable with the
limitation being made through a policy call by the
Legislature than one made by the Administration.
Representative Brown reminded Representative Mulder that
getting action done through the Legislature was not an easy
or timely option. She concluded, the amendment would
provide for temporary operations. Representative Mulder
suggested that Page 3, Line 27, adequately addressed that
concern.
Co-Chair Hanley stated that the amendment language was too
21
"broad". Representative Brown offered to redraft the
amendment. Following discussion that it was the Chair's
intent to move the legislation, Representative Brown MOVED
to adopt Amendment #8 as drafted.
A roll call was taken on the MOTION.
IN FAVOR: Navarre, Brown, Grussendorf.
OPPOSED: Martin, Mulder, Parnell, Therriault,
Kelly, Kohring, Hanley, Foster.
The MOTION FAILED (3-8).
Representative Brown MOVED to adopt Amendment #9.
[Attachment #9]. Representative Mulder OBJECTED.
(Tape Change, HFC 96-54, Side 2).
Representative Brown questioned that in the event of a
default, why the facility would be operated by the State
only "temporarily". Representative Mulder responded that
the intent of the legislation was to keep it private.
A roll call was taken on the MOTION to adopt Amendment #9.
IN FAVOR: Navarre, Brown, Grussendorf.
OPPOSED: Mulder, Parnell, Therriault, Kelly,
Kohring, Martin, Foster, Hanley.
The MOTION FAILED (3-8).
Representative Brown MOVED to adopt Amendment #10.
[Attachment #10]. Representative Mulder OBJECTED.
Representative Brown noted that the amendment would insure
that correctional officers and other staff are properly
trained to work with incarcerated felons. Representative
Mulder commented that concern was addressed on Page 3, Line
31 and Page 4, Lines 1 & 2. He added that record and
background checks would be a part of the contract language.
He concluded, that the concern would be handled between the
Commissioner of Corrections and the private contractor.
Representative Brown WITHDREW Amendment #10, agreeing that
it had been addressed. There being NO OBJECTION, Amendment
Representative Brown MOVED to adopt Amendment #11.
[Attachment #11]. Representative Mulder OBJECTED.
Representative Brown explained that Amendment #11 contains
standard language used by the Department of Administration
(DOA) in contracts to deal with non-performance on the part
of the contractor. Representative Mulder stated that
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information should be specified in the contracts.
Representative Brown suggested that by placing the language
in statute, would automatically place it in "any" contract
entered into.
Representative Parnell thought that "resulting excess costs"
would be standard language. Representative Navarre MOVED a
"friendly" amendment to Amendment #11, removing the language
"for any reason whatsoever" and "any resulting excess" and
inserting "reasonable". The language would clarify that if
a default by a contractor should occur, the State would then
continue the operations, charting back the costs.
Representative Mulder advised that concern had been
addressed in the procurement statutes. There being NO
OBJECTION to Representative Navarre's "friendly" amendment,
the language was changed.
A roll call was taken on the MOTION to adopt Amendment #11
as changed.
IN FAVOR: Navarre, Parnell, Brown, Grussendorf.
OPPOSED: Therriault, Kelly, Kohring, Martin,
Mulder, Hanley, Foster.
The MOTION FAILED (4-7).
Representative Brown MOVED to adopt Amendment #12.
[Attachment #12]. Representative Mulder OBJECTED.
Representative Brown noted that the amendment would provide
that the facility could be built in a district other than
the Third Judicial District.
Representative Brown MOVED a language change to Page 3,
Lines 9 and 10, which would read "related costs to
establishing correctional facilities may not exceed $100
million dollars". Representative Martin OBJECTED to the
conceptual amendment. Representative Mulder identified that
the Third Judicial District had been specified because the
pressure and expansion needs within the correctional system
are located within that district. He reiterated that in
order to maximize the efficiency through centralization and
size, building a facility in that area would avoid some
transportation and other hidden costs.
Representative Brown MOVED TO WITHDREW Amendment #12. There
being NO OBJECTION, it was withdrawn.
Representative Brown MOVED to adopt Amendment #5.
[Attachment #5]. Representative Mulder OBJECTED.
Representative Brown noted that Amendment #5 would require a
5% operational savings.
23
A roll call was taken on the MOTION to adopt Amendment #5.
IN FAVOR: Navarre, Brown, Grussendorf.
OPPOSED: Kohring, Martin, Mulder, Parnell,
Therriault, Kelly, Foster.
Co-Chair Hanley was not present for the vote.
The MOTION FAILED (3-7).
Representative Mulder recommended adopting a $300 thousand
dollar fiscal note in lieu of the other fiscal notes
submitted. He believed that the costs incurred by the
Department of Transportation and Public Facilities (DOTPF)
and the Department of Administration (DOA) could be rolled
into the cost of financing. The Department of Corrections
would require only a $300 thousand dollar allocation in
order to prepare the Request For Proposal (RFP) and
determine staffing operational requirements.
Representative Navarre recommended that each Department be
consulted to provide testimony regarding the fiscal impacts.
Mr. Shriner addressed the fiscal differences to that
Department. The Department of Corrections (DOC) would
receive the total allocation and then each of the other
departments would receive funds through an RSA from DOC. He
thought some costs could be capitalized through bonding.
Bonding costs should remain in the fiscal note. Mr. Shriner
warned that $300 thousand dollars would not cover all
necessary costs.
Representative Mulder disagreed, noting that the
Commissioner of Corrections had projected cost needs for a
thorough analysis of the entire proposal. He suggested that
was a "smoke screen" to delay the legislative process, and
emphasized that the $300 thousand dollars would be
sufficient in providing for staff and comparison time and
the design expertise for the RFP. Representative Martin
suggested that more money would require more time.
Representative Grussendorf questioned inclusion of the
maintenance concern. Representative Mulder replied that
maintenance should be required by the private contractors,
and that the contractor would be required to return the
facility to the "same condition" it was in before occupancy.
Representative Mulder reiterated that would be a contractual
item. Representative Martin added that private enterprise
always includes maintenance as part of the operating costs.
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Representative Mulder MOVED the $300 thousand dollar fiscal
note for the Department of Corrections. Representative
Navarre OBJECTED to the fiscal note. Following discussion,
Representative Navarre WITHDREW the objection to the fiscal
note, noting his objection to the legislation moving from
Committee before overviewing the Department of Corrections
long term plan.
Representative Mulder MOVED to adopt CS HB 428 (FIN) with
the individual recommendations and with the accompanying
fiscal notes. Representative Navarre OBJECTED.
Representative Navarre stated that he does not oppose
privatization and that with appropriate safeguards,
privatization could save the State money. He emphasized the
need for safeguards. He reminded members that the savings
and loans industry was a private industry which ultimately
caused the tax payers billions of dollars.
Representative Navarre advised that the legislation
established "no constraints". Once the facility is built,
the cost of operations would be out of their hands, except
through the RFP process. He suspected that major
maintenance would be deferred for the first five years.
Representative Navarre summarized that constraints must be
added to the bill. Privatization is not good at any cost.
Privatization is only good when constraints and
constrictions are added to save money. He reiterated that
the Department of Corrections plan should be considered
along with the proposed legislation.
A roll call was taken on the MOTION to MOVE the bill from
Committee.
IN FAVOR: Martin, Mulder. Parnell, Therriault,
Kelly, Kohring, Foster.
OPPOSED: Navarre, Brown, Grussendorf.
Co-Chair Hanley was not present for the vote.
The MOTION PASSED (7-3).
CS HB 428 (FIN) was reported out of Committee with a "do
pass" recommendation and with a fiscal note by the
Department of Corrections and a zero fiscal note by the
Department of Revenue dated 2/05/96.
ADJOURNMENT
The meeting adjourned at 5:20 P.M.
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