Legislature(2025 - 2026)ADAMS 519
02/03/2025 01:30 PM House FINANCE
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| Audio | Topic |
|---|---|
| Adjourn | |
| Start | |
| Overview: Fy 26 Department Budget |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
HOUSE FINANCE COMMITTEE
February 3, 2025
1:33 p.m.
1:33:54 PM
CALL TO ORDER
Co-Chair Josephson called the House Finance Committee
meeting to order at 1:33 p.m.
MEMBERS PRESENT
Representative Neal Foster, Co-Chair
Representative Andy Josephson, Co-Chair
Representative Calvin Schrage, Co-Chair
Representative Jeremy Bynum
Representative Alyse Galvin
Representative Sara Hannan
Representative Nellie Unangiq Jimmie
Representative Will Stapp
Representative Frank Tomaszewski
MEMBERS ABSENT
Representative DeLena Johnson
Representative Jamie Allard
ALSO PRESENT
Eric DeMoulin, Administrative Services Director, Department
of Administration.
SUMMARY
OVERVIEW: FY 26 DEPARTMENT BUDGET
Co-Chair Josephson reviewed the meeting agenda.
^OVERVIEW: FY 26 DEPARTMENT BUDGET
1:35:04 PM
ERIC DEMOULIN, ADMINISTRATIVE SERVICES DIRECTOR, DEPARTMENT
OF ADMINISTRATION, introduced the PowerPoint presentation
"State of Alaska: Department of Administration" dated
February 3, 2025 (copy on file). He began on slide 2 and
explained that the Department of Administration's (DOA)
primary mission was to provide support services for the
rest of the executive branch, ensuring that agencies were
better equipped to serve Alaskans. The details of DOA's
structure were provided later in the presentation. He
advanced to slide 3 and detailed the historical budget
comparison. He noted that the majority of the funding
sources fell under the "other" category, which he would
explain in more detail during the Results Delivery Unit
(RDU) overviews. He noted that DOA was primarily funded
through the "other" category because it was a chargeback
agency. He reiterated that the main objective of DOA was to
provide services for other state departments. There was
also some unrestricted general funds (UGF) funding
allocated for legal and advocacy services statewide.
Representative Johnson asked what Mr. DeMoulin meant by the
term "chargeback."
Mr. DeMoulin responded that chargeback referred to the
process of billing other agencies for services provided.
Mr. DeMoulin continued to slide 4 which included a
breakdown of the budget by various fund categories. The
majority of the funding was categorized under other,
including the interagency receipt authority, which was the
amount charged to other agencies and departments for the
services DOA provided. He relayed that a large portion of
the funding for the Office of Information Technology (OIT)
came from the Information Services Fund (ISF), which was an
internal service fund at the state level.
Mr. DeMoulin continued to the RDU overview on slide 5. He
explained that most sections within DOA were designed to
provide services to other departments across the state. The
services provided included centralized administrative
services, shared services of Alaska, OIT, risk management,
and legal and advocacy services. The primary funding
sources for the units were interagency receipts or
designated general funds (DGF). All agencies were
considered chargeback agencies because they all charged
services out to other departments.
Co-Chair Josephson asked if the term "appropriation" was
synonymous with the term RDU.
Mr. DeMoulin responded in the affirmative.
1:38:05 PM
Representative Stapp asked if there was a specific item
driving the UGF increase from the FY 21 actuals to the FY
26 proposed budget. He noted that there was about a 30
percent difference in UGF. He asked if there was a
particular item causing the increase.
Mr. DeMoulin responded that the increase in UGF was
primarily driven by the legal and advocacy services
category and the increase in caseloads. He explained that
the department was requesting several positions in the
governor's FY 26 budget, such as a supervising attorney for
paralegal support. He relayed that the classification
section of the Department of Labor and Workforce
Development (DLWD) had determined that the guardian ad
litem positions were now eligible for overtime, which had
historically not been the case. The change was also
contributing to the cost increase in the general fund for
that year.
Representative Stapp asked for a rough estimate of the
caseload increase. He asked whether the increase was
substantial.
Mr. DeMoulin replied that he would need to consult with the
Director of the Office of Public Advocacy (OPA) to get the
specific increase in caseloads. He would follow up with the
information.
1:39:41 PM
Representative Hannan asked about the asterisk and footnote
on slide 5, which indicated that the RDU overview excluded
some divisions. She asked where she could find the overview
for the excluded Division of Motor Vehicles (DMV),
particularly because it was a significant revenue producer.
She was interested in seeing the DMV included in the RDU
overview.
Mr. DeMoulin responded that the RDU overview was strictly a
view of the budget and did not necessarily include
revenues. He noted that while DMV was a revenue center for
the state and fully funded through DGF receipts, there were
no significant budget changes from year to year. He relayed
that DMV had been omitted from the overview to avoid
cluttering the graph with units that had no substantial
changes.
Representative Hannan asked what was being done with DMV
receipts, other than funding the operation of DMV.
Mr. DeMoulin responded that the DMV receipts were
transferred directly to the general fund.
Co-Chair Josephson asked what the specific amounts of the
receipts were.
Mr. De Moulin responded that he would follow up with the
information.
Representative Bynum asked whether DOA reported the other
charges or intergovernmental charges it billed to other
departments as revenues. He wondered if the charges were
passed through to the general fund or if the charges were
recorded as expenses.
Mr. DeMoulin responded that interagency authority appeared
as revenue for DOA and the expense was reflected when other
departments made payments to DOA. He explained that
interagency authority had a unique structure in that the
expenditure portion was omitted from statewide expenditures
while the expenses were viewed on the departmental side.
1:42:15 PM
Mr. DeMoulin continued to slide 6 which outlined some of
DOA's recent accomplishments. He highlighted the successful
negotiation of several bargaining unit contracts during the
previous year within the Labor Relations (LR) component
within DOA. The department had also been able to implement
an intake portal for occupational injury reports through
the Division of Risk Management (DRM), which had proven to
be a valuable reporting tool for improving efficiencies.
The department had also been able to negotiate significant
savings regarding pricing through the Division of
Retirement and Benefits (DRB) for mid-market checks with
OptumRx and the pharmacy benefits. Additionally, he noted
that DMV was close to introducing mobile driver's licenses,
or e-driver's licenses, which would soon be available to
the public.
Co-Chair Josephson understood that the governor wanted to
move a number of positions from LR to the Department of Law
(DOL). He asked if he was correct.
Mr. DeMoulin responded in the affirmative.
Co-Chair Josephson asked how LR would be impacted by the
change. He asked what would remain behind after the
positions had been transferred.
Mr. DeMoulin responded that the situation had not yet been
fully flushed out, though some positions had already been
transferred to DOL from LR. He added that DOL and the DOA
Division of Personnel (DOP) were working together to
determine exactly what responsibilities and positions would
transfer. He clarified that much of the work was still in
progress, with both departments working on a clean handoff
to determine where responsibilities would lie, which duties
would remain, and which would be transferred.
Co-Chair Josephson asked whether attorneys would be
involved in negotiations.
Mr. DeMoulin replied that it seemed likely. He relayed that
attorneys had previously advised on contract negotiations,
and it was a reasonable assumption that attorneys would
participate moving forward.
Representative Stapp asked for more details on the third
bullet point on slide 6, which related to implementing
improved pricing through mid-market checks with OptumRx,
and an AlaskaCare Pharmacy Benefit Manager for employee and
retirement plans. He asked for further details on the item
and whether it would be beneficial or detrimental for DOA.
Mr. DeMoulin responded that he would need to defer to DRB
to provide more detailed information. He offered to provide
answers to any questions in writing.
Representative Hannan asked about the types of positions
that had been transferred to DOL. She asked how many
positions were attorneys and how many were not. She
wondered whether new attorneys would be hired into
positions that had previously been occupied by LR
specialists.
Mr. DeMoulin replied that he would need to defer to DOL to
detail the positions that had been transferred, but he
confirmed that the positions that had moved from LR were
not attorney positions. He would need to follow up with the
committee on the exact job titles but clarified that the
positions generally fell within Human Relations (HR) job
classifications.
1:46:43 PM
Representative Stapp commented that it would be helpful for
Mr. DeMoulin to include a brief overview of the items on
the slides.
Mr. DeMoulin understood the comment. He continued to slide
7 which detailed some of the increases and decreases to the
governor's FY 26 budget.
Representative Galvin asked Mr. DeMoulin to elaborate on
what he meant by expanding operations on slide 7.
Mr. DeMoulin responded that the department was looking at
providing additional administrative support for legal and
advocacy services. He elaborated that the support was based
on evaluating total caseloads, case counts, and the growing
administrative needs within the legal division, which were
reflected in the second bullet point on slide 7.
Representative Galvin asked if there were more cases now
than there had been in the past and whether the expansion
was intended to support the increase.
Mr. DeMoulin responded in the affirmative and confirmed
that OPA had seen an increase in cases. He added that OPA
did not employ case caps and it had been striving to become
fully staffed to provide the best services possible.
Representative Galvin noted that the second bullet point on
slide 7 mentioned expanding operations. She asked if there
would be a need for other attorney and staff positions to
support the expansion. She suggested that that additional
positions would be needed due to similar expansions and
needs within the department.
Mr. DeMoulin responded that the subsequent bullet points
outlined several positions and initiatives designed to
support the expansion. Some of the additional positions
that the department sought to fill were an Attorney IV
position to provide legal support and leadership within the
Public Guardian section, a paralegal support position, and
the conversion of a part-time HR position to a full-time
position to support payroll services. He noted that there
was also an increase in the budget in funding for the
Workiva accounting software, which the department used to
produce the statewide financial statements annually. The
additional funding was intended to add more functionality
and build efficiencies. Additionally, there were increases
for OPA related to lease costs for building upgrades. He
added that software costs were rising every year and the
department was renegotiating contracts with its enterprise
IT licenses.
Co-Chair Josephson highlighted the reversing of a one-time
case backlog contractor support, which appeared on the
right side of the slide. He asked which division was
impacted by the item.
Mr. DeMoulin replied that the contractor support related to
the legal department.
Co-Chair Josephson was concerned because OPA and the Public
Defender Agency (PDA) were facing significant challenges.
He questioned whether the department could manage with a
reduction of about $1.5 million in legal assistance
considering the delays in case processing.
Mr. DeMoulin responded that the decreases in the budget
were part of a point-of-process and that one-time
increments were not increases directly to the base budget.
He explained that the one-time increment was never part of
the department's base budget. He noted that the $1.4
million allocation was only available for one year as it
was a one-time increment. He relayed that reversing the
increment in the future would be a point of process during
the budget drafting process.
Co-Chair Josephson asked if the $1.4 million would be made
up for in the base budget.
Mr. DeMoulin replied, "not to the full extent." He
acknowledged that he was not involved in putting together
the one-time increase and was not aware of the specifics of
what made up the $1.4 million. He thought that some of it
was related to the additional personnel positions being
added within the legal services component.
Representative Galvin asked whether the backlog had been
fully resolved.
Mr. DeMoulin responded that he could not confirm that the
backlog had been fully resolved.
Representative Galvin askied if it would be possible to
investigate what would be required to clear the backlog.
She shared that constituents had reported to her that there
were long wait times on the phone and frequent
disconnections. She understood the issues were intended to
be addressed by the one-time increment. She asked whether
the funds would help resolve the difficulty individuals
were experiencing in receiving the assistance they needed.
She asked what it would take to fix the problem and
expressed that she would be happy to support the process in
any way possible.
Mr. DeMoulin asked if the backlog to which Representative
Galvin was referring was specific to the public guardians.
Representative Galvin replied that it was part of the
problem, but there were delays across the board and
recipients had trouble accessing all types of services. She
commented that the Supplemental Nutrition Assistance
Program (SNAP) and Women, Infant, and Children (WIC)
program were both experiencing disruptions.
Co-Chair Josephson commented that SNAP was under the
Department of Health (DOH).
Representative Galvin understood that SNAP was not under
DOA, but the backlogs were being experienced across the
board.
1:54:03 PM
Representative Hannan directed attention to the third
bullet under decreases, which referred to the reversal of
labor contract negotiations and arbitration for $146,000.
She asked whether the amount represented an increment for
DOL or if it was simply for the purpose of saving money for
DOA.
Mr. DeMoulin responded that the reversal of some items in
the budget were one-time adjustments and part of the
budgeting process. He clarified that he could not speak
directly to the resources being requested by DOL.
Representative Hannan asked for more information on the
reversal related to labor contract negotiations.
Mr. DeMoulin responded that LR had received multi-year
operating appropriations to hire external assistance as
needed for contract negotiations. He noted non-base budget
funds were utilized for the negotiations. Budget
corrections would need to be made in DOA's base budget
because the work was being moved to DOL and some of the
one-time funds would no longer be necessary.
Mr. DeMoulin continued to slide 8. He explained that the
next slides would outline the significant budgetary changes
for FY 26 and the services provided by various agencies
within DOA. He relayed that Administrative Services
provided services such as budget consultation, accounting
consultations, and business development work aimed at
building efficiencies in payroll. He noted that while
health and administrative services were primarily handled
by DRB, there was coordination between DRB and
Administrative Services. He remarked that Administrative
Services appeared to be relatively stable.
Mr. DeMoulin moved to slide 9 and the changes within the
Division of Finance. He explained that the division
provided statewide accounting services, managed enterprise
systems, and maintained the payroll systems IRIS and ALDER.
The division also handled payroll services for the state
and managed the central corporate travel management
contract, which included corporate travel services and
procurement cards through U.S. Bank.
1:57:13 PM
Mr. DeMoulin advanced to slide 10 and discussed DOP, which
provided statewide human resource services. He noted that
the division had been involved in labor union negotiations,
arbitration, and conflict resolution. The extent of the
division's continued involvement in the areas was still
being determined. He acknowledged that the most significant
budgetary change for DOP was the ongoing transfer of
positions to DOL. He did not know the exact number of
positions.
Co-Chair Josephson understood that the transferred
personnel would not necessarily be lawyers, but labor
negotiators housed under DOL.
Mr. DeMoulin responded in the affirmative.
Representative Hannan asked if all labor negotiators would
be transferred to DOL or whether the positions would exist
in both departments.
Mr. DeMoulin replied that the work was currently being done
collaboratively between the two departments. He was aware
of one DOL employee with extensive experience in contract
negotiations who was still involved in the process despite
the transfer. He relayed that while DOL would likely handle
labor negotiations in its entirety in the future, there
would be some overlap due to the natural transition. The
department would continue to support its sister agencies
during the period of change.
Co-Chair Josephson asked which agency was responsible for
monitoring or tracking the salary study report.
Mr. DeMoulin replied that DOL had initially contracted for
the salary study and that the classification managers
within the department were deeply involved in the project.
Co-Chair Josephson asked when the legislature would be able
to review the report.
Mr. DeMoulin responded that he did not have a specific date
or timeframe to share with the committee. He noted that
there had been a presentation on the report in the previous
week but he did not have any new information to provide.
Co-Chair Josephson asked whether the proposed release date
for the report had been set for late March of 2025.
Mr. DeMoulin responded in the affirmative.
1:59:57 PM
Representative Galvin asked how much funding the state
allocated for the report.
Mr. DeMoulin replied that the initial appropriation for the
study was $1 million.
Representative Galvin asked if there had been an additional
appropriation for the salary study.
Mr. DeMoulin responded that there had been no supplemental
appropriation.
Representative Galvin asked what was the original agreed
upon timeframe for the completion of the report.
Mr. DeMoulin replied that the initial time frame was to
receive some preliminary data by the end of the last fiscal
year, which was on June 30, 2024. The department had been
working with its contractor Segal to gather data for the
report by that date.
Representative Galvin noted that as of the current date,
the release of the report was already six months late.
Mr. DeMoulin stated that he was unsure of whether any
promises had been made regarding the final report's release
date. He shared that Segal was under contract with the
state to provide the report by June 30, 2024.
Representative Galvin asked whether it was common practice
for reports to be released six months to a year after they
were seen by the department.
Mr. DeMoulin responded that it was not a common practice
and it did not set a precedent. He noted that there were
many variables and inputs involved in creating a
statistically relevant salary study, especially for
policymakers who would rely on the data to make informed
decisions. The classification section worked extensively on
the study, which covered approximately 400 positions
statewide. He emphasized that conducting a salary study for
a single job class could be a lengthy process and the
comprehensive nature of the study across the state
contributed to the time required to complete it.
Co-Chair Schrage inquired whether the additional time taken
to complete the salary study was due to additional work
requested beyond the original scope. He asked if there
would be additional costs associated with the delay. He
expressed concern that if the study took twice as long, it
might result in double the cost.
Mr. DeMoulin responded that there would be no additional
cost, as the original appropriation of $1 million was still
sufficient to cover the work. He explained that the scope
of the contract was being refined, but no price overruns
were expected.
Co-Chair Foster asked for the name of the company
conducting the study.
Mr. DeMoulin confirmed that the company was Segal.
Co-Chair Foster asked if Segal would provide a report
explaining the significant delay in completing the study.
Mr. DeMoulin responded that he was uncertain whether a
narrative from Segal would be provided.
Co-Chair Schrage asked what changes in the scope of the
study had contributed to the delay.
Mr. DeMoulin replied that he was not directly involved in
the contract and could not speak to the specifics of the
changes, but he would follow up and provide more
information.
2:04:47 PM
Mr. DeMoulin continued to slide 11 and explained that there
were not many significant changes for DRB and that salary
adjustments were the primary budgetary change.
Co-Chair Josephson expressed concern about delays in
retirement reporting, particularly for teachers in the
Teachers' Retirement System (TRS) defined contribution (DC)
plan. He had spoken with multiple constituents who were in
Tier III and were retirement planning and concerned about
the delays. He explained that the districts were struggling
to forward the necessary revenue to accurately track
retirement contributions due to a security breach. He asked
for an update on the situation and what was being done to
remedy the issue. He asked whether affected individuals
were entitled to interest for the delay.
Mr. DeMoulin replied that there was a lot going around at
DRB in the aftermath of the breach, but the division was
working to resolve the situation. He noted that there had
been coordination with tax professionals and Empower, the
administrators of the retirement plans, to address the
breach. He anticipated that a plan of resolution would be
communicated later in the week. He relayed that the
resolution would likely be implemented in stages due to the
volume of work involved.
Representative Stapp understood that after the breach,
retirement payments were delayed up to 14 weeks. The delays
were particularly long for TRS members. He asked what the
current timeframe for retirees to receive their benefit
payments following retirement was. Additionally, he asked
for more information on the current processing times.
Mr. DeMoulin responded that DOA received updates from DRB.
He recalled that the goal was to process payments within
six weeks or less, which had been achieved.
Representative Stapp noted that there were no requests for
additional personnel within DRB. He asked whether Mr.
DeMoulin could guarantee the payments would be made within
the projected timeframe of six weeks going forward.
Mr. DeMoulin replied that he thought it was an attainable
goal. He remarked that DRB Director Kathy Lea had done a
great job at reducing vacancies and changing organizational
structures to allocate resources properly in order to meet
the deadline.
Representative Stapp relayed that he wanted to make sure
that the standard would be continuously met going forward.
He asked if Mr. DeMoulin was confident that future
retirement payments would be timely.
Mr. DeMoulin responded in the affirmative. He could not
make any guarantees, but he was highly confident that the
goal would be met.
2:09:18 PM
Co-Chair Schrage asked whether retirees who had experienced
delayed contributions would be entitled to interest
payments. He asked if a decision had been made about the
payments.
Mr. DeMoulin stated that he was not able to speak to the
decision as it was beyond the scope of his job. He
emphasized that the division was focused on taking care of
employees statewide.
Representative Bynum asked for clarification on the
communication plan regarding the retirement issue. He asked
what the form the communication would be in and who it
would be distributed to.
Mr. DeMoulin responded that communication would be sent out
soon, but he was uncertain about the specific audience or
format. He thought it might come in the form of a
communication resolution. He knew that many people were
impacted by the decision.
Mr. DeMoulin advanced to slide 12 and explained that Shared
Services of Alaska provided centralized processing services
across departments, including accounts payable, travel,
debt recovery, procurement, and print and mail services.
Representative Tomaszewski asked whether each department
had its own accounting system.
Mr. DeMoulin responded that that all departments and the
executive branch used the same IRIS accounting system,
although some state corporations used proprietary systems.
Mr. DeMoulin moved to slide 13 and explained that OIT was
responsible for enterprise-level IT services, including
information security, service management, communications
connectivity, enterprise applications, and centralized data
center support.
Representative Tomaszewski asked if OIT was responsible for
statewide IT.
Mr. DeMoulin responded that OIT handled the enterprise-
level services. Each department across the state had its
own proprietary systems and oftentimes had bespoke IT
needs.
2:12:43 PM
Mr. DeMoulin continued on slide 14 and the Risk Management
section, which focused on managing the state's self-
insurance risk and included claims processing, litigation
management, contract review, insurance administration, and
consulting. He noted that a significant change from the FY
25 management plan to the governor's FY 26 budget was a
reduction of $967,000 in the state insurance capacity
reserve account. He added that the Catastrophe Reserve
Account (CRA) had grown, which had been made possible
through year-end general fund sweeps.
Co-Chair Josephson asked whether a reduction had been made
from the $50 million allocated for CRA.
Mr. DeMoulin replied that no reduction had been made from
the $50 million to CRA. He explained that the $967,000
reduction referred to the reversal of the four-year state
insurance reserve account, which was separate from CRA. The
funds had been built into the reserve account to address
the specific appropriation, while CRA remained intact.
Representative Hannan asked why $967,000 was being
withdrawn instead of leaving it in the account.
Mr. DeMoulin responded that the withdrawal was related to
one-time budgetary items, specifically the four-year state
insurance catastrophe account. He indicated that the
department had already addressed the issue on a larger
scale by increasing the total balance of CRA, which had
$250 million cumulatively.
Representative Hannan understood that the $967,000 would
return to the general fund.
Mr. DeMoulin responded in the affirmative.
Mr. DeMoulin continued on slide 15, which addressed legal
and advocacy services. The services included public
guardianship, elder fraud prevention, guardian ad litem
positions, and services for children in need of aid,
commonly referred to as the "CINA" cases, court-appointed
special advocates, and PDA as a whole. He explained that
some of the significant budget changes included expanding
leadership positions and administrative support and
allowing guardian ad litem positions to qualify for
overtime pay, which had not been budgeted for previously.
The department had been monitoring the additional costs
associated with making the positions overtime eligible.
Additionally, the department was examining the cost of
increasing office spaces to accommodate additional staff.
Co-Chair Josephson noted that there appeared to be a
discrepancy between the budgetary needs reflected on slide
15 and the reversal of one-time contractor support shown on
slide 7. He understood that OPA had long relied on
contractor support, with private attorneys being hired for
additional cases or to handle conflicts. He noted that
slide 15 illustrated the need for about $1 million to pay
for personnel, while there was a lack of need indicated on
slide 7.
2:17:10 PM
Mr. DeMoulin replied that the one-time increments were
technical budget items and agreed that Director James
Stinson of OPA might express a desire for additional
funding.
Mr. DeMoulin continued on slide 16 which detailed the
requests for DMV. Major services provided by DMV included
licensing, registration, and titling services, providing
commercial driver's licenses, training resources, crash
data, real IDs, and screening for fraudulent activity. One
of the significant budget changes for DMV was the addition
of a new analyst programmer position. The need was driven
by an increasing workload within the DMV's IT department,
which was handling over 100 IT projects, including system
updates, upgrades, and security patching. The workload had
significantly increased, prompting the need for an
additional IT position within the organization.
Co-Chair Schrage asked why the new position was being
funded as a one-time increment given the temporary nature
of the increased workload.
Mr. DeMoulin responded that IT support was dependent upon
the nature of the projects and the breakdowns. He noted
that the timeline for IT projects was often indicated to
start at implementation and end at fruition. He explained
that IT support was a lesser burden. He relayed that it
depended upon the project and the scope, and the projects
would not necessarily continue into perpetuity.
Co-Chair Schrage asked if it would be reasonable to ask Mr.
DeMoulin to provide a list of the ongoing IT projects along
with the expected completion dates. He asked for more
information regarding the shift towards mobile or digital
IDs, what was driving the change, and why it was being
prioritized at this time. He remarked that there was no
federal mandate to make the shift and he thought it seemed
like an increased workload during a time at which the state
did not have extra capacity.
Mr. DeMoulin responded that the shift towards issuing
digital driver's licenses and IDs had been a priority for
both the commissioner's office and the governor's office.
He also indicated that he was unsure about the scope of the
workload involved in the project, though it would be a
valuable service for Alaskans and provide greater
efficiency and convenience. He noted that DOA was working
with a contractor to help facilitate the project but he was
uncertain of its direct impact on the need for the
additional IT position.
Co-Chair Schrage commented that while having access to
digital IDs would be convenient, he was not sure it should
be a high priority given the state's current financial
constraints.
2:20:45 PM
Co-Chair Foster remarked that he had initially assumed that
mobile ID referred to the unit that traveled to rural
Alaska to assist individuals in obtaining their IDs,
particularly considering the upcoming deadline for
obtaining Real IDs. He asked for an update on the program.
Mr. DeMoulin confirmed that the program was not the same as
the mobile ID initiative, but DMV could provide more
details. He would follow up with more information.
Representative Galvin remarked that the deadline for
compliance with the Real ID initiative had been pushed back
multiple times, with the current deadline set for May 7,
2025. She asked whether the increased workload within the
DMV was related to the effort to ensure that all Alaskans
received an ID that would allow them to travel domestically
in compliance with Real ID requirements. The issue had been
brought up by several of her constituents, and she wanted
to confirm that the state was on track to meet the needs of
all its residents.
Representative Hannan asked whether the new digital IDs
would be recognized by federal authorities as a Real ID.
She asked whether the electronic version of a Real ID would
meet federal requirements, particularly for those who
already possessed a Real ID and were seeking a digital
version.
Mr. DeMoulin responded that he understood that there were
some validation tools that would need to be in place at
places like airports. He understood that TSA recognized
digital IDs as a valid form of identification. He thought
the implementation would begin at the Ted Stevens Anchorage
International Airport.
2:23:40 PM
Mr. DeMoulin continued on slide 17, which focused on the
department's vacancy counts. He acknowledged that vacancy
rates had been a recurring topic of conversation and
provided some context regarding DOA's staffing changes. He
explained that the department experienced frequent
transfers in and out, depending on the services being
provided or if responsibilities were shifted back to other
departments. He noted that recent changes included the
return of recruitment services and IT help desk positions
to their respective divisions, which led to fluctuations in
the total number of positions across the department. The
shifting dynamic meant that the number of positions grew or
shrank based on statewide initiatives and the denominator
for vacancy rates also changed, which impacted the overall
vacancy percentage. He indicated that DOA's vacancy rate
was not solely based on percentage but also on the gaps in
budgeted positions.
Co-Chair Josephson asked where payroll was housed.
Mr. DeMoulin responded that the Division of Payroll
[Payroll Section] was part of the Division of Finance,
which fell under the Central Administrative Services
component. He skipped ahead to slide 19 which provided a
breakdown of vacancy rates by RDU. He noted that the
Division of Finance currently had a vacancy rate of 32
percent, but the payroll section specifically was facing a
significantly higher vacancy rate of 46 percent. The
increased vacancy rate was largely due to the ongoing
staffing challenges in the payroll unit, which had been
struggling with vacancies for the past two years.
Co-Chair Josephson asked whether the payroll division was
still relying on outside contractors to manage the
workload.
Mr. DeMoulin replied that the payroll division was no
longer using contractors to handle payroll tasks. Instead,
the division had digitized the process, which had
introduced efficiencies over the past year. The digital
transformation had replaced the previous paper-based system
for processing Notice of Pay Problems (NOPPs). The old
system of submitting NOPPs on paper and printed out was
inefficient, especially given the high volume of inquiries
caused by staffing shortages. As part of the new system,
the department had implemented a ticketing system to manage
and resolve issues. He stated that there were currently
over 3,000 tickets in the system. Not all of the tickets
were formal NOPPs and the number included various types of
payment inquiries. Specifically, there were 708 formal
NOPPs that currently needed to be addressed.
2:27:00 PM
Representative Stapp asked about the trends in premium and
overtime pay within the DOA's RDU components from FY 24 to
FY 25.
Mr. DeMoulin responded that overtime in payroll had been
higher in FY 24 compared to previous years, primarily due
to staffing shortages and the resulting increased workload.
Representative Stapp asked whether the department was
experiencing a decrease in overtime across all of its
components considering that the vacancy rate for FY 25 was
lower than FY 24. He remarked that fewer vacancies
typically meant less overtime. He asked if overtime hours
were up across the board or only in payroll.
Mr. DeMoulin responded that rates were up only in payroll.
He did not think there was a drastic increase or decrease
in other areas of the department.
Representative Galvin asked for confirmation that the
payroll vacancy rate within the department was 46 percent.
Mr. DeMoulin responded in the affirmative.
Representative Galvin expressed significant concern about
the ongoing vacancy issues within DOA, particularly in
light of the wage study that had been requested over a year
ago. She noted that the study was intended to evaluate
whether the state was competitive with industry standards
and help address the underlying causes of vacancies. She
questioned whether the study would be relevant given the
time lapse. She suggested that rather than spending $1
million on the study, the state could have simply increased
wages, which could have potentially reduced the vacancy
rate. She was also concerned about whether enough attention
was being given to solving the problem and she asked
whether there was anything the legislature could do to
assist in addressing the issues.
Mr. DeMoulin responded that the concerns were valid. He
explained that the salary study and adjusting pay rates
were small components in addressing vacancies. While he
agreed that increasing pay could help fill vacancies, there
were risks of paying above the established pay rates for
certain positions, which could create issues of fairness
and consistency. He stressed that efficiency improvements
were another crucial element in managing vacancies and
addressing staffing needs. For example, the Division of
Finance had undertaken several initiatives to streamline
processes and reduce the need for additional personnel,
such as automating the approval processes for low-risk
timesheets and the implementation of a system to digitize
and index paper documents. The improvements would allow
staff to handle cases more efficiently and reduce the time
spent searching through physical files. The digitization of
documents such as NOPPs was a key step in improving
efficiency. By digitizing the paperwork and allowing it to
be queried by employee ID, the division hoped to eliminate
the time-consuming task of manually searching through
thousands of physical documents. Such changes would speed
up the resolution of issues and reduce the burden on staff,
which would address some of the underlying causes of
vacancies.
Representative Galvin asked how many positions were
represented by the 46 percent vacancy rate.
Mr. DeMoulin responded that the 46 percent vacancy rate
equated to approximately 30 vacant positions in payroll.
Representative Galvin asked whether the goal of the
division's efficiency efforts was to eliminate the need for
the 30 positions.
Mr. DeMoulin replied that the goal was not necessarily to
reduce the number of positions, but to ensure that the
department could adequately staff the existing positions by
improving efficiency. Some of the efficiency initiatives
might reduce the need for high numbers of staff members in
certain areas, but other departments and tasks could also
benefit from redeploying resources. The focus was on
optimizing the existing workforce while continuing to
address vacancies as effectively as possible.
Representative Galvin asked if there was any other
department that was experiencing similar vacancies.
Mr. DeMoulin responded that he did not know offhand.
2:33:08 PM
Co-Chair Josephson asked if payroll was provided for public
health nurses.
Mr. DeMoulin confirmed that payroll was handled for DOH.
Representative Bynum asked whether the 2025 vacancy figures
included additional positions that were added in 2024 and
had not yet been filled.
Mr. DeMoulin responded in the affirmative.
Co-Chair Schrage relayed that he was concerned about the
payroll issues. He had worked for a construction company
where he found out firsthand how important it was to pay
employees correctly and on time. He was alarmed by the 46
percent vacancy rate and asked whether the system
improvements and initiatives would resolve the payroll
issues in the next year or if they would merely serve as a
temporary fix to reduce errors and delays.
Mr. DeMoulin responded that he understood there was a loss
of confidence in the system and that payroll was one of the
most sensitive issues for employees. He explained that
significant progress had been made in identifying and
addressing inefficiencies. He was working on an analysis of
the collective bargaining agreements and payroll
complications to streamline processes and restore trust. He
noted that he had been meeting with unions to address the
issues directly and expressed confidence that the
improvements made so far were leading to tangible progress.
He could not offer a definitive timeline for resolving the
issues as the process of implementing new systems and
gathering data to track progress was ongoing. The new
applications were rolling out in the coming week, and he
hoped to share the timeline soon. He acknowledged that
addressing the backlog was a priority and offered
reassurance that the department was actively working on a
strategic plan to ensure that the payroll issues would not
resurface in the future.
Co-Chair Schrage remarked that he was glad to hear that
eradicating the backlog was Mr. DeMoulin's goal. He asked
if the implementation of new systems and efficiencies would
be enough to resolve the issue, or if the vacancy rate
would still need to be addressed in order for payroll to
function well.
Mr. DeMoulin responded that he was not fully equipped to
answer the question. He thought that the solution would
likely be a combination of both approaches. He explained
that it was possible that more could be done with fewer
resources as efficiencies were built. However, he could not
provide a precise definition of what "less" would look like
at the current moment. He added that even if employees were
relieved from their current paper-based processes and
manual timesheets, there would still be a need to enhance
services in other areas. The services might involve
allocating resources to quality assurance or other
necessary tasks. He noted that currently, many resources
were focused on validating inputs on a day-to-day basis.
The goal was not necessarily a reduction in positions, but
rather to increase efficiency, improve accuracy, and
provide better service to Alaskans.
Co-Chair Schrage appreciated that large strides were being
made, but he was not sure that the issue would be resolved
solely through efficiencies and new applications. He
stressed that the vacancy rate needed to be addressed. He
thought that the state should address the issue with the
same urgency as a small business would in similar
circumstances. He was concerned that the seriousness of the
issue was not understood. He agreed with Representative
Galvin that higher pay would help address the issues. The
lack of information about appropriate wages was a
significant concern, as it contributed to uncertainty
regarding timely pay and the associated vacancy rate issues
across various state departments. He reiterated that the
vacancy rate should be a central focus.
Mr. DeMoulin replied that despite a vacancy rate exceeding
40 percent, the payroll team had consistently processed
99.8 percent of payroll on time. The team's accomplishment
was particularly impressive given the team's staffing
shortages and lack of adequate tools. He emphasized that
the staff had been working hard and had achieved a high
level of efficiency, even without the necessary resources.
He was confident that ongoing improvements would continue
to support their efforts.
2:41:10 PM
Representative Hannan shared that when she met with payroll
employees the previous year, the employees had expressed
concerns not only about the vacancy rate but also about the
complexity of the job. Working in payroll was more complex
than it appeared. She requested additional longitudinal
data on employee tenure, specifically the number of
employees who had been in their positions for more than one
year, five years, and up to ten years. She believed that
the lack of experienced employees with knowledge of the
nuances of the system contributed to inefficiencies and it
typically took about a year for new employees to become
fully functional in these positions. She asked for
information on whether employee retention had improved and
whether the state had been able to keep new hires long
enough to advance them through the state's step process.
Mr. DeMoulin responded that he had a detailed payroll
presentation prepared and would be happy to present it to
the committee at a later date. He added that he would be
presenting on payroll in the House State Affairs Committee
later in the week.
Co-Chair Josephson looked forward to the department's
responses to the committee's questions.
Representative Stapp commented that it seemed like payroll
was functioning well, except for the small 0.2 percent of
individuals who had not received their paychecks on time.
However, he thought that the steps taken so far appeared to
be mitigating the problem. He thought the situation must be
moving in a positive direction because there had been no
requests for additional funding or budgetary support. He
asked what should be done if the problem worsened rather
than improving, despite the steps that had been implemented
and the absence of any requests for additional resources.
Mr. DeMoulin responded that he was unsure how to answer
Representative Stapp's question. He noted there was indeed
an ask related to payroll in the capital budget, which he
believed would help improve the situation in the future.
The capital request involved a more robust time and
attendance system designed to address several challenges
that made payroll processing difficult for staff. He
explained that one of the significant issues was the large
number of rules related to various bargaining unit
contracts that needed to be adhered to. Navigating the
complicated system was especially challenging given that
many payroll positions were entry-level. He acknowledged
that it would take time to build the efficiencies necessary
to process the contracts. He emphasized that the key to
solving the challenges was providing staff with the
necessary tools, and that was the purpose of the capital
ask.
Representative Stapp asked for confirmation from Mr.
DeMoulin that the payroll situation would improve
significantly if the capital appropriation was funded and
implemented.
Mr. DeMoulin confirmed that he expected the situation to
improve significantly if the capital appropriation was
funded and implemented. He acknowledged that while the
request was based on the best estimates available, he could
not guarantee that it would address all the state's needs.
He offered reassurance that the appropriation would put the
state in a more positive position.
2:46:00 PM
Representative Jimmie understood there were payroll
processing issues related to missing payments and revised
administrative processes in other departments. She asked
for more information about the processes involved and asked
which department was responsible for addressing the issues.
Mr. DeMoulin asked for clarification from Representative
Jimmie on whether she was referring to union dues.
Representative Jimmie responded that she was unsure.
Mr. DeMoulin responded that many dues were opt-in or opt-
out, and he could not speak to the details without further
information.
Co-Chair Josephson suggested that Representative Jimmie
follow up offline for further clarification.
2:47:26 PM
Co-Chair Josephson reviewed the agenda for the following
day's meeting.
ADJOURNMENT
2:47:54 PM
The meeting was adjourned at 2:47 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HFIN DOA Budget Overview Presentation 2.3.25.pdf |
HFIN 2/3/2025 1:30:00 PM |
HB 53 |