Legislature(1997 - 1998)

02/23/1998 03:21 PM House L&C

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
    HOUSE LABOR AND COMMERCE STANDING COMMITTEE                                
                 February 23, 1998                                             
                     3:21 p.m.                                                 
MEMBERS PRESENT                                                                
Representative Norman Rokeberg, Chairman                                       
Representative John Cowdery, Vice Chairman                                     
Representative Bill Hudson                                                     
Representative Jerry Sanders                                                   
Representative Joe Ryan                                                        
Representative Tom Brice                                                       
Representative Gene Kubina                                                     
MEMBERS ABSENT                                                                 
All members present                                                            
COMMITTEE CALENDAR                                                             
* HOUSE BILL NO. 347                                                           
"An Act relating to an exemption from overtime wage requirements               
for certain motor vehicle mechanics."                                          
     - HEARD AND HELD                                                          
* HOUSE BILL NO. 400                                                           
"An Act combining parts of the Department of Commerce and Economic             
Development and parts of the Department of Community and Regional              
Affairs by transferring some of their duties to a new Department of            
Commerce and Rural Development; transferring some of the duties of             
the Department of Commerce and Economic Development and the                    
Department of Community and Regional Affairs to other existing                 
agencies; eliminating the Department of Commerce and Economic                  
Development and the Department of Community and Regional Affairs;              
relating to the Department of Commerce and Rural Development;                  
adjusting the membership of certain multi-member bodies to reflect             
the transfer of duties among departments and the elimination of                
departments; and providing for an effective date."                             
     - HEARD AND HELD                                                          
(* First public hearing)                                                       
PREVIOUS ACTION                                                                
BILL: HB 347                                                                   
SPONSOR(S): REPRESENTATIVES(S) COWDERY                                         
Jrn-Date    Jrn-Page           Action                                          
01/23/98      2118     (H)  READ THE FIRST TIME - REFERRAL(S)                  

01/23/98 2118 (H) LABOR & COMMERCE 02/23/98 (H) L&C AT 3:15 PM CAPITOL 17 BILL: HB 400 SHORT TITLE: DEPT OF COMMUNITY & ECONOMIC DEVELOPMENT SPONSOR(S): REPRESENTATIVES(S) KOHRING, Austerman, Barnes, Cowdery, Hodgins, Kelly, Mulder, Ogan, Ryan, Therriault, Vezey Jrn-Date Jrn-Page Action 02/12/98 2307 (H) READ THE FIRST TIME - REFERRAL(S) 02/12/98 2308 (H) L&C, FINANCE 02/23/98 (H) L&C AT 3:15 PM CAPITOL 17 WITNESS REGISTER MARCO PIGNALBERI, Legislative Assistant to Representative John Cowdery Alaska State Legislature Capitol Building, Room 416 Juneau, Alaska 99801 Telephone: (907) 465-3879 POSITION STATEMENT: Presented HB 347. MONTE JORDAN, Supervising Investigator Wage and Hour Section Division of Labor Standards and Safety Department of Labor 675 7th Avenue, Station J-1 Fairbanks, Alaska 99701 Telephone: (907) 451-2886 POSITION STATEMENT: Answered questions on HB 347. STEVE ALLWINE, Vice President Alaska Auto Dealers Association 2180 Fritz Cove Road Juneau, Alaska 99801 Telephone: (907) 789-1386 POSITION STATEMENT: Testified in support of HB 347. JAMES D. HINES, auto technician Mendenhall Auto Center 8725 Mallard Avenue Juneau, Alaska 99801 Telephone: (907) 789-1386 POSITION STATEMENT: Testified in support of HB 347. SCOTT HANCOCK, auto technician Saturn of Anchorage 720 East 9th Avenue Anchorage, Alaska 99501 Telephone: (907) 272-4022 POSITION STATEMENT: Testified in support of HB 347. JIM SLOAN, auto technician Eero Volkswagen of Anchorage, Incorporated 935 Gambell Street Anchorage, Alaska 99501 Telephone: (907) 272-5522 POSITION STATEMENT: Testified in support of HB 347. STAN PETITO, Service Manager Cal Worthington Ford of Alaska, Incorporated 1950 Gambell Street Anchorage, Alaska 99501 Telephone: (907) 276-5300 POSITION STATEMENT: Testified in support of HB 347. RICK MORRISON Alaska Auto Dealers Association; Eero Volkswagen of Anchorage, Incorporated; Saturn of Anchorage 935 Gambell Street Anchorage, Alaska 99501 Telephone: (907) 272-5522 POSITION STATEMENT: Testified in support of HB 347. DON ETHERIDGE Alaska State Chapter, AFL-CIO; District Council of Laborers 710 West 9th Street Juneau, Alaska 99801 Telephone: (907) 586-3707 POSITION STATEMENT: Testified against HB 347 on behalf of the AFL-CIO, but noted they are working with the AADA and the Department of Labor. DWIGHT PERKINS, Special Assistant Office of the Commissioner Department of Labor P.O. Box 21149 Juneau, Alaska 99802-1149 Telephone: (907) 465-2700 POSITION STATEMENT: Provided department position on HB 347. REPRESENTATIVE VIC KOHRING Alaska State Legislature Capitol Building, Room 421 Juneau, Alaska 99801 Telephone: (907) 465-2186 POSITION STATEMENT: Sponsor of HB 400. MIKE KRIEBER, Legislative Administrative Assistant to Representative Vic Kohring Alaska State Legislature Capitol Building, Room 421 Juneau, Alaska 99801 Telephone: (907) 465-6863 POSITION STATEMENT: Answered questions on HB 400. MIKE IRWIN, Commissioner Department of Community and Regional Affairs P.O. Box 112100 Juneau, Alaska 99811-2100 Telephone: (907) 465-4700 POSITION STATEMENT: Provided department position on HB 400. VICKI L. HEALY P.O. Box 876287 Wasilla, Alaska 99687 Telephone: (907) 373-3736 POSITION STATEMENT: Testified as a Head Start Program parent with concerns about HB 400. ACTION NARRATIVE TAPE 98-16, SIDE A Number 0001 CHAIRMAN NORMAN ROKEBERG called the House Labor and Commerce Standing Committee meeting to order at 3:21 p.m. Members present at the call to order were Representatives Rokeberg, Cowdery, Hudson and Ryan. Representative Brice arrived at 3:23 p.m., Representatives Kubina and Sanders arrived before 3:30 p.m. HB 347 - OVERTIME WAGE EXEMPTION FOR MECHANICS Number 0104 CHAIRMAN ROKEBERG announced the committee's first order of business was HB 347, "An Act relating to an exemption from overtime wage requirements for certain motor vehicle mechanics." REPRESENTATIVE JOHN COWDERY, the bill sponsor, stated his staff would present HB 347. HB 347 read: * Section 1. AS 23.10.060(d) is amended by adding a new paragraph to read: (17) work performed by a mechanic primarily engaged in the servicing of motor vehicles if the mechanic is employed as a flat-rate mechanic by a nonmanufacturing establishment primarily engaged in the business of selling or servicing motor vehicles; in this paragraph, "motor vehicles" does not include boats or aircraft. * Sec. 2. The amendment to AS 23.10.060(d) made by sec. 1 of this Act applies to work first performed on or after the effective date of this Act. Number 0117 MARCO PIGNALBERI, Legislative Assistant to Representative John Cowdery, came forward to present some background information on HB 347. He stated, speaking from a prepared statement which was distributed to the committee members: This bill is necessary to allow flat-rate mechanics, their employers and consumers, to be certain about the price of a particular repair job, whether or not that job extends into overtime. In current practice, a flat-rate mechanic is compensated on the basis of a percentage of the hourly shop rate. The flat-rate mechanic provides the skill and maybe the specialized tools to do the job. The employer provides the garage and the overhead expenses. If the flat-rate mechanic takes 8 hours or less to complete a job there is no problem. However, if it takes more than 8 hours then the overtime law is triggered. Alaska's overtime law requires flat-rate mechanics' compensation to be based on a complex hourly rate formula that vitiates the flat-rate concept. This is the fundamental reason for HB 347. Hourly compensation and flat-rate compensation are fundamentally different animals and do not mix. Flat-rate compensation cannot and should not be converted to hourly compensation. This legislation will bring our state statute in line with the federal statute by exempting flat-rate mechanics from overtime requirements. The federal law recognizes the uniqueness of flat-rate compensation and therefore exempts flat-rate mechanics. The language in the federal law is found at Title 29 of U.S. Code Section 213, subsection (10)(A) where it says: "Any salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles, trucks, or farm implements, if he is employed by an nonmanufacturing establishment primarily engaged in the business of selling such vehicles or implements to ultimate purchasers;". Number 0269 Now HB 347 does not apply to partsmen. It is mechanic specific to the mechanics who work in nonmanufacturing establishments that sell or service motor vehicles, but not boats or aircraft. Alaska's overtime pay requirement is stricter than the federal government's. The federal requirement is that overtime pay be paid ... after 40 hours of work per week. Alaska's requirement is that overtime pay be paid after 40 hours per week and after 8 hours per day. Flat-rate mechanics are exempt from the federal requirement. HB 347 will exempt them from both the weekly and the daily overtime requirements in Alaska law. For example, in Day 1 in the work life of Bob, the flat- rate mechanic, if he does a job for 10 billable hours and does it in 9 hours, his agreement with his shop owner is that he gets ... 40 percent of the shop rate, if we say the shop rate is $60 per hour. Current law requires that Bob's compensation be calculated as follows and you'll see on page 1 of the testimony, the table [Mr. Pignalberi referred to Table 1 in his written statement], that you have to go through all the steps in each one of these columns to determine what Bob's compensation is for that particular job. Number 0367 A problem exists in that a daily calculation is just that, it's a daily calculation that is only good for one day. It changes each day whenever there's a variance in the number of hours worked, or in the daily flat-rate total. Any variation in either the length of the work day, or the flat-rate mechanic's daily earnings, will change the effective pay rate and thus the overtime rate. On Day 2, look at what happens if another customer comes in with exactly the same 9-hour job. Say the mechanic has already worked a 3-hour job before he starts on the new 9-hour job. ... The table [Table 2] there will show that the total compensation due the mechanic was different than he got for the same job on Day 1, it's $40 more. Now current Department of Labor rules require the calculation of an effective hourly rate on a cumulative, weekly basis. The flat-rate mechanic's compensation for the very same work will differ if his pay is calculated on a two-day work week vis- -vis, say, a five-day work week. Now this calculation assumes that the flat-rate mechanic will work no more the rest of the week. If he works more, then the effective hourly rate and hence the overtime rate will change. This situation prevents the employee and employer from knowing what is each day's compensation because it depends on knowing the exact amount of work for the whole week in advance. For example, the compensation for a job completed on Wednesday will differ depending on whether the employee is paid on that Wednesday or whether he works additional days that would cause the calculation of Wednesday's compensation to change. The law forces absurdity, which is probably why the federal government provides the exemption. Number 0498 Now to progress to the third day in this hypothetical life of Bob the flat-rate mechanic, no flat-rate jobs were available that day, they didn't come in, and he stands by for 10 hours, and he has a standby rate of $12 per hour. Now we simply do that calculation in the table [Table 3] so that we'll be able to see how it affects his overall weekly total at the end of Day 6. Now this Day 3 table shows Bob's compensation as if it was a stand-alone day. However, if Bob got sick and didn't work Day 4 and didn't work Day 5, then his pay would have to be calculated differently [Table 3A]. It is absurd that the flat-rate mechanic's compensation for a given day's work should differ depending on what work was performed on other days of the week. But, that's the situation inflicted by the current statute. On the fourth day, the flat-rate mechanic works three identical flat-rate jobs of three hours each. The first job's flat rate is $72, as you'll see in Table 4. The second job's flat rate is also $72. The third job cannot be charged $72 because there is an ... hour of overtime included. The overtime hour triggers the Department of Labor's conversion formula from flat-rate to hourly calculation, hence the third job must be charged two hours of straight time and one hour at an overtime rate for a total job cost of $84, whereas the other jobs were $72. Under the flat-rate mechanic concept, all three consumers would have paid the identical price for the identical job. However, the statute vitiates the flat- rate concept and requires the flat-rate mechanic's compensation to be converted to hourly, overtime rates. Number 0615 Then on the fifth day in our hypothetical example, we have an 11-hour repair which is done in 8 hours but no overtime is due because ... he only worked 8 hours and did not yet trigger the 40-hour weekly overtime [Table 5]. Finally on the sixth day a job comes in that is identical the job that came in on the first day. Again, the ... overtime statute is triggered. The job that cost $253 on the first day cost $356 on the sixth day. [Mr. Pignalberi noted Table 6 had not copied on the written statement, but he referred the committee to the bottom of the next page, where it said "Day 6," noting the bottom table had the same numbers.] ... The final table is a combination of the six days of work activity that I've just described. You will note that the effective hourly rate changes each day because it is based on the cumulative hours and pay from previous days of the week. Also, the overtime rate changes because it is a function of the effective hourly rate. Consequently, it's impossible for an employer and a flat- rate mechanic to know, in advance, the exact amount of compensation due at the end of any day or week. As a result, most of the employers of flat-rate mechanics simply restrict them from working overtime to avoid confusion and the attendant liability of violating the law. Current state statute requires conversion of flat-rate agreements between the employers and their flat-rate mechanics, conversion to an hourly rate. This is akin to trying to convert a cat into a dog. You can force an operation and move around the parts but you only end up with a freak, and the current law is a freak. It scares employers. It deprives flat-rate mechanics of the opportunity to work. HB 347 corrects the situation by separating flat-rate compensation from the statute governing hourly and overtime pay. Number 0755 MR. PIGNALBERI stated he would be happy to answer any questions and noted the presence via teleconference of Ms. Monte Jordan from the Department of Labor (DOL) in Fairbanks to assist with any technical questions regarding the formula. Number 0765 REPRESENTATIVE COWDERY noted Mr. Pignalberi had worked pretty extensively with this and asked Mr. Pignalberi if he really understood what he had just said. Representative Cowdery asked if, in Mr. Pignalberi's opinion, the average person in the DOL understood it. Number 0782 MR. PIGNALBERI responded that there were only a couple of people specialized in the DOL who knew how this formula worked through its various permutations. He said, of the six tables mentioned, they had probably done 70 or so iterations and many of them differed. He said they finally had these verified by the DOL that morning. Mr. Pignalberi stated, "So it's ... more complex than even I could portray to you, because every day the situation is somewhat different. ... It's more than any employer or employee would want to deal with." Number 0815 CHAIRMAN ROKEBERG noted the attendance of Representative Sanders, Representative Brice and Representative Kubina. He commented that it would be much easier for the committee to decipher the formula if they would have had it the previous Friday. Number 0831 REPRESENTATIVE COWDERY responded that they hadn't gotten the formula down themselves until a matter of minutes ago, noting they had worked both Saturday and Sunday. Representative Cowdery displayed a copy of what he called the flat-rate parts guide (Motor parts and time guide), noting it was a 1995 version. He stated this was a standard most shops, small and large, used. Representative Cowdery stated hourly and parts rates were given for any job - brakes, motor, transmission, for example - so that estimates could given to customers when they came in. He said, from his experience in this business using this book, that any seasoned mechanic could beat this book. For a ten-hour job, he would say a seasoned mechanic could do it in less time, in the seven to eight-hour range, commenting he hoped some mechanics were present who could testify to that fact. Representative Cowdery said the book was available for the committee's perusal, noting he had some pages marked. He commented that this was also the "bible" the automobile factories used for jobs done under factory warranty. Number 0936 REPRESENTATIVE TOM BRICE asked if a consumer was charged for ten hours if a job estimated at ten hours by this took only nine hours. Number 0945 REPRESENTATIVE COWDERY answered in the affirmative. Number 0955 MR. PIGNALBERI stated this bill was not about what the consumer is charged, it's only about the way to determine compensation for the flat-rate mechanic. Number 0967 REPRESENTATIVE JOE RYAN noted, for the edification of committee, he knew from a friend who was an orthopedic surgeon that orthopedic surgeons use a similar book to determine charges for operations. Number 0990 REPRESENTATIVE BILL HUDSON asked Representative Cowdery who published the book Representative Cowdery was referring to, and if it was for Alaska. Number 0995 REPRESENTATIVE COWDERY responded that there were several, indicating it was a national publication. He said he had some dating back to the 1940s, noting they were published and sold more or less like the statutes. Representative Cowdery commented that it is very complex, referring to a passage on an engine for a Camaro or Firebird. He said it has the parts, the retail prices, and a list of times for the different functions, whether it be a brake job, steering wheel, engine, transmission, starter; it has all of these broken out in the number of hours each job would require. He said, "And it has nothing to do with the hours that the shop time - you know, the shop charges or the hours that they pay the mechanic, it's just a kind of a bible." Number 1075 CHAIRMAN ROKEBERG noted there were approximately nine people waiting to testify. Chairman Rokeberg asked Ms. Shirley Armstrong, committee aide to the House Labor and Commerce Standing Committee, for a copy of the federal statute, stating it was Title 29 of the United States Code, the Fair Labor Standards Act (FLSA). He referred to "section" (10)(A) of 29 U.S.C. 213. To Mr. Pignalberi, Chairman Rokeberg said he was concerned that if they went forward with this, HB 347 would exempt the automobile dealers, but not the corner auto mechanics' shop, the few gas stations left in the state with service bays, things of that nature. Number 1136 MR. PIGNALBERI responded he thought the problem Chairman Rokeberg was alluding to was the difference between the federal exemption and state law. Mr. Pignalberi said HB 347, as written, would apply to the corner garage repair place but not the gas station, because they had to be primarily engaged in the business of servicing auto vehicles. Number 1157 CHAIRMAN ROKEBERG pointed out that the federal code said "selling," not "servicing." MR. PIGNALBERI replied that was the difference between the federal statute and the way they have crafted HB 347, stating HB 347 would apply to the small independent repair facility. Number 1173 CHAIRMAN ROKEBERG asked how it could apply if it was against the federal code. Number 1179 MR. PIGNALBERI stated, "In speaking with legal services on this subject earlier today, they say if the federal inspector was to do an investigation, it would be up them as to whether or not they would try to make an employer pay [an] amount that might be due under the federal statute vis- -vis the state statute." However, Mr. Pignalberi said the big difference is that HB 347 applies to the eight hour per day situation which does not exist in federal statute. He thinks Alaska is unique among the 50 states in that it requires employers to pay overtime after an 8-hour day. Mr. Pignalberi stated the federal law and the rest of the states require overtime pay after the 40-hour week, noting, "So, we don't have a rub with the federal statute until after we've passed the 40-hour per week situation, and then it's ... somewhat hazy to me what happens after that." Number 1235 REPRESENTATIVE RYAN asked, "If I were the owner of N C Machinery [N C Machinery Company], could I qualify my people under this bill?" indicating he was referring to the Caterpillar, Incorporated, franchise. Number 1246 MR. PIGNALBERI noted he did not have a copy of the bill in front of him, but stated, " If N C -- the Caterpillar dealer qualifies with that language in that one sentence of the bill, then you - you certainly want this bill. I believe it would, yes." REPRESENTATIVE RYAN added, "It says selling or servicing motor vehicles. It's rather broad -- 'motor vehicles' is rather broad." Number 1268 MR. PIGNALBERI asked if a "caterpillar" qualified as a motor vehicle. REPRESENTATIVE RYAN replied, "Propelled by internal combustion engine ...." Number 1278 REPRESENTATIVE COWDERY stated he had phoned several small shops in Anchorage that morning, "In fact the ones that do my business, it's a two-man shop and owner with one mechanic. I asked 'em about this and he said, he told me the way he does business, he pays his - his guy an hourly rate, plus a percentage of the flat-rate book because everything that comes in ... might or might not be covered, so that's how he does it. I asked if he was aware that probably what he's doing is probably not in tune with the state statutes and he didn't know that, but he said half the shops that are his size that he knew did a similar -- things that he did or similar." Number 1320 CHAIRMAN ROKEBERG noted he wished the committee to take all the testimony at that meeting. Number 1325 REPRESENTATIVE HUDSON pointed out what he thought was a technical flaw in the bill; on line 5 of the bill, it designates this as (17), but he believed there was already a (17), community health aides. REPRESENTATIVE GENE KUBINA commented that he thought one of them had been dropped. CHAIRMAN ROKEBERG noted it was a drafting issue. Number 1358 REPRESENTATIVE KUBINA stated he thought Representative Cowdery was wrong, that a business had to have over four employees for any of that section to count for overtime. Number 1370 REPRESENTATIVE COWDERY stated that was the shop owner's comment to him. Number 1376 CHAIRMAN ROKEBERG went to Ms. Jordan in Fairbanks. He asked her to clarify two of the technical issues raised: Representative Kubina's comment about the four-employee standard and the Chairman's question about the potential conflict between state and federal law. Number 1394 MONTE JORDAN, Supervising Investigator, Wage and Hour Section, Division of Labor Standards and Safety, Department of Labor, testified via teleconference from Fairbanks. She said there is an exemption from all of the overtime statutes for an employer with less than four employees. She stated, "A small business that has less than four employees does not have to pay overtime under state law, you still have to look at federal law." Number 1412 CHAIRMAN ROKEBERG noted the federal code spoke to automobile dealers. He gave the situation of a larger mechanics center - for example, 20 employees working at an auto maintenance shop - saying that would not be covered because of the federal statute speaking only to auto dealers and he asked Ms. Jordan if that was correct or incorrect. Number 1437 MS. JORDAN noted she was not an expert on FLSA, but it was her understanding that FLSA does exempt auto dealerships, but not gas stations and small garages. She stated, "So what if someone called our office, or the employee came in and wanted to file against that auto dealership if - if they would be exempt under the feds if we had a law that exempted them and they were a small garage employee, then we would refer them to the feds because there is no such exemption." Number 1473 CHAIRMAN ROKEBERG asked if the federal law applied to small shops with less than four employees. Number 1480 MS. JORDAN replied that the federal government does not have an exemption based on number of employees, it has an exemption based on gross received income of the employer. She said, "Again, federal law occasionally does cover an area that we don't, because ours is both over 8 and over 40." Number 1497 CHAIRMAN ROKEBERG asked if there were further questions of Ms. Jordan. There being none, he requested she stand by. Number 1524 STEVE ALLWINE, Vice President, Alaska Auto Dealers Association (AADA), came forward in Juneau to testify. He commented, as the committee had heard from Mr. Pignalberi, it was a pretty confusing issue. Mr. Allwine said he would try not "beat the same things," and try not to make it quite as complex as it unfortunately seems to become. He commented that, in a nut-shell, current statutes in the state of Alaska do not provide an exemption from overtime restrictions for flat-rate mechanics and that, unfortunately, requires the DOL to attempt to regulate what has historically been an unregulated area in most other states. He said the fundamental difficulty with this issue is that flat-rate mechanics are not paid by the hour. Mechanics are paid either a flat amount, $10, $20, $30 per billable hour, or a percentage of the billable hour, explaining that "billable hour" refers to the charge on a per hour basis the merchant bills to the consumer. Mr. Allwine noted the example of 40 percent was given earlier. He said it came out of the parts and times guide previously referred to, and he would provide more history shortly. He stated that, as the committee could see, the DOL had been relegated to what was really an impossible task of trying to convert flat-rate pay to an hourly calculation. He stated customers affected by the current regulation included, but were not limited to, automobile dealers, retail consumers, wholesale accounts (repairs completed for another garage), and automotive manufacturers. Number 1614 MR. ALLWINE explained, regarding the way flat-rate mechanics are paid, that the times for specific repairs are calculated in a way to accurately predict how long the work will take to perform and the resulting time is then divided into tenths of an hour. He said examples of these calculations range from .2 hours to replace the windshield wipers on a Lincoln Continental to 8.3 hours for the complete removal and replacement of an engine in a Saturn 4-door sedan. The times used are obtained from several published sources: Motor's, Chilton's, Mitchell's (ph), and each manufacturers' own time guides provided to automobile dealers. Mr. Allwine said that it is that data in those books which allows an accurate estimation of the cost of a particular repair to the consumer. He noted it also worked, and was especially true, in automobile body shops. He stated that a flat-rate mechanic is structured into an eight-hour day under the current system. If the mechanic exceeded the eight hours, his compensation was subject to the extremely complex overtime formula as interpreted by the DOL. Mr. Allwine commented that the DOL has no choice, it has to do this through "regulation." He referred to the Mr. Pignalberi's explanation, stating the committee could see the calculation was extremely difficult to administer in the areas of calculation, accrual for accountants, and payment - "You never know exactly whether you're doing it right." He said, for these reasons, most Alaskan employers restrict their flat-rate mechanics to an eight-hour workday. Mr. Allwine explained and emphasized this means that if a repair is close to completion and the work day is at an end, as an employer he is requiring the mechanic to stop work even it would only take an additional half hour to complete the repair. Mr. Allwine noted this was especially annoying for a customer in Southeast Alaska trying to catch a ferry who had to wait several more days for the next ferry because the repair couldn't be complete in time. He said this situation results in frustrated consumers not just frustrated workers. Number 1742 MR. ALLWINE stressed that HB 347 differed significantly from the federal wage and hour exemptions, and that the AADA applauded Representative Cowdery's foresight in this area. He said HB 347 is broad inasmuch as it includes independent repair facilities indicating these facilities are prevalent in Alaska, as well as automobile retailers. Mr. Allwine said HB 347 identifies and separates mechanics employed as hourly mechanics from those paid under the flat-rate mechanism. He stated HB 347 narrowed federal law because it states, "Primarily engaged in selling or servicing motor vehicles." He indicated the AADA believes this would eliminate a possible problem in situations where mechanics are working in gas stations and required to perform other duties, because selling and servicing are not the primary functions in those cases. He said federal wage and hour laws provide numerous exemptions, and when Alaska took control of its labor laws, restricting the federal statutes in a blanket manner was the prudent thing to do. Mr. Allwine stated this was done by simply not allowing any exemptions at the outset and, as time has progressed, specific exemptions have been authorized. He noted he mentioned this for a couple of reasons: 1) to demonstrate that flat-rate mechanics were not singled out, nor was any class of employee in the initial legislation; and 2) because HB 347 is specific and appropriate, as are other exemptions that have been authorized over time. Number 1815 MR. ALLWINE said beneficiaries of HB 347 include flat-rate mechanics, body and paint personnel, employers, consumers, and the DOL, because the department would no longer have to administer such a cumbersome "regulation." The revised statute would allow flat- rate mechanics flexibility in the workplace, increased productivity and higher income. Mr. Allwine stated it would eliminate a cumbersome overtime calculation for employers and place Alaska on a par with other states. He said this would serve to attract and retain flat-rate mechanics and new personnel to a vocation which is suffering major shortages nationwide. Number 1848 REPRESENTATIVE HUDSON noted Mr. Allwine indicated in his testimony that the DOL was unable to deal with this because of regulations. Representative Hudson asked if Mr. Allwine thought this was the department's interpretation of regulations or if could he point specifically to the statutes which precluded the DOL from trying to find a regulatory solution. Number 1865 MR. ALLWINE said he believed this is complicated because an exemption is required to eliminate something from "wage and hour." He said he believes if there was another way to do it, if they could do this through regulation, the AADA would be happy consider all ideas and work toward that. Mr. Allwine stated he also wanted to briefly address Representative Ryan's question about whether N C Machinery Company would fall under HB 347. Mr. Allwine said the answer was technically no, because to be a motor vehicle, he believed, the vehicle had to be licensed to be operated on state and federal highways indicating he thought that would effectively eliminate the equipment N C Machinery Company dealt with. Number 1908 CHAIRMAN ROKEBERG asked Mr. Allwine if he had any comments regarding the Chairman's previous question about the federal law and its impact in the differential between auto dealers and corner mechanics. Number 1915 MR. ALLWINE asked the Chairman to restate the question. Number 1949 CHAIRMAN ROKEBERG clarified he was talking about the differential between the federal statute of the United States Code [29 U.S.C. 213, subsection (10)(A)] which specifically cited auto dealers, not corner mechanics. Number 1961 MR. ALLWINE stated he thinks HB 347 was a somewhat more favorable take on that because smaller independent shops, including paint and body shops, are prevalent in Alaska. He noted there aren't just franchise automobile dealers throughout the state. Mr. Allwine said he thinks that if it is proper, it certainly is appropriate from AADA's perspective that the language of HB 347 include those independent shops. He indicated he thinks it's appropriate, in other words, to include a shop that primarily services, as well as a shop that primarily sells and services automobiles. Number 1988 CHAIRMAN ROKEBERG stated he would like to move on to other testimony, commenting that the committee would not be moving HB 347 at this meeting. Number 1994 REPRESENTATIVE COWDERY stated Mr. Allwine had previously said he would "get into this book a little bit more," and asked him to expand his comments. Number 1999 MR. ALLWINE replied that he had covered it about halfway through. He said, "If you go to another state, you will find a book like that. If you were to take your car in and ask for a repair, it will be based on these books, it is very consistent throughout the United States." Mr. Allwine confirmed that the book (the Motors parts and times guide) was a national publication. Number 2016 CHAIRMAN ROKEBERG said he wouldn't ask some of the other dealers on-line but could ask Mr. Allwine, as an AADA member, "If they calculated that a job will take 8 hours based on the book, and it only takes the mechanic 6 hours and he gets paid his 40 percent of the six hours or however the formula works, what happens to the ..." Number 2028 MR. ALLWINE stated the mechanic gets paid for his 8 hours, noting that was the incentive; if the mechanic produces the job and does it properly in 6 hours, he is paid the 40 percent of the 8 hours. Number 2036 CHAIRMAN ROKEBERG asked who gets the 60 percent and the savings per hour between the customer and the dealer. Chairman Rokeberg asked if the dealer made the profit. Number 2043 MR. ALLWINE responded he was in it for the money. CHAIRMAN ROKEBERG replied that was okay, he believed in profits. Chairman Rokeberg noted he had just wanted to go on record without putting any of Mr. Allwine's associates on the spot when they were testifying. Number 2054 REPRESENTATIVE RYAN asked if this was predicated upon a journeyman mechanic. MR. ALLWINE answered in the affirmative. REPRESENTATIVE RYAN asked if a customer still received the originally quoted price if there were a lot of complications and a job ran over. MR. ALLWINE responded in the affirmative, adding that the book took additional options on the vehicle and complications like rusted bolts into consideration. He noted there were adjustments for those types of things. Number 2078 REPRESENTATIVE BRICE asked who audited the book to ensure reasonable accuracy. MR. ALLWINE indicated he was not sure, probably the Society of Automotive Engineers (SAE). Number 2118 JAMES D. HINES, auto technician, Mendenhall Auto Center, came forward to testify in support of HB 347. He stated he has been working for approximately 36 years as a flat-rate mechanic. Mr. Hines said he feels that if they don't get this bill and it goes the other way with the overtime, he would lose time if he had to stop after the eight hours and start again the next day. He said it would cost him more time on the job and make his job a lot harder to do. He added, "And I don't know, as far the overtime, I don't know how you'd ever figure what your pay would be on that." Mr. Hines said he's asked people in other states and he said they don't have this overtime problem. Number 2161 REPRESENTATIVE KUBINA confirmed that Mr. Hines worked for the dealership but was paid on a per-job basis, receiving health insurance and a retirement plan, and was almost like an independent contractor. Number 2187 CHAIRMAN ROKEBERG asked Mr. Hines if his employer in Juneau allowed him a little flexibility, or if he was asked to quit working after eight hours. MR. HINES replied that he was currently allowed the flexibility to work over the eight hours. CHAIRMAN ROKEBERG asked if they had to pay him the overtime. MR. HINES responded, "Well, that's in the makings -- I don't know how they figure it out." CHAIRMAN ROKEBERG continued, "Why, 'cause it's so complex you're not sure what you're getting paid every week? In other words, you actually have to rely on your boss's accountant to figure out what you're gonna get paid every week, and you can't really figure out if you're getting the right amount of money." MR. HINES agreed. Number 2214 REPRESENTATIVE KUBINA asked what happened if Mr. Hines came in one day and there was no work. Did he just not get paid, or did they tell him to go home? Number 2219 MR. HINES replied that he could go home or he could wait and hope something came through the door. REPRESENTATIVE KUBINA asked if Mr. Hines received a standby wage while he was waiting. MR. HINES answered in the negative. He said he guessed that was part of the job. Number 2232 REPRESENTATIVE KUBINA asked if that had been the case for pretty much of Mr. Hines' whole 36 years as a flat-rate mechanic. MR. HINES indicated that had been the case for most of his 36 years, that his pay has been based on commission. Number 2241 CHAIRMAN ROKEBERG asked if Mr. Hines thought that he made a pretty good living for a hardworking man. MR. HINES replied he made a good living. Number 2243 REPRESENTATIVE COWDERY confirmed Mr. Hines was familiar with the parts and times book. MR. HINES stated he had been working out of it for many years. REPRESENTATIVE COWDERY asked Mr. Hines if he felt comfortable saying he could beat the time in the book. MR. HINES indicated he could match the time, if not beat it. REPRESENTATIVE COWDERY asked Mr. Hines if he generally beat the time. MR. HINES answered in the affirmative. Number 2259 REPRESENTATIVE RYAN commented that Mr. Hines testified he received retirement and health benefits, saying that somewhat explained the 60 percent to the dealer. Number 2265 CHAIRMAN ROKEBERG stated the committee would go to teleconference testimony from Anchorage, asking witnesses to limit their testimony to two or three minutes. Number 2283 SCOTT HANCOCK, auto technician, Saturn of Anchorage, testified via teleconference from Anchorage in support of HB 347. He stated he has worked as a technician with Saturn of Anchorage for 14 years. Mr. Hancock said the law, as it currently stands, limits their shop hours, and changing the law would be a win-win situation for both the consumer and the technician. It would allow them to expand their shop hours and would allow him to earn more money. Number 2335 JIM SLOAN, auto technician, Eero Volkswagen of Anchorage, Incorporated, testified next via teleconference from Anchorage in support of HB 347. He stated he has been a flat-rate automotive technician for 25-plus years. He currently works for Eero Volkswagen of Anchorage, Incorporated, and has been there almost 21 years. Mr. Sloan stated that the flat rate is a good system and that they don't need overtime. He said it would be nice for him to be able to finish a job without burdening his employer with overtime; he would be able to get his cars finished at the end of the day whether it took him (indisc.) hours or ten hours. Number 2364 CHAIRMAN ROKEBERG asked if that concluded Mr. Sloan's testimony, and if anyone had asked him to testify that day. Number 2370 MR. SLOAN replied that his employer did invite him to come down on his own volition. CHAIRMAN ROKEBERG asked Mr. Sloan if he worked beyond eight hours a day. Number 2378 MR. SLOAN replied generally he did not. CHAIRMAN ROKEBERG asked if his employer had to pay him overtime if he worked beyond eight hours a day. MR. SLOAN answered in the affirmative. Number 2392 STAN PETITO, Service Manager, Cal Worthington Ford of Alaska, Incorporated, testified next via teleconference from Anchorage. He stated he has been a service manager for 20 years. Mr. Petito said it is important to point out that all the technicians he has ever talked to are against any (indisc.) of this sort. He said the technicians feel like they are independent employees because they are allowed freedom during the day from constant supervision. He said if they need to make a run or have a cup of coffee, they're allowed to because they work by piecework. Mr. Petito mentioned the discussion of what he referred to as the labor time guide. He said the more productive a technician is, the better trained he is, the more money he invests in tools, the more efficient he is going to be. He indicated they have some technicians who might take 9 hours for an 8-hour pay job; they have others who might take 6 hours for an 8-hour job. He said the labor time guide they keep referring to is there for the protection of the consumer and the technician because it gives a fair, established time for a well- trained, well-equipped technician. Mr. Petito said he thinks the accounting nightmare that would be involved in calculating overtime pay was pointed out very well in the beginning. He said (indisc.) technicians do not have to work over 8 hours a day, about 80 percent of the time there isn't a need for it, but there are those times 15 minutes or an hour away from completion of a job when the technicians would like to be able to have the freedom to make that choice and finish the customer's vehicle. Number 2459 RICK MORRISON, Alaska Auto Dealers Association; Eero Volkswagen of Anchorage, Incorporated; Saturn of Anchorage, testified next via teleconference from Anchorage. Mr. Morrison stated, "In listening to the testimony today I ..." [TESTIMONY INTERRUPTED BY TAPE CHANGE] TAPE 98-16, SIDE B Number 0001 MR. MORRISON continued, "... but because of this law, we cannot sit and calculate what our expenses are gonna be (indisc.) try to create the bill to come in under that estimate. Most of our technicians today are a much smarter group, very highly educated. We don't refer to them as mechanics anymore, and even though the print-out in here says 'mechanic,' these guys are truly and highly motivated technicians." He said many technicians have their own tool boxes, which may contain as much as $30,000 to $35,000 worth of their own tools. He stated they send the technicians out for continuing education; he personally sends 10 to 15 people out a year. Mr. Morrison stated he is trying to emphasize that these are very, very sophisticated technicians compared to the situation in the industry 25 to 30 years ago when this law was enacted. Mr. Morrison said he would say the technicians in his stores made, on average, about 120 to 140 percent every hour they worked because of their ability to do the job faster than the times the books called for, noting it was a great incentive. He indicated it was also an incentive to do the job right the first time because if it wasn't done right the technicians would have to do the job again on their own time, and he indicated this made it a self-governing or self- policing system. Mr. Morrison indicated he thought any journeyman- level technician in the industry, if asked, would say he or she would much rather work under flat rate system than an hourly and overtime system because he or she had the ability to do the job as fast as he or she wanted. Number 0068 MR. MORRISON stated one of the disadvantages of the current law was that it limited flexibility. He related: A couple of gentlemen in their Saturn store came to him with the idea of opening up on Saturdays to provide better customer service. They would see if everybody would be willing to work one extra hour a day and "every other week we'd take one day off." Mr. Morrison said it sounded like a great idea but he couldn't do it under the current law, he said, "Because the customers are not willing to pay the extra amount of money that it costs them their flat-rate hour, which, again, they're making 120 to 140 percent more, and pay overtime on top of that, so I have to look at 'em (indisc.) so I can't allow you to do that. So there isn't flexibility to do it." Mr. Morrison said he started in the automotive business 25 years ago as a technician. He noted he had been an ambitious young man, and commented that he and his family had benefited because he was given the privilege of being able to put in as much time as he wanted working off of a flat-rate system. He stated, "Under current Alaska law, you can't do that because it's too restrictive. ... In conclusion, I'd tell you that it's a very minor exception. It provides a lot of additional incentive for the workforce. If they don't want to work more than that, I don't believe that they would be forced to work more than that. In our particular ... stores, we really let the technicians govern that. These guys are a smart, intelligent group and they'll work with you, and their goal is to make the consumer happy because that just brings in more business for them. And I haven't found anybody within our organization that would oppose (indisc.) if they had the flexibility on the other side." Number 0161 DON ETHERIDGE, Alaska State Chapter, AFL-CIO; District Council of Laborers, testified next in Juneau. He stated he worked for the District Council of Laborers and was speaking on behalf of the AFL- CIO. He said normally they oppose any overtime exemption bill and HB 347 is no exception, but Mr. Etheridge said they are working with the dealers and the DOL to find a solution agreeable to all parties without "messing up" state statute. He said they hope they can get that done shortly. He mentioned one of his bosses, Mano Frey, had discussed this with an AADA representative that morning, and he said Mr. Frey is also waiting to get in touch with Mr. Flanangan (Deputy Commissioner) from the DOL tomorrow to see if there is a solution which does not involve changing the statute. Mr. Etheridge stated, "We get concerned every time we change or add an exemption to overtime laws, or to the wage and hour of any type, 'cause it's just another chink in the armor the way we look at it, and we're getting so many chinks that pretty soon the armor's gonna fall off." Number 0210 CHAIRMAN ROKEBERG commented he didn't think they had lost any chinks in the past three years while he's been here. Number 0216 MR. ETHERIDGE replied that was because they have been fighting hard. Number 0225 DWIGHT PERKINS, Special Assistant, Office of the Commissioner, Department of Labor, came forward to testify. Mr. Perkins stated there had been a lot of discussion about the flat-rate mechanic, noting he thinks there are many of misconceptions about the law and about what is currently being done in the industry. He said the DOL is philosophically opposed to this type of legislation, noting the concerns Mr. Etheridge addressed. He stated the DOL's concern is that it would be a weakening of Alaska's wage and hour laws. Mr. Perkins said he agreed with Chairman Rokeberg's comments about few "chinks in the armor" in the last three years. However, Mr. Perkins stated, the DOL is "on watch" to make sure the working men and women of Alaska receive their fair pay for their fair days' work. He referred to Mr. Pignalberi's example and said he was glad there wasn't a real Bob out there because Bob would probably be filing a workers' compensation claim for all the stress he experienced figuring out his pay. Mr. Perkins said he appreciated Mr. Pignalberi's and Representative Cowdery's efforts, noting they have had an open dialogue. He said it is the DOL's understanding that the AFL-CIO and the AADA are working together, and, if it was the wish of the committee, he stated, "The Department of Labor would help facilitate to come back to the committee with some language that would be livable to all parties." Number 0311 REPRESENTATIVE HUDSON asked Mr. Perkins if he was optimistic the DOL could find something within the regulatory scheme to resolve this issue. Number 0317 MR. PERKINS said he was optimistic the department might be able to. He noted some ideas have been expressed, and stated the department would look into all avenues, hopefully coming to a resolution. Number 0332 REPRESENTATIVE RYAN thanked Mr. Perkins for being open enough to try to solve this problem, noting it makes a big problem go away. Number 0341 REPRESENTATIVE COWDERY also thanked Mr. Perkins. Representative Cowdery mentioned that they had discussed this for a long time, and he was certain they could come up with a solution he thinks would be acceptable to everyone. Representative Cowdery asked Mr. Perkins, "Do you know how many other states that have something like this that we're trying to get going here ... the eight-hour ..." Number 0359 MR. PERKINS replied he didn't know offhand. He said, "As been stated, there is the Federal Labor Standards Act, FLSA, that has been referred to that does mention it." Mr. Perkins cautioned, "There is the potential overtime liability for the shops out there that are not the automobile, and it - it does specifically state that in FLSA." He noted the department would look at this, mentioning that Mr. Pignalberi had touched on it and Monte Jordan ["Monte Brice" misstated on tape] with DOL in Fairbanks had discussed it. Mr. Perkins stated it was something the department needed to look into, but said they would be happy to report their findings, and any accomplishments or resolutions they might come to, if it was the wish of the committee. Number 0395 CHAIRMAN ROKEBERG stated Representative Cowdery's office has requested legislative research which indicates at least seven states have this type of legislation, noting the Chairman thinks the number is greater. He said it was his wish that they come back to this committee with a solution. He would commend all parties to this, including the automobile dealers and organized labor, making sure DOL fully cooperates with those groups to find a resolution to this issue in regulation to avoid amendment of the statute. He stated, "Because if we can't, then we will amend the statute. Number 0425 MR. PERKINS stated that Commissioner Cashen would be happy to try to make the wishes of the committee come true. Number 0430 CHAIRMAN ROKEBERG closed the public hearing for that meeting on HB 347, indicating HB 347 would be held over. Number 0489 CHAIRMAN ROKEBERG called a brief at-ease at 4:19 p.m. The committee reconvened at 4:21 p.m. HB 400 - DEPT OF COMMUNITY & ECONOMIC DEVELOPMENT Number 0501 CHAIRMAN ROKEBERG announced the committee's next item of business was HB 400, "An Act combining parts of the Department of Commerce and Economic Development and parts of the Department of Community and Regional Affairs by transferring some of their duties to a new Department of Commerce and Rural Development; transferring some of the duties of the Department of Commerce and Economic Development and the Department of Community and Regional Affairs to other existing agencies; eliminating the Department of Commerce and Economic Development and the Department of Community and Regional Affairs; relating to the Department of Commerce and Rural Development; adjusting the membership of certain multi-member bodies to reflect the transfer of duties among departments and the elimination of departments; and providing for an effective date." Number 0520 REPRESENTATIVE VIC KOHRING came forward to present HB 400 as the prime sponsor. Representative Kohring stated HB 400, as many of them had probably heard over the past several weeks, merges two departments of state government: the Department of Community and Regional Affairs (DCRA) and the Department of Commerce and Economic Development (DCED). He referred to the sponsor statement and said he wanted to give the committee an outline of what they were trying to accomplish. The sponsor statement read: Focusing on economic development is the main purpose for merging two existing departments into the new Department of Commerce and Rural Development. The proposed divisional structure will ensure local government assistance continues, infrastructure planning is enhanced, and that economic development strategy and project funding is centralized and optimized. The missions of the departments of Commerce and Economic Development and the Community and Regional Affairs are similar, to promote economic development of Alaskan communities. The two departments compliment one anther, however cross department coordination can be difficult. Two separate management structures and goals result in a scattered development strategy. Having a unified development vision and placing funding resources under one department will better serve all Alaskan communities, and Alaska as a whole. Currently the departments of Commerce and Economic Development and the Community and Regional Affairs have economic development programs, along with job training and child care programs. These non-development, non- commerce related programs will be moved to the departments of Labor and Health and Social Services, respectively. Under the new departments, these important programs can be integrated with existing programs in those departments while providing better service to Alaskans. This reorganization frees the new Department of Commerce and Rural Development to focus on economic development activities. Alaska's fiscal crisis necessitates reengineering government. This merger will eliminate one commissioner's office, but does not eliminate services. While creating budget savings, program delivery and economic development will be enhanced and streamlined in the new Department of Commerce and Rural Development. REPRESENTATIVE KOHRING referred to the majority's five-year plan to reduce spending, noting they were currently entering year three. Representative Kohring indicated programs many people would like to see retained will have to be cut in this budget-cutting effort unless creative ways of reducing government spending are examined. He noted that is essentially what they are doing with this plan, restructuring government: merging and consolidating so that they can run programs more efficiently, reducing the size of bureaucracy, and hence covering for programs they normally would have to cut quite deeply if they continue with their five-year plan. Representative Kohring stated the idea here is to reduce upper management. He said that by virtue of combining these two departments into one government entity, only one upper management structure would be required. He indicated that would mean eliminating one of the two commissioners, and eliminating the various assistants, deputy directors and positions of that nature within one of those two commissioners' offices. Number 0597 REPRESENTATIVE KOHRING stated they were also focusing on development of Alaska's economy with HB 400, it was not just budget-cutting per se. He said their ultimate goal was to enhance economic development throughout the state, and they feel that by streamlining the bureaucracy and focusing resources on these important economic development programs that goal will eventually be achieved. Representative Kohring indicated there are a couple of items within DCRA in particular which would be transferred to other departments through HB 400. The child care assistance programs, including the Head Start Program, would be transferred to the Department of Health and Social Services (H&SS), and the Jobs Training Partnership Act Program (JTPA) would be transferred to the Department of Labor. Representative Kohring said the theory is there are certain programs within certain departments in state government that logically could fit elsewhere. He said, in an effort to streamline these two "divisions" and focus strictly on economic development, they thought they would take a look at transferring out some of the things which would logically fit elsewhere in the budget. Representative Kohring stated, "Also, infrastructure development is the primary focus of what we're trying to ultimately accomplish in the course of developing our economy, and that's part ... of the effort with this bill as well." Number 0654 REPRESENTATIVE KOHRING stated HB 400 creates four divisions: 1) Division of Rural Services, formerly DCRA; 2) Statewide Development Division, formerly DCED; 3) Financial Resources Division, which pulls together all the funding entities like Alaska Science and Technology Foundation (ASTF) and the Power Cost Equalization Program (PCE); and 4) Division of Administration, which would combine the duties of the two merged departments, running the entire new department. Representative Kohring said, "So it's - it's an effort not only at saving money and focusing on enhancing the economy, but also taking a department and making one that's relatively simple, that's not a big, complex, gigantic colossus of a department out there, it's just four simple, straight-forward divisions." Also, Representative Kohring stated he wanted to point out the state currently does not have any kind of rural development plan. He said, "Where do we want to go as far as developing the economy of rural Alaska?" noting they feel this provides the framework so they can start the process of putting together an overall plan and then implementing it. Representative Kohring stated he feels HB 400 has a great deal of support, commenting that it has been cosponsored by ten Representatives, over one-third of the House majority. He indicated HB 400 was also a culmination of a two-year effort: taking the initial concept Representative Kelly had two years ago with his 150-page bill, working with it and refining it into the current, approximately 68-page version of HB 400 before the committee. He stated, "So it might look like a big bill, and it is, but it's far less than what we originally started with, 'cause our effort is trying to make this thing as simple as we can," indicating most of the legislation was statutory changes associated with the merger. Number 0754 REPRESENTATIVE KOHRING stated he wanted to thank the members of the Administration who had worked well with him and his staff. He said he and his staff made a concerted effort to reach out to staff at DCRA, DCED and the Governor's Administration on the third floor of the Capitol Building. Representative Kohring indicated they wanted to let these groups know it was an effort to work together, that they felt it ought to be a nonpartisan attempt to run these economic development programs much more effectively and efficiently. He said it is not simply a budget-cutting effort, it is a recognition of their responsibility to do what they can to enhance Alaska's economy. Representative Kohring noted they are not trying to destroy either one of the existing departments, they are trying to make them work better. He said they are trying to protect services with HB 400, focusing more on streamlining the bureaucracy, namely the upper management of the new department. Representative Kohring referred to an outline he said was not in the committee members' packets, noting he would like to briefly go over some additional major points. He noted that, again, they were focusing on economic development in the delivery of these programs, mentioning they had already discussed infrastructure. Representative Kohring stated the committee was probably already familiar with the ARDOR Program [Alaska Regional Development Organization Program, DCRA], which he said was contained within the DCED's budget. He referred to the January 1998 ARDOR Annual Report and commented that ARDOR recognizes the need to develop Alaska's economy and also the infrastructure. He quoted Donna Tollman, president of the ARDOR Association, "Economic development is not simply creating a business or a job and the term means something different in each region of Alaska." He said Ms. Tollman goes on to say, "When infrastructure is in place, new business starts and job creation is the translation. Where little infrastructure exists, economic development means developing the water, energy and transportation systems and workforce, translated creating an environment in which economic development can occur." Representative Kohring noted ARDOR recognized the importance of developing Alaska's infrastructure, which he said is the foundation for a strong economy. He stated that is what HB 400 achieves as well. Number 0853 REPRESENTATIVE KOHRING stated HB 400 contains the concept of "one- stop funding." He indicated all the financial-related entities like ASTF, PCE, the Alaska Industrial Development and Export Authority (AIDEA), and also revenue sharing and municipal assistance, would be grouped under one "management auspices" in the new Financial Services Division. He said they feel that would make it easier for grant and loan applications for local communities to occur and it would also enable the new department to identify optimum funding for each project. Representative Kohring said that currently the different financial entities are scattered among different agencies; by consolidating these entities they think they will be able to achieve greater efficiencies. Representative Kohring commented that then there is, of course, the cost associated with this whole effort. He stated, "Is it really worth [it] to do this? Are we really saving money? And we feel the answer is - is yes. We feel that HB 400 will create immediate cost savings, both in the short and long term. He indicated the primary short-term cost savings would come from the elimination of one of the two upper management structures. Representative Kohring said they feel that number would be approximately $1 million right from the start, noting he had specific information he could circulate to the committee. Representative Kohring said he'd like to point out another report, one prepared by DCED in 1994. He stated this report was done by a local consultant; it identified the existence of duplicating functions of these two departments and multiple statutes which basically result in two economic development entities. Representative Kohring said that report recommended examining those and considering merging the two departments together. He said he would spare the committee the precise legal verbiage but noted he had a quote there with him to that effect. Representative Kohring stated, "So the department itself actually, by virtue of commissioning this study, recognized that there is, in fact, benefit to be gained by doing this merger here." Number 0956 REPRESENTATIVE KOHRING also noted the presence of his finance staff aide, Mike Krieber, who would provide detail and technical information as needed. In closing, Representative Kohring said he would like to identify three things: 1) the problem they are dealing with, with this budget cutting process and with these departments; 2) the solution; 3) what the desired result would be if they implement that solution. Representative Kohring stated the problem is that, he said in their minds, government needs to be restructured. He said that as they continue to reduce government spending, recognizing across-the-board cuts are not necessarily the answer, they think restructuring, as they are presenting here with HB 400, is certainly a good way to go. Representative Kohring added he thinks greater efficiency in program delivery is needed, indicating he feels that is not currently being accomplished. He stated the solution with HB 400 would be to cut the bureaucracy instead of important programs, by unifying these two departments. He stated the desired result would be enhanced economic development throughout Alaska, preserving important economic development programs, noting that this also fits in with their majority's plan to achieve greater efficiency in government. He referred to the majority's "commitment to Alaska plan," noting the plan indicated that they were trying to achieve greater efficiency. Representative Kohring stated that concluded his presentation and he was prepared for questions, unless the Chairman wished to proceed with further testimony. Number 1034 CHAIRMAN ROKEBERG stated the committee would take questions at this time, then take testimony. He noted the committee could call Representative Kohring back up after the testimony. Number 1043 REPRESENTATIVE COWDERY asked for examples of duplication in the two departments. Number 1050 REPRESENTATIVE KOHRING responded that they are working on specifics regarding overlapping functions and are examining the different missions of the two departments. He noted, however, they have a list of quite a few things operated under both DCED and DCRA. For example: rural economic development, rural small business development, fishery-related programs, rural tourism, energy development, electrical utility assistance. Representative Kohring stated that both entities are currently performing similar functions in the examples just cited. He said they're taking a harder look at precisely where that overlap is and what kind of savings could be achieved if some of the overlapping functions were eliminated. REPRESENTATIVE COWDERY indicated Representative Kohring had discussed the administration of the new department. He asked, "If you created a new department, what would that title be, and that type of thing, and who would be in charge?" Number 1110 REPRESENTATIVE KOHRING responded that it would be called the Department of Commerce and Rural Development. He noted that they were trying to retain the names of the previous departments as much as possible. Representative Kohring said "commerce" was retained because they want people to know it is an economic development- related entity; "rural" was retained because they also want people to know that they're trying to develop the economy of rural Alaska. Representative Kohring noted Representative Cowdery's question about upper management structure. He stated HB 400 does call for the elimination of the DCRA upper management structure and that commissioner's office. However, he said, the make-up of the new management entity would be left at the discretion of the (indisc.) administration once the bill became law. Number 1157 REPRESENTATIVE HUDSON commended Representative Kohring on combining many elements from two departments, indicating he thought, from Representative Kohring's testimony, that it probably would ultimately involve several other departments as well. Representative Ryan stated, because it was a very comprehensive look at governmental services and how those services are performed, he was interested in knowing if existing statutory services were being eliminated. He clarified he meant services the legislature has imposed upon these various departments in the past, and he asked Representative Kohring if he had identified services that should be eliminated "within this rewrite here." Number 1204 REPRESENTATIVE KOHRING noted Mr. Krieber's presence for technical assistance and stated it was his understanding HB 400 did not eliminate any services. He said the bill, as it currently stood, focused just on the bureaucracy of one of the two management entities; services would stay the same under the new management auspices per the divisions he had earlier outlined, and one of the two commissioners' offices would be eliminated. Number 1232 CHAIRMAN ROKEBERG referred to page 40, line 13, "(27) REPEALED", the safety of air carriers in the state, and line 21, "(32) REPEALED", the neighborhood revitalization program. He stated, "That looks like as if there's a programmatic repeal of authority of the department ...." Number 1299 MIKE KRIEBER, Legislative Administrative Assistant to Representative Vic Kohring, came forward to testify. He responded, "A lot of what is listed there as repeal had been previous repealed in prior legislation. There're not any programs eliminated by that ... section." CHAIRMAN ROKEBERG commented it should be checked out. Number 1322 REPRESENTATIVE HUDSON, from his experience over quite a number of years, commented on the complexity of redesigning how an administration performs the work the legislature has imposed upon it through the statutes over the years. He noted Representative Kohring indicated he and his staff were conversing with various elements of the Administration, Representative Hudson said he was assuming that would be the Governor's office as well. He asked if HB 400 embodied some of the views, concerns and hopefully some (indisc.) with the Administration. Representative Hudson asked Representative Kohring if that was his view, and how he would characterize the Administration's reaction to HB 400. Number 1392 REPRESENTATIVE KOHRING stated the Administration recognizes what they were trying to accomplish and appreciated their efforts to reach out to the Administration and work with it. Representative Kohring referred to a possible newspaper quote which supposedly said, "If something isn't broken, why are we trying to fix it?" He indicated that generally summed up the Administration's perspective, at least from the perspective of the Governor's office. Representative Kohring indicated he and his staff have tried very hard to work with the Administration, to be open, and to hear the Administration's feedback. He noted he hasn't received any specifics from the Administration, but the concern has been expressed, " What are you trying to accomplish here, Vic, if both organizations are working well?" Representative Kohring noted he would answer that by saying they are trying to accomplish greater efficiencies by merging the two departments together, running the whole department under one management entity. He said, from his perspective, "It's broken if we can, in fact, save ourselves some dollars and run the same programs with less dollars. And from - from what we've deduced, from our research and what we put together right off the bat we'll be able to save a million dollars as a result of the implementation of this legislation." Number 1468 REPRESENTATIVE COWDERY asked Representative Hudson, as a member of the administration 15 or 20 years ago, how many departments were there then and how have the departments have grown, and if Representative Hudson had a perspective on that. Representative Cowdery indicated Representative Hudson might possible answer the second question in combination with Representative Kohring. Number 1494 REPRESENTATIVE HUDSON stated he certainly did have a perspective on it, noting he came in 1974 with Governor Jay Hammond and obviously government has grown appreciably since then. Representative Hudson attributed much of this growth to new programs imposed on the administration by the legislature. They have created new programs as they have had more money, and he thinks the administration has had to grow in order to accommodate a lot of that work. Representative Hudson indicated, however, that every administration has a different way of attempting to administer and perform the services and the levels of works the legislature has imposed. Representative Hudson indicated he hopes the legislature is working with the current administration in their approach, noting representatives of the Administration would be speaking about the ideas embodied in HB 400. Number 1552 REPRESENTATIVE BRICE asked why the Head Start Program was being kept in the new department, noting the decision to move the day care and child care programs out of this new department into H&SS. Number 1580 REPRESENTATIVE KOHRING indicated it was his understanding that the Head Start Program was under the auspices of the child care assistance programs and was transferred out of the new department in this legislation. He asked Representative Brice what page of the legislation he was referring to. Number 1592 REPRESENTATIVE BRICE indicated page 40, lines 27 and 28, which read: "(24) operate the headstart funding program governed by 42 U.S.C. 9835." Representative Brice noted that was under the duties of the Department of Commerce and Rural Development. Number 1603 CHAIRMAN ROKEBERG added that he had many question of that nature. Number 1611 REPRESENTATIVE BRICE asked one other question, "I keep hearing how this is going to create an efficiency of -- in terms of provision of service to the people of the state of Alaska. I've heard it, I've heard it - I don't see it in the bill. Could you maybe direct us a little bit towards - towards that?" Number 1641 REPRESENTATIVE KOHRING stated he would point most toward what would be called the Financial Services Division. He noted Mr. Krieber had pointed that out as well, and perhaps could elaborate on some of the details when they had a chance. Representative Kohring stated they feel putting all these services like ASTF, PCE, AIDEA, the revenue sharing and municipal assistance programs, which are scattered throughout government right now, under the management, control and operation of one division would enable them to "more optimize" the funding of these programs to run them better. Representative Kohring noted it was somewhat like a "one-stop shopping program." If municipal entities, organizations out there, needed assistance they could go to just one division, as opposed to working with separate divisions within state government. Representative Kohring indicated they think this Financial Services Division would minimize delays in grant monies, noting it would be easier for municipal entities to go through the processing of grant and loan applications. Representative Kohring said he thinks that would be the primary thing he would point to (indisc.) enable them to achieve greater efficiencies, and asked Mr. Krieber if he had anything to add. Number 1715 REPRESENTATIVE BRICE used the analogy of comparing apples and oranges with regards to AIDEA and ASTF in that scenario, noting he felt the programs were not meant to do the same thing, and were meant specifically to be different, otherwise there would not be the need for two separate programs. Representative Brice indicated there had not been complaints about AIDEA or ASTF. He stated, "And it gets back to the question, I guess, if - if efficiency's what we're looking for, the greatest - the most efficient type of government is also that form of government which leads or -- that does not allow public input or any other type of involvement that we - that we think is important. Not that that's what we're doing here, but I just don't see how we're getting to the efficient provision of large bonding and capitalization of industrial development in this state by ... moving AIDEA from point A to point B." Number 1821 REPRESENTATIVE KOHRING indicated he simply thinks having it all together makes it easier to provide services to (indisc.) entities, municipalities. He indicated that these municipalities can then go to just one division and the one individual operating that division; he used the analogy of "singing from one sheet of music." Representative Kohring stated it would also help them focus more on infrastructure and energy development. He noted energy development is one of the big things they are trying to accomplish, particularly for the benefit of rural Alaska. He said they are trying to look at these different programs from that perspective. Representative Kohring stated, "How can we work all these together in tandem to help further develop, not just the infrastructure, but energy-related resources in the state of Alaska to help our ..." Number 1870 REPRESENTATIVE BRICE commented, "So the purpose then is to develop a viable energy program for the state." REPRESENTATIVE KOHRING replied that was much of what they were trying to accomplish. REPRESENTATIVE BRICE continued, "As opposed to using AIDEA or ASTF to develop small businesses or medium-size industrial businesses to create economy. That's why I think it's important to keep maybe those types of programs separate .... In my mind, they serve very distinct roles, and if what we're talking about is to create a super energy program, you know, then maybe what we -- then probably that's what we're ... looking to do here." Number 1924 CHAIRMAN ROKEBERG noted he agreed with a good deal of what Representative Brice was saying. Chairman Rokeberg stated he wished to take some further testimony and then they could start looking into some of the details. Number 1939 REPRESENTATIVE KOHRING stated HB 400 does not change the missions of any of the specific programs, but they would like to recognize that rural energy development is extremely important for Alaska, particularly with the PCE program, one of the new department's funding sources. He said they are cognizant of that serious approaching problem, and moving to recognize the importance of infrastructure development, the importance of energy development. He noted they thought if they could put all these funding entities under one management roof, it could help to enhance those two aspects, and he stated Mr. Krieber wished to offer a comment or two. Number 1992 MR. KRIEBER stated the problem is both DCRA and DCED are funding infrastructure projects; both departments are funding rural small development initiatives, grants, and loans. Mr. Krieber indicated both departments use a "shotgun approach," and combining the departments would result in efficiencies. He noted he had recently attended a Southeast Alaska Community Economic Revitalization Team (SE-CERT) meeting here over a few days which brought together the various federal and state funding entities. Mr. Krieber noted the subject of the meeting was "scoping," in order to get the entities all to focus on the same type of result and try to decide who would take the lead; he said it was very apparent in that meeting that there was quite an overlap, so, he said, there is some coordination out there which is not achieving the desired results. He indicated the formation of the Financial Services Division in the one new department would give them the results currently being desired by these various departments. Number 2073 REPRESENTATIVE KOHRING noted Chairman Rokeberg had asked about lines 13 and 21 on page 40, dealing with repealing of statutes. Representative Kohring indicated their intent was not to repeal any current services, other than transferring some services into different departments, and he indicated they would check the statutes. CHAIRMAN ROKEBERG said that was some of the minutiae they could get into later. REPRESENTATIVE KOHRING continued, indicating the inclusion of the Head Start Program in the new department was an error by Legislative Legal and Research Services. He said the intent was to transfer the program to H&SS, noting that they would have to come back with a proposed committee substitute in order to incorporate the appropriate language. Number 2122 CHAIRMAN ROKEBERG stated that he wanted the committee members and the sponsor to know starting at 3:30 a.m. that morning he read the entire bill, all 68 pages. He stated, "There's a number of little things in there ...." Chairman Rokeberg stated he would like to go on unless there was some (indisc.). Number 2140 REPRESENTATIVE HUDSON requested a sectional analysis. Number 2146 CHAIRMAN ROKEBERG noted the presence of a brief, simple sectional analysis in the bill packet. Chairman Rokeberg informed the committee it was his intention to have further hearings on HB 400 on February 25 and February 27. He indicated the scheduled bills would be heard first and HB 400 would be taken up at approximately 4:00 p.m. on both days. Chairman Rokeberg stated he wanted to minimize any inconvenience for the personnel from the various departments, but noted the committee would like to have people available for technical questions, and he said the committee looked forward to the presence of the bill sponsor. Chairman Rokeberg invited Commissioner Irwin, DCRA, to come forward to testify, and he invited Representative Kohring to sit at the committee table. Number 2240 MIKE IRWIN, Commissioner, Department of Community and Regional Affairs, came forward to testify. He noted the presence of other DCRA personnel who would be able to answer technical questions, as the Chairman had indicated, and also the presence of Jeff Bush, Deputy Commissioner, DCED, and personnel from other affected agencies. Commissioner Irwin stated, "This is a bill, obviously, that would have a profound effect on the department that I work for and to the people across the state who rely on the services that we provide, and in many ways I think that we provide a very good product. I'm not going to go into a lot of financial or programmatic detail as to the pros and cons of this particular piece of legislation. There are many people much more expert and knowledgeable than I about the technicalities who will make themselves available to you as you consider this. I want to confine my remarks to a couple of specific areas and also, if I might to -- I was taking notes as Representative Kohring was speaking, and I might have a few things to ... say on those as well. First, I would like to speak to the notion that efficiencies in government is one of the prime considerations of the legislation before you. In fact, this was one of the chief reasons given two years ago when the legislature was considering dismantling DCRA through HB 409. At that time I had only been in this job for a little over a year, so I have to honestly admit that, that time, I didn't quite know if what we did and what we were all about was - was inherently inefficient or efficient. And so I've had to ... roll up my shirtsleeves to try and find that out since there seem to be a lot of people in this body who tend to think that we are quite inefficient." Number 2386 COMMISSIONER IRWIN continued, "I would like to submit that DCRA is one of most efficient organizations of its type that I have ever been around, and I speak from a lot of experience. I've worked in the private sector for multi-million-dollar corporations. I've worked in the non-profit world, again for organizations that administer literally tens and hundreds of millions of dollars in state and federal dollars annually. I've worked for the federal government, and this is my second time in an appointed policy position in state government, and adding to that from the world of academia, I also bring a master's degree in public administration to kind of help balance out my hands-on management over the last two decades. So I haven't come to the conclusions when I talk about efficiencies of this department in any kind of haphazard way. Nor have I come to these conclusions out of a subjective analysis that says I could very well lose my job as a result of HB 400. In that regard, I know that I am just a temporary hire, I always have been, and it's just a matter now of how temporary that ... is. COMMISSIONER IRWIN CONTINUED, "My assessment, rather, that DCRA is an efficient department is based on factual analyses ..." ["We don't have a lot of layers of bureaucracy that simple issues need to work their way through before a decision can be made."] [TESTIMONY INTERRUPTED DUE TO TAPE CHANGE, INSERTED PHRASE FROM WRITTEN STATEMENT] TAPE 98-17, SIDE A Number 0001 COMMISSIONER IRWIN continued, "... (indisc.) and on the way up. I mean certainly on - on internal issues such as personnel and other matters where you should have a - a more rigorous system, we do, but when it comes to actual policy decisions, folks needing things to get done, they can a pretty quick decision out of the ... head offices. When a pulp mill closes in Ketchikan, or a fire destroys the generation system up in Chalkyitsik, or, as happened this summer out in Bristol Bay and Kuskokwim, we have some 52 communities and the attendant families put in financial crisis, we can and do respond with an efficiency and effectiveness that is difficult to match - and here I would like to go to Mr. Krieber's statement about the community economic revitalization team process that we're enacting, and in fact, it's my department that's the head of that and who invited him to come the that particular meeting. And as he stated, there were lots of federal and state agencies there. The problems with trying to find an effective response has very little to do with DCRA or Commerce and Economic Development. The people who are actually at that table, and who really need to - to work more effectively and efficiently together, in this particular circumstance because we have federal timber issues in the mix, we - we have all kinds of layers of - of issues affecting the Tongass community. It's actually a lot of the resource agencies, both federal and state, who - who really need to be at the table and working effectively together for the benefit of those communities, and, in fact, it's our agencies who, through our models, help those - those folks along in that regard. And when the restructuring of our workloads is mandated by reductions in our budgets as has happened the last several years, I think, again, this is a time when DCRA, through our small organization and through our ability to react, we have been able to - to do the reconfigurations of talent and the reorganization of the structure to accommodate those and still put the product and the service out there on the street." Number 0180 COMMISSIONER IRWIN stated, "On the other hand, I realize that when statements are made regarding the perceived inefficiencies of government, it's not only about particular agencies, but also about how efficiently government works in the whole, and I understand and appreciate that. With respect to HB 400, again I fail to see how a better service or product will be provided to Alaskans by rearranging certain functions of government, and then taking what's left of DCRA and having it subsumed into a much larger organization. If larger is better, then I guess this makes some sense. In my opinion, however, larger is not necessarily more efficient; and I think that there are a lot of people who would agree with that; in fact, that - that perhaps it's fundamentally less efficient the larger you get. If efficiency, as it is used here to rationalize HB 400, is simply to save a relatively minor amount of wages ... by reducing a few positions at or near the top of the two departments slated for consolidation, then the rationale works. One commissioner would go, as would up to two or three top managers between the two departments. These savings would, we feel, however, be offset many times over by just the sheer costs of carrying out the dismantling and consolidation anticipated in this legislation. Now we don't have the fiscal note yet prepared, we're working with Representative Kohring's office on that, and I think that there are some who would say, 'Well, you know you really won't be changing people around. You won't be changing their sites and all of that.' I - I don't know that I agree that that would be the best approach to take in something like this, I think that there would a lot of arguments for co-location and actually the need for moving people around, and all of the costs that - that go with that, and ... every time you move a person the standard rate used by the Department of Administration is - is something like $5,000 per person. Those are just the financial costs, not to mention the personal costs that will be born by workers and their programs as they see and experience the tumult and uncertainty of their work environments. These uncertainties, and the emotional burdens that are inherent to them, will saddle and demoralize these workers and professionals throughout the many long years, and it will take years to truly effect the changes contemplated in HB 400. And I can't even begin to put into financial terms the cost of lost productivity that will certainly follow." Number 0359 COMMISSIONER IRWIN stated, "The other point that I really wanted to - to bring up today, and it's a difficult one for me to talk about in many ways, has to do with the friction that we're currently seeing as a state, regarding relations between urban and rural Alaska. I think it's safe to say that those frictions are greater today than at any time since statehood. Just this morning I participated in a press conference announcing the Governor's formation of a commission on rural governance and empowerment. And the driver behind all of this, and as we've seen, some of your colleagues ... in the House in Community [and] Regional Affairs this week will also starting to look at those - those same issues, that there's something out there, ... there is something happening in Alaska. These issues, that like bubble gum, the more you chew on 'em, the harder they get, and they seem to all be coming to a head and - and there seems to be kind of a critical mass. Again, when you look at subsistence, when you look at tribal sovereignty, native sovereignty that's manifesting itself at this particular time in the Venetie court case that could be decided by the Supreme Court at any time. We hear discussions about the fairness between funding, funding for rural schools versus urban schools. These are just some real -- they're the hot issues of the day, they all affect and have ... their roots in the rural-urban relationship. I bring this up in the discussion of HB 400 because I see a true connection here. Rightly or wrongly, there are those throughout the state, citizens and policy-makers alike, who see a clear connection between DCRA and rural Alaska. For some, this connection has a positive connotation. For others, this connection is anything but positive. In reality, DCRA has a relationship with, and responsibilities to, every Alaskan community from the largest to the smallest. When it comes to financial relationships - from safe communities funding which used to be municipal assistance and revenue sharing, to day care assistance and jobs training ... -- those three programs comprise a majority of - of the funds that run through our department. Our relationship with Alaska's large urban governments constitutes by far and away the greatest amount of our workloads and fiduciary responsibilities, and we're proud of this fact. But, yes, when it comes to on-the- ground, hands-on service delivery, our specialty is assisting communities of small to medium size." Number 0541 COMMISSIONER IRWIN stated, "Many, and if not an outright majority, of these communities are made up largely of Alaska Natives. To that extent, I can understand those who characterize these unending attempts to do away with DCRA as nothing more than veiled ... attacks on rural Alaska in general and the Alaska Native community in particular. Such a notion, I am sure, makes each and every one of us in this room uncomfortable and I'm equally sure that such is not the motivation of anyone in this legislature, least of all the prime sponsor of HB 400. But public policy is not a science as we all know, it is an art. And it is thus subject to individual interpretations of the how's and the why's of the fact that HB 400 is before us today. To the extent that many in rural and Native Alaska see this as yet another attempt to pull the rug out from under them, care and caution in how we proceed is of paramount importance. Together we will have to answer the question as to whether or not this is simply an attempt to take away what may see as, quote, a rural seat at the governor's cabinet. Together, we will have to convince many tens of thousands of Alaskans that this isn't an attempt to take the talent and the energy that has been built up over the past 25 years, ... talent and energy that addresses the governance and community development needs of rural Alaska, and let it dissipate into organizations that have missions quite unsimilar to that of the current Department of Community and Regional Affairs. And with that, I'd like to thank you once again for allowing me to speak and I'd be happy to go into other areas of inquiry ... to answer questions you might have." Number 0644 CHAIRMAN ROKEBERG stated he wanted to comment about Commissioner Irwin's reference to the friction between rural and urban Alaska. Chairman Rokeberg noted he has been saying much the same thing for about the last five or six years because he thought this was very foreseeable, indicating it was particularly foreseable from the narrower view of declining state revenues, decreasing oil production and "price squeezes." He indicated, with less money available to fund interests that may historically been funded statewide, it was quite foreseeable and predictable that this schism between the urban and rural areas would grow, noting he thinks that is only a portion of it. Chairman Rokeberg stated, as he said the Commissioner rightly pointed out, there are other issues, not necessarily economic in origin, but just as important, particularly with some of the people in rural areas of the state. Chairman Rokeberg indicated he felt this type of friction, or schism, was really unfortunate. He stated he knew for certain that the bill sponsor and those interested in HB 400 did not harbor "any of those particular types of biases or prejudices that ... we certainly don't accept in this state and haven't for decades and decades, and - and rightfully so." Chairman Rokeberg added that he did think the Commissioner pointed out a few things that might not actually be correct, referring to the idea of a rural seat on the governor's cabinet, and noting that attitude, if it existed, should be examined by those holding it. COMMISSIONER IRWIN noted he meant it the other way around. Number 0778 CHAIRMAN ROKEBERG responded that it meant the same thing however it was characterized, noting he did not want to create any more friction but that was part of the exercise they were going through. Chairman Rokeberg stated, "I think you've identified -- and I think this committee, the whole legislature, and the people in the state, more importantly, ought ... to be aware of what you bring forward on that issue because it's extremely important and a very sensitive-type thing we need to be able to work with and work around." Number 0808 REPRESENTATIVE COWDERY commented on the discussion of the division between urban and rural Alaska. He noted five generations of his family have lived in Alaska, and said, "My perspective, that as long as politicians, and the press and everything, keep driving that wedge of Native Alaskans rather than Alaskans, and urban, you know, and - and Black Americans instead of Americans and this and that. I think ... it's sad that we keep doing that or that that happens, and I think it makes the time when we'll all become one further down the road." Representative Cowdery noted Commissioner Irwin had spoken about the emotional stress of the uncertainty, indicating all the committee members appreciated that stress at every November general election. He asked Commissioner Irwin if he would be willing to work in the new department if asked, bringing his expertise in to help develop this, if HB 400 became law. Number 0911 COMMISSIONER IRWIN replied he had honestly not given it much thought. He noted there would obviously be only one commissionership, and said he has jokingly spoken with Commissioner-designee Sedwick of the DCED about "arm-wrestling" for the position. Commissioner Irwin stated he chose to accept his current appointment from Governor Knowles because DCRA is a department he feels in tune with and akin to. He noted his roots are in rural Alaska, his and his wife's families both live there; he said he is a product of rural Alaska. Commenting that he was not bringing up the issue of "rural versus urban," Commissioner Irwin noted he thinks there are very unique issues specific to rural Alaska including economic development. He indicated he feels a structure like DCRA, with its particular talents and expertise developed over the last 25 years in rural governance, is necessary to help find the answers to some very difficult issues which have plagued this state for a long time. Commissioner Irwin indicated he thought governance played a major role, even in the inability to get good economic opportunities in rural Alaska, even where those economic opportunities presented themselves. He noted he has a particular passion for that, and that was one of the reasons why he accepted his present position. Commissioner Irwin indicated he did not accept his appointment because of financial need, and was not overly concerned about that aspect if his job was eliminated. In response to Representative Cowdery's question, Commissioner Irwin said he did not know, stating, "It doesn't look to me to be the kind of structure that ... would be the type that I would necessarily find any real personal things to help me get up in the morning and want to go to work." Number 1018 REPRESENTATIVE COWDERY said, "Even if it was commissioner, you wouldn't?" Number 1025 COMMISSIONER IRWIN stated he didn't know. Number 1025 REPRESENTATIVE COWDERY asked him if he would be willing, if this became law, to take a position below the level of commissioner in the new department, if he was asked. Number 0132 COMMISSIONER IRWIN answered, "Not at all." Number 1034 REPRESENTATIVE COWDERY noted revenues were down and money was going to be cut this year. He asked Commissioner Irwin where he would cut $5 million in his department. Number 1047 COMMISSIONER IRWIN replied he could not do it, mainly because he did not have any pieces large enough, indicating he would have to totally dismantle myriad programs. He indicated the biggest chunk of DCRA's general fund dollars went into the Safe Communities Program; he noted the Administration's position on that is very clear so $5 million would not come from there. He noted he has other "big chunks," giving the example of child care, which is also one of the Administration's priorities. Commissioner Irwin stated, "I can't trim and cut $5 million dollar worth out of the ..." Number 1091 REPRESENTATIVE COWDERY asked Commissioner Irwin if he could cut less. Number 1095 COMMISSIONER IRWIN answered he did not think so at this point without coming to the hard decisions; coming back and asking them, "What is it you would like us not to do anymore?" He noted they have trimmed down, found efficiencies, had layoffs, restructured, and he said he thinks they are "still putting the product out there on the street that we've always been able to." He attributed this to the many incredible people who work for DCRA, noting he can't speak for other departments who might have personnel just as good. He stated, however, that he knew that whatever he asked of DCRA staff, they had delivered, whether it meant taking on a couple of different jobs, making up the rest of it on the weekends and in the evenings. Number 1140 REPRESENTATIVE BRICE asked Commissioner Irwin, on a time line, how long he thought it would take to implement the changes within HB 400. Number 1153 COMMISSIONER IRWIN noted up-front things like new stationery for everyone, and he said it would take a little while to get the administrative aspects in place, stating he did not intend to sound "flip." He commented that, as far as the restructuring and moving of people, it could take years to get everybody where they need to be logistically, noting DCRA, DCED and the other affected departments have state leases all over the place. Commissioner Irwin mentioned that through some of the work DCRA's been doing on the coordinated response in southern Southeast Alaska, he has gotten to know some people in Washington State who work in a hybrid department not unlike what this one would be. He noted Washington State had done a similar move three years ago, indicating that he did not think they should be looking to Washington as an example because of the lack of correlations between the states. He said he did know, however, that Washington still hasn't effected the entire changes anticipated by the legislature, noting a lot of it had to do with "corporate culture." He said the people in-house, not the leaders, don't like the change and are intent to make sure it doesn't succeed in a lot of ways. Number 1234 REPRESENTATIVE BRICE asked how much discussion Commissioner Irwin had had with "these folks who did this." Representative Brice asked if there was discussion about the impact on programs during this time. COMMISSIONER IRWIN replied, "We didn't get into the - the technical details; Vic and I have had conversations, but it was basically finding out what it was that he was proposing." Number 1257 CHAIRMAN ROKEBERG noted that it was almost 5:20 p.m. He conferred briefly with Jim Nordlund, Director, Division of Public Assistance, H&SS; and Jeff Bush, Deputy Commissioner, DCED. It was determined that Mr. Nordlund would delay his testimony until February 27; Mr. Bush was not available February 27, and would testify on February 25. Chairman Rokeberg stated the committee would probably like to hear from Commissioner Irwin again if he was able to attend another hearing, and the Chairman requested the presence of DCRA staff if the Commissioner would not be available. Chairman Rokeberg stated the committee would next take the testimony of Ms. Healy, who was visiting from Wasilla, and then conclude the public hearing on HB 400 for that day. Number 1324 VICKI L. HEALY came forward to testify. Ms. Healy stated she was a parent associated with the Head Start Program ["association" stated on tape]. Ms. Healy stated she was concerned about the Head Start Program being shuffled around under various entities, noting her lack of experience in the political arena and her unfamiliarity with the terms. She indicated she was glad they had figured out keeping the Head Start Program in the new department was a mistake, but moving it to H&SS didn't make her feel any better. Ms. Healy stated that, as a parent, her concern is currently the Head Start Program is an "awesome tool within the communities." She said it is one of the things that, as parents, they can get proper, quick response and reactions for their families and friends. She stated, "It's not a degrading thing, you don't feel bad walking into a Head Start office. ... That is one thing that does work well through the DCRA, and just to say, 'Well, because they're overlapping something with another office, then Head Start should be shoved someplace else, and we think that they'll do better there.' Right now we're working wonderfully where we are." Ms. Healy indicated she is concerned, as a parent, about what would happen if the Head Start Program is moved away from DCRA and put under another entity. She indicated she is not saying H&SS is a bad entity, but she said it is slower running, or "bogged down" as far as response time from a community member up the chain and back to get a response. Ms. Healy indicated, in her opinion, it would slow down their growth as a community. Number 1421 MS. HEALY stated, "How many families -- right now where somebody can go and talk to somebody at DCRA and address a problem and get almost an immediate response, where we have to go down the chain later and work our way through a thicker bureaucracy -- how many families are gonna fall through the cracks during that long delay that we're now gonna have to set by going someplace else, just because they deal with other children issues or self-help issues? Head Start works in all communities, and it's community-oriented, whether it's federally funded or not. It works with the community, it's community people involved, it's not just going into an office where somebody else that you have to deal with who acts like the money is coming out of their pocket, is making all the decisions. This is community-involved, and if you do move it around with careless thought, I don't see a projected future. 'Well, if we move it there, this is why it's going to run more efficient.' I don't see any of that in writing. 'This is ... our five year projection on how Head Start is going to work better there than it does right where it's at now.' And as a parent, that concerns me." Number 1489 CHAIRMAN ROKEBERG asked what type of contact parents had with the actual administration. Number 1495 MS. HEALY responded, "We have meetings all the time. I -- there's committees, all types of involvement. We get to work with the people within Head Start as to what kind of training is gonna happen with the parents on a weekly basis. 'Are we gonna do anger management this month? Are we gonna do, 'How to deal with a new baby in the family?' The people come to the meetings, they get to vote on things with the staff, with the administration, with that community -- and being in a Head Start Program that deals with multiple communities - Wasilla, Big Lake, Chugiak, Eagle River, Palmer - we even get to deal, as parents, separately within our own communities and work with the other ones. Where one thing works well in Wasilla, 'We're gonna do this for a fund-raiser to help this portion of Head Start out,' they may have something else, and, 'Wow, that's a good idea, so maybe we'll do 'em separate and maybe we'll combine 'em.' The community does get involved and they get to make those decision[s] and these are all things that run well through the program. 'Okay, can we do this? Can we do this garage sale in order to fund something to do this?' It has to go up the chain, it has to come back. We need a response for something like that. If it takes us five months to find out whether or not we can do that for a fund-raiser as parents, to try and help our community and our children, that opportunity has been missed because we couldn't even perform the fund-raiser 'cause we couldn't get a response on whether or not that was something legally that could be done. And we get that kind of response as Head Start people through this office." Ms. Healy noted the intended switch of the Head Start Program to H&SS. She stated, "There's a lot of other things that are involved under that hat, and to just shove Head Start in there because you want to merge two other entities, and take something away from them that they're already performing well, I don't see where Head Start is going to benefit, I don't see where the communities, and me, as a parent, is gonna benefit." Number 1609 CHAIRMAN ROKEBERG asked if there were any questions for Ms. Healy. There being none, Chairman Rokeberg announced that the committee, as previously arranged, would first take up the scheduled bills on Wednesday, February 25, and Friday, February 27, and then reopen the public hearing of HB 400 at approximately 4:00 p.m. on both days. He confirmed that Representative Kohring would be able to be in attendance. ADJOURNMENT Number 1648 CHAIRMAN ROKEBERG adjourned the House Labor and Commerce Standing Committee meeting at 5:25 p.m.

Document Name Date/Time Subjects