Legislature(1997 - 1998)
03/06/1998 03:30 PM L&C
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HOUSE LABOR AND COMMERCE STANDING COMMITTEE March 6, 1998 3:30 p.m. MEMBERS PRESENT Representative Norman Rokeberg, Chairman Representative Joe Ryan Representative Tom Brice MEMBERS ABSENT Representative John Cowdery, Vice Chairman Representative Bill Hudson Representative Jerry Sanders Representative Gene Kubina COMMITTEE CALENDAR 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; ASSIGNED TO SUBCOMMITTEE (* First public hearing) PREVIOUS ACTION 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 02/23/98 (H) MINUTE(L&C) 02/25/98 (H) L&C AT 3:15 PM CAPITOL 17 02/25/98 (H) MINUTE(L&C) 02/27/98 (H) L&C AT 3:15 PM CAPITOL 17 02/27/98 (H) MINUTE(L&C) 03/06/98 (H) L&C AT 3:15 PM CAPITOL 17 WITNESS REGISTER DAVID ALEXANDER Alaska Adult Education Association 125 West Fifth Avenue Anchorage, Alaska 99501 Telephone: (907) 279-7827 POSITION STATEMENT: Testified against Section 65 of HB 400, which moves the Job Training Partnership Act Program to the Department of Labor REPRESENTATIVE VIC KOHRING Alaska State Legislature Capitol Building, Room 421 Juneau, Alaska 99801 Telephone: (907) 465-2186 POSITION STATEMENT: Sponsor of HB 400. DAN KENNEDY 851 East Westpoint Drive, Suite 108 Wasilla, Alaska 99654 Telephone: (907) 376-1272 POSITION STATEMENT: Testified in support 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: Provided information on HB 400. TOM LAWSON, Director Division of Administrative Services Department of Commerce and Economic Development P.O. Box 110803 Juneau, Alaska 99811-0803 Telephone: (907) 465-2505 POSITION STATEMENT: Presented fiscal note for HB 400. REMOND HENDERSON, Director Division of Administrative Services Department of Community and Regional Affairs P.O. Box 112100 Juneau, Alaska 99811-2100 Telephone: (907) 465-4708 POSITION STATEMENT: Testified on the fiscal note for HB 400. KEITH GERKEN, Architect Facilities Division of General Services Department of Administration P.O. Box 110210 Juneau, Alaska 99811-0210 Telephone: (907) 465-5683 POSITION STATEMENT: Testified on the fiscal note for HB 400. JOSEPH SPEARS, Data Processing Center Supervisor Division of Administrative Services Department of Community and Regional Affairs 333 West Fourth Avenue, Suite 220 Anchorage, Alaska 99501 Telephone: (907) 269-4513 POSITION STATEMENT: Testified on the fiscal note for HB 400. REPRESENTATIVE ALAN AUSTERMAN Alaska State Legislature Capitol Building, Room 434 Juneau, Alaska 99801 Telephone: (907) 465-2487 POSITION STATEMENT: Testified on HB 400. ACTION NARRATIVE TAPE 98-26, SIDE A Number 0001 CHAIRMAN NORMAN ROKEBERG called the House Labor and Commerce Standing Committee meeting to order at 3:30 p.m. Members present at the call to order were Representatives Rokeberg and Ryan; Representative Brice arrived at approximately 4:10 p.m. HB 400 - DEPT OF COMMUNITY & ECONOMIC DEVELOPMENT Number 0050 CHAIRMAN ROKEBERG announced the committee's order 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." Chairman Rokeberg stated the committee would take testimony for the record on HB 400, noting the purpose of the meeting had been to review the bill in greater detail. Number 0159 DAVID ALEXANDER, Alaska Adult Education Association, testified via teleconference from Anchorage. He said the association is a provider of job training to adults throughout Alaska, with 20 centers in Alaska; the largest of those centers are located in Juneau, Fairbanks, Anchorage, Soldotna and Wasilla. Job Training Partnership Act (JTPA)-funded programs are occurring in each of those centers. Mr. Alexander referred to Section 65 of HB 400 moving the JTPA Program from the Department of Community and Regional Affairs (DCRA) to the Department of Labor (DOL). He said the Alaska Adult Education Association would prefer have the JTPA administration left with the new Department of Commerce and Rural Development because DCRA's approach to delivery of job-training services has been effective. He noted the three private industry councils have been much more sensitive to the needs of the business community in terms of orienting job-training programs toward business's actual needs than many of the other job training initiatives undertaken in the state. He noted the councils are made up of private employers; there is one statewide council, and one council in each Anchorage and Fairbanks. Number 0338 MR. ALEXANDER said the Alaska Adult Education Association is very much in favor of some of the DOL's work, but finds DOL is generally not a job-training agency and may not have the right philosophical orientation in this area. He indicated the association believes the JTPA Program administration would be much more effective if the program is left in the new department. Mr. Alexander commented on his 27 years of job-training experience working in Anchorage and statewide and noted he had also been on Alaska's models committee for the new "one-stop centers." In his tours of about ten of these facilities he said he consistently found that the existing private industry council set-up in each city where an effective job training program was going on was stimulated by the private industry council members themselves, the private business community members involved in the job training program decisions. He indicated he feels the current private industry council arrangement is effective and said his association believes the new Department of Commerce and Rural Development is the best location for JTPA programs. Number 0651 CHAIRMAN ROKEBERG asked if he was a state employee or a contractor. MR. ALEXANDER replied that he is a contractor; he works for Nine Star Enterprises in Anchorage. He noted it has Anchorage and statewide JTPA programs recruiting, training and employing adults. He stated this year's current placement rate is between 62 and 67 percent. Number 0542 CHAIRMAN ROKEBERG asked the amount of federal versus state money to finance the JTPA programs. MR. ALEXANDER replied he did not know. Number 0559 CHAIRMAN ROKEBERG asked why, in brief, Mr. Alexander's organization did not feel DOL would be effective with the JTPA Program. Number 0581 MR. ALEXANDER replied it is the association's perspective that DOL is focused on employment services where people come in, find out about jobs and take those jobs. He noted he has worked with DOL and is pleased with a lot of its services, but does not think it is a job-training organization or currently oriented toward job training. Mr. Alexander said he thinks the private industry council structure might not survive if DOL administered the JTPA funds, and he thinks a move away from the current business orientation maintained by the three private industry councils would not be good for the people served. Number 0716 CHAIRMAN ROKEBERG asked Representative Kohring to review the documentation he has provided to the committee. Chairman Rokeberg indicated after Representative Kohring's review the department members would have an opportunity to testify or answer questions. Number 0778 REPRESENTATIVE VIC KOHRING came forward to testify, noting the presence of Mike Krieber to help answer questions. Representative Kohring stated he chairs the Department of Commerce and Economic Development (DCED) and DCRA budget subcommittees; he feels he has a good understanding of those budgets and that it is consequently appropriate for him to pursue this legislation. He stated HB 400 would merge two economic development-related state government entities, DCED and DCRA; with the expectation upper-management dollars would be saved, taking the focus off of cutting specific programs within those two budgets. He reiterated that they were speaking of streamlining and restructuring government with the expectation that funding for these programs would go farther by eliminating upper management. Representative Kohring reviewed a 26-page packet of HB 400 materials distributed to the committee. He indicated the objective is to combine two departments, transfer certain programs out of these departments into more appropriate departments, and eliminate overlapping functions. He gave the examples of job training and child care as programs to be transferred. In addition to budget-cutting, a primary objective would be allowing the new department to focus on economic development throughout the entire state. House Bill 400 eliminates one of the two commissioner's offices and upper administrative division staff in one of the two departments. Representative Kohring reiterated that it does not eliminate or cut programs or impact services. He indicated, however, once the new department was in place some adjustments would probably be made after duplicating functions were precisely identified. Number 0997 REPRESENTATIVE KOHRING said another feature of HB 400 would be to unify financial resources under a new division intended to provide optimum funding for private and public projects, and businesses. This would enhance the development of infrastructure, which is inherent to the economic development and community self- sufficiency. Representative Kohring stressed that HB 400 would save approximately $1 million a year by eliminating one of the two commissioner's offices and the upper management staff. He indicated another benefit would the optimum funding of construction projects and the minimization of debt service for communities and private owners. Economic development-related projects would be completed sooner because of quicker project funding identification, expediting economic development. Businesses would benefit through "one-stop" access to various loan programs. Representative Kohring referred to his previous testimony on HB 400, noting the new department would be made up of four new divisions: the Division of Rural Affairs, formerly DCRA; the Division of Statewide Development, formerly DCED; the Division of Financial Resources, consolidating the various funding sources; and the Division of Administration, providing payroll-related services, personnel management, budgeting, et cetera. Number 1130 DAN KENNEDY testified next via teleconference from the Matanuska- Susitna Legislative Information Office (Mat-Su LIO). He stated he is a certified public accountant (CPA) and president of the greater Wasilla Chamber of Commerce). Mr Kennedy said he was testifying on his own behalf in support of HB 400 but noted the Wasilla Chamber of Commerce board would have a resolution in support of HB 400 before it on March 25. Mr. Kennedy said he feels like somewhat of an expert witness. He commented he has been practicing as a CPA in Alaska for 18 years; 7 years with an international CPA firm in Anchorage and 10 years as the chief financial officer, vice president of finance, for Matanuska Telephone Association (MTA). He said he has been in public CPA practice with his wife, also a CPA, for the last two years. He referred to his article entitled "The Re-engineering of Local Telecommunication Companies," published two years ago as he received his master's degree in business administration (MBA) from Alaska Pacific University. Mr. Kennedy said he feels very qualified to speak on the topic of merging departments because he orchestrated the merger, or re- engineering, of MTA's departments of finance and administrative services at the corporate headquarters in Palmer. He commented MTA is the third largest local exchange carrier in Alaska with annual revenues greater than $40 million and he noted the company will save approximately $200,000 annually. Number 1264 MR. KENNEDY congratulated the representatives who have brought HB 400 forward and indicated he believes future cost savings are very important to this task. Mr. Kennedy commented he thinks government, and even the private sector and corporate America to some degree, often improperly focuses on current year budgets or the current fiscal year (FY), overlooking long-term benefits or strategic planning efforts. He indicated he believes HB 400 would result in significant cost savings to state government, urging the commissioners of both DCRA and DCED to "grasp onto" this concept in HB 400 and cooperate fully with the legislative re-engineering efforts. Mr. Kennedy said the commissioners should take the initiative and show their leadership, noting both have tremendous private sector experience. The way to become more effective, he said, at least in corporate America, is by always re-engineering, looking at the most efficient and effective method of organization. Mr. Kennedy also said, as a CPA and advisor of both large and small Alaska businesses, he was truly disappointed that the current Administration continues to press for more government and more spending. He recommends state government follow the private sector's leadership by becoming leaner and more effective. Mr. Kennedy reiterated his support for the merger of DCED and DCRA, stating he was available for further testimony and noting his expertise in this area. He said he would also be very interested in making a proposal in a public RFP (Request for Proposals) process to assist with this merger. Number 1412 CHAIRMAN ROKEBERG asked Mr. Kennedy how many people were in the two merged groups at MTA. Number 1425 MR. KENNEDY replied that there were 28 people in the finance department and approximately 40 people in the administrative services department, which included purchasing, procurement, warehousing, contract administration and human resources. He noted, similar to HB 400, MTA removed an unnecessary top management level, eliminating a vice president and an executive assistant, saving approximately $200,000 without losing any particular thrust or important functions of the merged departments. Number 1470 CHAIRMAN ROKEBERG indicated Mr. Kennedy, as the vice president of finance, must have been the surviving head executive of the new department. Number 1478 MR. KENNEDY answered in the negative, stating he "walked the talk." Because he felt so strongly that MTA had to become more competitive in an emerging, highly competitive industry, he eliminated his own position and started his CPA firm. Number 1509 CHAIRMAN ROKEBERG asked Mr. Kennedy what he would include in an RFP to assist with this endeavor. Number 1534 MR. KENNEDY indicated the RFP should specify a firm with experience effectively merging either governments or departments in the private sector, especially looking "for the seal of long-term Alaskans for the work that the two departments do." He said he is familiar with the work of the two departments, referring to summaries from the departments' world wide web sites, and stated, "I think it's (indisc.) qualifications and understanding of Alaska needs are the two primary elements of the scope of that engagement." CHAIRMAN ROKEBERG asked what the scope of work would be. Number 1583 MR. KENNEDY said he thought HB 400 recommended cost savings, first and foremost, by eliminating one of the commissioner positions. Secondly, he said, the re-engineering of an entity in the private sector is an extensive process with focus on gathering input from the employees. He said he is a strong advocate of empowering employees, noting employees at all levels in a company have a tremendous understanding for the business they perform. He thinks an engagement similar to the re-engineering concepts used extensively in corporate America in the last four or five years would work very well here because these two departments interact often with the private sector. Mr. Kennedy recommended gathering input from both the employees and the customers of these two departments, i.e. the users of the services, for better and more effective management of this element of state government. Number 1649 CHAIRMAN ROKEBERG asked how the compensation was usually arranged in an RFP. MR. KENNEDY indicated he had seen it both by the hour and by contract, noting he has seen RFPs through the state of Alaska and said he has seen (indisc.) within state government that could better answer that question in accordance with state regulation. CHAIRMAN ROKEBERG asked Mr. Kennedy his "ballpark" cost estimate for a third-party contractor such as himself. MR. KENNEDY replied he thought it would be an engagement not to exceed $100,000. CHAIRMAN ROKEBERG said the committee would appreciate Mr. Kennedy written input with further thoughts on this, particularly regarding what needs to be done to accomplish this. Number 1719 REPRESENTATIVE KOHRING came forward to continue his review of HB 400, thanking Mr. Kennedy for his outstanding testimony. Representative Kohring provided copies of addition written testimony in support to the committee, indicating two were from witnesses who had testified at the February 27 public hearing. He noted one of the other statements was from Don Tanner, a member of the Hickel Administration and former deputy commissioner of DCRA. Mr. Tanner's letter reiterates the merits of HB 400: unnecessary overhead would be cut; efficiencies in implementing programs would be increased; and economic growth, particularly in rural Alaska, would be enhanced. Representative Kohring said Mr. Tanner feels the departments do perform similar tasks in spite of previous testimony to the contrary, Mr. Tanner thinks HB 400 would be good for rural Alaska, and he thinks HB 400 would be good for the state budget. Representative Kohring noted helping economic development in rural Alaska is one of the goals. Representative Kohring referred to additional support letters in the HB 400 packet, noting three were from people representing Tamsure Construction (ph), a Wasilla-area general contracting firm. Representative Kohring also provided a two-page summary to the committee containing answers to frequently asked questions about HB 400. Number 1829 REPRESENTATIVE KOHRING referred to page three of the packet, "Overlapping Economic Development Related Activities of DCED and DCRA." He commented one of the major points he is trying to make with this legislation, in addition to cutting the budget and enhancing economic development, is that these two entities are very much related in the sense they are economic development organizations trying to spur growth in Alaska's economy. Representative Kohring noted they examined the missions of DCRA's and DCED's different programs to see where that overlap is occurring. He commented that the activity categories are listed in the left column, the middle column lists corresponding DCRA programs, and the right column lists corresponding DCED programs. The activities categories are: rural economic/business development; rural tourism; rural sanitation and infrastructure projects: planning/funding/management/operations; energy/electrical development and funding; utility assistance; assistance to economically distressed regions; fisheries. Representative Kohring stated there aren't necessarily identical programs in both entities, but there are certainly related programs which tie into these activity categories. Number 1889 CHAIRMAN ROKEBERG noted the former Division of Tourism was not listed in the tourism activity category for DCED. He asked if the former division was now being called the Office of Tourism. Number 1908 REPRESENTATIVE KOHRING said there was a new Budget Review Unit (BRU) calling it the Office of Trade and Tourism, which reflected their changes in Finance last year. He commented that should have been noted and was an oversight. Number 1919 MIKE KRIEBER, Legislative Administrative Assistant to Representative Vic Kohring, said they were focusing on the rural aspects of tourism; in particular, efforts toward rural development in the tourism industry. Number 1930 CHAIRMAN ROKEBERG noted, however, the title is "Overlapping Economic Development Related Activities of DCED and DCRA," and said he thought they were supposed to be merging the departments. Number 1940 REPRESENTATIVE KOHRING noted he wouldn't go into each specific program because of time constraints, but said he wanted to show the committee DCED's and DCRA's different programs relating to the major activity areas identified in that left column. He stated the committee could see there are many programs that not only relate to economic development but are also similar to each other. Representative Kohring stated the next page gives the actual cost savings of HB 400. He commented the bill calls for the elimination of the DCRA commissioner's office, but the composition of the upper management team would actually be up to the Governor. Representative Kohring listed the savings: $458,000 from the elimination of the commissioner's office specifically; $421,000 from the elimination of the administrative services office; $102,000 from the elimination of the Division of Community and Rural ["regional" stated on tape] Development (DCRD) director position; $73,000 from the elimination of miscellaneous expenses such as travel, contractual and supplies, for a total of $1,054,000 in savings. Representative Kohring indicated those are significant savings, and he emphasized the savings would be ongoing for every future year, an important consideration for the committee. Number 2016 REPRESENTATIVE KOHRING indicated further justification for HB 400 is that the one-time implementation costs would be more than offset by the many millions the state would save over time. He referred to the next page, "Evaluation of New Department Staffing Levels," stating he wanted the committee to see how the DCED and DCRA compare to other state government departments. He commented concern was expressed at the last hearing that a merger would create a cumbersome colossus which would be difficult manage without incurring extra personnel expense. He said DCED currently has only 348 employees and DCRA has 180 employees for a combined total of 528. He said the total would be just under 500 employees after some positions are eliminated, commenting it would still be a small department , the fourth smallest in state government. Representative Kohring said they feel it would still very much be a manageable department. Number 2088 CHAIRMAN ROKEBERG commented that a battalion size in the United States (US) Army was around 400 or 500, noting Representative Kohring might want to check this. There was some discussion regarding the sizes of US Army divisions and Roman legions. Number 2128 REPRESENTATIVE KOHRING said the packet's last section contained his rebuttals to DCRA and DCED staff testimony at the February 25 hearing, and to concerns expressed by Mr. Perkins, Special Assistant, DOL. Representative Kohring said the deputy commissioner who spoke [note: both the DCRA and DCED deputy commissioners testified at the February 25 hearing] noted DCED has a fundamentally different mission from DCRA, and DCED programs focus more on private sector businesses while DCRA focuses more on public. Representative Kohring said the deputy commissioner was essentially saying the missions of the departments are separate because one is public and the other is private, and Representative Kohring indicated he disagrees. He stated DCED does provide funding for publicly-owned projects not just private. He noted the Governor's proposed FY 1999 capital budget includes $16.8 million in Alaska Industrial Development and Export Authority (AIDEA) funds; including monies for DCRA, the departments of Administration, Corrections, Environmental Conservation (DEC), Transportation and Public Facilities (DOT/PF), Revenue, Natural Resources (DNR), Military and Veterans Affairs, et cetera. Number 2189 CHAIRMAN ROKEBERG said, "You mean these agencies are ripping off AIDEA for this amount of money?" He asked, "Or is this capital budget grants ...?" REPRESENTATIVE KOHRING confirmed it was capital budget grants, and also part of the Governor's proposed budget, not necessarily what the legislature was going to authorize. However, it does underscore the fact, he said, that DCED is not simply involved with the private sector; it is providing monies for the public sector as well, contrary to previous testimony. Representative Kohring also noted that the Alaska Public Utilities Commission (APUC) oversees private and public utilities, and is inherently involved in public and public infrastructure development as well; including water, sewer, natural gas, telecommunications and various other utilities. Thirdly, Representative Kohring commented on a quote in DCED's operational budget overview document for FY 1999 which states that one of the functions of the Division of Trade and Development is "helping communities develop needed infrastructure," which he said further underscores DCED deals with public financing not just private. In explanation, Representative Kohring indicated that public financing, as also done by the legislature, involves spending monies dealing with infrastructure development impacting the public sector. In summary, he said, both DCED and DCRA participate in planning and funding of public and private projects and he thinks it is pretty clear the deputy commissioner's position in that regard was not completely accurate. Representative Kohring commented he has tried to clearly note that there are multiple examples of duplicating, related functions and programs dealing with economic development in both departments. He referred to Exhibit 1, noting there are many types of overlapping functions despite the deputy commissioner's testimony that there were literally no duplicating functions within DCRA. Representative Kohring said the duplicating functions include rural tourism, infrastructure and community facilities [order in packet: 1) sponsor's rebuttals to DCED; 2) sponsor's rebuttals to DCRA; 3) sponsor's rebuttals to DOL; 4) 5-page Exhibit 1; 5) 1-page Exhibit 2; 6) 2-page Exhibit 3. There is also a small section identified as Exhibit 1 on page 2 of the rebuttal to DCRA]. Number 2285 CHAIRMAN ROKEBERG indicated Exhibit 1 referred to the DCRA Rural Development Initiative Fund (RDIF) loan summary. Number 2295 REPRESENTATIVE KOHRING reviewed the materials and indicated he made a misstatement about the deputy commissioner's testimony regarding duplication. Representative Kohring said, "He feels that there's no connection between the two, that there's no duplicating functions between DCED and DCRA, and if you'll note ... on Exhibit 1, you'll see that DCRA does, in fact, have functions that relate to DCED and economic development here, particularly when it comes to private organizations that have been the recipient[s] of funds." Number 2317 CHAIRMAN ROKEBERG referred to the various loan programs, grants, et cetera, in Exhibit 1 and asked if that was what Representative Kohring was referring to as far economic development-related activities. REPRESENTATIVE KOHRING referred the question to Mr. Krieber. MR. KRIEBER answered in the affirmative. Number 2330 REPRESENTATIVE KOHRING indicated there are many types of overlapping functions of these departments. He summarized that they have found many examples which indicate overlapping functions exist and that there is much in the way of duplication occurring between these two agencies. Representative Kohring noted the deputy commissioner said many staff would have to be relocated due to the merger. Representative Kohring also referred to the fiscal note which Mr. Lawson would present later and indicated DCED's perspective is that the merger would require relocating many personnel. Representative Kohring disagreed, noting the DCED deputy commissioner also noted two full-time space planners would be necessary for office space consolidation because DCED felt all of these staff people would have to be put in one location. Representative Kohring disagreed with that also, referring to Exhibit 3 which points out that DCED currently occupies multiple locations and is functioning fine without being consolidated. Kohring continued, "I'd also like to point out that a few other - a few programs ..." [TESTIMONY INTERRUPTED BY TAPE CHANGE] TAPE 98-26, SIDE B Number 0001 REPRESENTATIVE KOHRING continued, "... being transferred to other departments as well, and what that really means is there's gonna be a very minimal number of employees that are going to be transferred to other locations." He indicated a maximum would be 19 people being moved and it could be as few as 3. Three people would essentially be moved across the street with the transfer of the Head Start Program to the Department of Health and Social Services (H&SS) from its current DCRA location. He said relocating 19 people would cost $95,000 at most, based on the standard $5,000 used by the department. Representative Kohring referred to Item 4 in the rebuttal to DCED, noting the deputy commissioner indicated the new department would require two deputy commissioners. Representative Kohring rebutted that, commenting the new department would have under 500 employees, approximately 350 employees if the 104 people in the independent entities were excluded. Representative Kohring referred to his earlier testimony on department sizes, noting that was a relatively small department and there are only three departments in state government currently with two deputy commissioners. Representative Kohring noted the new department would retain the DCED special assistant. Representative Kohring said the DCRA deputy commissioner indicated during his February 25 testimony that DCED funds public and private projects, but DCRA only funds public entities. However Representative Kohring referred to Exhibit 1, noting there are 34 different private entity recipients of RDIF loans. Page 2 of Exhibit 1 shows that DCRA has a mini-grant award program with a total of 6 public and private partnership grants. Representative Kohring indicated this further underscores that private parties as well as a public entity are involved. Number 0146 CHAIRMAN ROKEBERG referred to one RDIF loan entries in Exhibit 1, stating he assumed Tailor Made Pizza (in McCarthy) was a private entity. Number 0150 REPRESENTATIVE KOHRING answered in the affirmative. Representative Kohring next addressed DCRA's claim that it does not participate in rural tourism development. He said the committee can see that there are rural tourism development-related programs funded through DCRA. He next addressed the commissioner of DCRA's assertion that DCRA funds mostly publicly-owned infrastructure projects, stating that is completely incorrect. Referring again to Exhibit 1, Representative Kohring noted DCRA's RDIF loan program shows only one of 34 loans used for infrastructure and that loan was for a privately-owned RV (recreational vehicle) park. The mini-grant program list shows none of the 23 grants were actually used for infrastructure. In summary, both DCED and DCRA fund and administer private and public projects; rural tourism projects as well as infrastructure and community facility energy electric-related projects, and he asked, "Why do we have two departments that perform these same tasks? We should merge these two departments together if they're in fact out there performing the same tasks." Number 0215 REPRESENTATIVE KOHRING referred to the February 27 memorandum to the committee from Lamar Cotten, Deputy Commissioner, DCRA, noting there were disagreements there also. He commented Mr. Cotten stated DCRA has limited involvement in assisting communities to develop a community strategy for health and safety, community infrastructure, and jobs and economic development and so forth. In rebuttal, Representative Kohring asked if rural communities would ever become independent if only a few communities were actually receiving limited assistance from DCRA, indicating DCRA's function is to help rural communities attain economic self-sufficiency. Representative Kohring said HB 400 would provide the framework to enable rural Alaska a chance to build its economy through greater coordinated assistance for rural communities through these programs administered through the new department. He agrees a comprehensive approach to economic development is needed, but it seems an effective strategy is especially needed because of the many factors affecting economic development. Representative Kohring said DCRA is inherently involved in such a strategy but he indicated there isn't a good focus on effective development in the present situation, the focus the new department would provide. The next rebuttal items deals with the DCRA's assertion that it refers community officials to other agencies including DCED after a development strategy is determined. Representative Kohring noted DCRA is not involved with developing this strategy and only serves as a "middleman" agency; therefore, DCRA should be merged into DCED where such coordination would be more effective. Another point in the memorandum is that DCRA's regional development efforts are primarily provided through funding and administrative support of the Alaska Regional Development Organization Program (ARDOR). Number 0303 CHAIRMAN ROKEBERG indicated the ARDOR Program has been in two or three departments in the past three years. Number 0313 REPRESENTATIVE KOHRING noted the ARDOR Program funding comes through interagency receipts from DCED and under HB 400 this program would be funded directly through the new department, eliminating DCRA's current middleman role and creating greater efficiency. Number 0338 REPRESENTATIVE JOE RYAN asked if Representative Kohring had identified the costs involved in this transfer of funds. REPRESENTATIVE KOHRING said they haven't specifically identified the resulting savings from addressing the duplicating functions. REPRESENTATIVE RYAN indicated he thought there would be associated administrative and auditing costs with this transfer of funds. Number 0355 REPRESENTATIVE KOHRING said they would expect the departments, if merged, to examine and recognize that there are duplicating functions, combining those programs with resulting more efficient use of funds in delivering the same programs. Representative Kohring referred Item 4 in his rebuttal to DCRA, saying DCRA states its RDIF program differs from DCED's small business economic development revolving loan program because they serve different clienteles. In rebuttal, Representative Kohring referred again to Exhibit 1, noting DCED is also involved in the RDIF program, and he said they feel efficiencies in management can be achieved if this program is operated under one department. He asked, "Why should we have this RDIF loan program providing loans through DCRA and also providing loans through DCED?" noting that is another example of duplicating functions where greater efficiencies could be achieved through merging. Referring to Item 5, he said DCRA indicated it agrees that it provides infrastructure scoping, planning and funding. He said DCRA states also that it provides rural sanitation, in this case rural sanitation business management assistance. However, he said DCRA said DCED does not perform these tasks. Number 0425 REPRESENTATIVE KOHRING pointed out that DCED does perform these tasks, and it is another example of DCRA doing something similar to DCED. Representative Kohring more specifically pointed to AIDEA, noting AIDEA is an important part of DCED relating to economic development, international and domestic trade. He stated, "Again, we've got AIDEA running under this auspices referring to DCED and then we've got the - the other program under DCRA, so there are very similar functions there." He also noted that AIDEA is apparently involved in early scoping and planning in the course of funding these projects and its participation in the Southeast Alaska Community Economic Revitalization Team [SE-CERT], despite the deputy commissioner's assertion. Number 0466 CHAIRMAN ROKEBERG pointed out AIDEA is an independent agency, indicating this would be discussed later. Number 0473 REPRESENTATIVE KOHRING summarized in response to the deputy commissioners of both DCED and DCRA that there is ample evidence all kinds of duplicating activities are currently occurring. He said that again, it is not precisely the same, necessarily, in some cases yes, but by and large they are speaking about related economic development programs being administered in both DCRA and DCED. He said they think that further justifies merging the two departments, noting the departments are both economic development entities, commenting that they should put the two together under one "management roof," saving themselves that $1 million in costly and expensive upper management bureaucracy. Number 0508 REPRESENTATIVE RYAN asked Representative Kohring if he knew offhand the number of child care functions are performed by the state, commenting he knew of three: child care assistance under H&SS which goes to municipalities, Division of Family and Youth Services (DFYS) which pays for babysitters for people, AFDC (Aid to Families with Dependent Children) in the "welfare to work" program, and he imagines there are a few more. Number 0525 REPRESENTATIVE KOHRING stated he was not really familiar with all of the programs under H&SS, but they feel H&SS would be a much improved fit for the child care and Head Start programs currently in DCRA, since there are child care and early child development- related programs in H&SS. Number 0542 MR. KRIEBER indicated there were three child-related programs with DCRA: the Head Start Program, the Child Care Program and the day care assistance program. Number 0568 REPRESENTATIVE KOHRING noted he disagreed with the comments of Mr. Perkins, the DOL's special assistant, on February 27 that DOL would not be a "good fit" for the JTPA Program to be transferred from DCRA. Representative Kohring referred to the DOL's mission per AS 23.05.010: AS 23.05.010. Purpose. The Department of Labor shall foster and promote the welfare of the wage earners of the state, improve their working conditions and advance their opportunities for profitable employment. REPRESENTATIVE KOHRING noted the language "advance their opportunities for profitable employment." which he believes refers to job training. If DOL's statutory mission is to provide for job training, then it only makes sense to put JTPA in DOL. Also, Representative Kohring pointed out that the transfer of JTPA, the State Training Employment Program (STEP) and the "one-stop" programs from DCRA into DOL are consistent with the statutory purpose. Representative Kohring noted currently DCRA refers JTPA and STEP trainees to employment services at DOL, providing the funding to DOL for this service, and he said they question why a middleman is even involved. Number 0635 CHAIRMAN ROKEBERG confirmed that DOL collects the STEP money "from unemployment compensation" and turns it over to DCRA to expending it. Number 0659 REPRESENTATIVE KOHRING answered in the affirmative, noting they feel it would more appropriate for DOL to keep and spend that money with JTPA under its management auspices. He indicated that concluded his presentation, noting they had a relatively lengthy rebuttal, probably Representative Brice's benefit, justifying the transfer of the child care and Head Start programs to H&SS. REPRESENTATIVE TOM BRICE requested a copy. CHAIRMAN ROKEBERG said anything Representative Kohring had in that regard should be in the record. Number 0697 REPRESENTATIVE KOHRING indicated they think moving these programs to H&SS will provide the administration the opportunity to gain greater efficiencies as far as providing improved services to Alaska's families. He said this newly-established federal child care and development fund, which is part of the federal government's welfare reform package, does require the various states to "serve families through a single integrated child care system," indicating putting all the various child-related services into one integrated child care system would satisfy this mandate of the federal government. He commented this was also based on their belief that having everything under one roof would provide much better service for the residents of the state. Number 0759 REPRESENTATIVE BRICE noted the day care, child care and Head Start programs in DCRA were not all income-based programs and he indicated he was concerned that moving these programs into the welfare programs would take child care away from families needing child care assistance in order to stay off welfare. He indicated putting these DCRA programs, not strictly income-based programs, under the new Alaska Temporary Assistance Program (ATAP), formerly AFDC, made them strictly income eligibility-types of programs. He was concerned because he thought they would end up putting 10,000 or 12,000 working families on welfare, or taking away their child care, and thought there would be major problems if these families were paying the full amount for their child care. He indicated a somewhat associated problem would be the effect on programs directed toward operators of day care centers rather than individual families, questioning whether this would require those centers to be completely income-based if receiving those benefits. Number 0841 REPRESENTATIVE KOHRING referred to his involvement with the DCRA and DCED budgets the last two years and said that issue had been addressed last year concerning the two child care-related programs, the day care assistance program and Child Care Program. House Bill 400 would not make any changes to those programs but there is a possibility that the budget subcommittee might take action to combine the two programs, as it tried to last year. Number 0860 REPRESENTATIVE BRICE reiterated his concern about the effect of possibly turning a non-income-based program into an income-based program on those people on the margin of eligibility who need a small amount of child care assistance in order to work Number 0889 CHAIRMAN ROKEBERG asked how these families would lose their benefit, questioning whether it was a federal criteria. Number 0893 REPRESENTATIVE BRICE answered in the affirmative. He said the income standards for ATAP qualification are statutorily established in Alaska at approximately 70, 75 percent federal poverty levels (FPL). He said a lot of these people are probably at 85, 90 percent FPL, or 100 or 110 percent FPL which is approximately $12,000 to $14,000 a year. Number 0926 CHAIRMAN ROKEBERG indicated he didn't think an administrative merger alone would have an effect, mentioning the possibility of having bifurcated criteria. Number 0935 REPRESENTATIVE BRICE commented about possible effects of putting it all within the "child care providers" under H&SS, stating, "In other words, if you take this pot of money, throw it in that pot of money, it's going to be required that those standards by which that pot of money is administered is going to be applied to everything within that pot." Number 0955 CHAIRMAN ROKEBERG said, however, that HB 400 doesn't provide for that, and confirmed it would be up to the budget subcommittee to give direction within the budget document. Number 0961 REPRESENTATIVE BRICE stated that was the next question: Whether or not that will happen? He said then it also becomes a question also of playing the people who aren't on welfare off against the people who are on welfare, asking "And how do you provide adequate child care in both instances?" CHAIRMAN ROKEBERG asked if that was the threat by removing them from DCRA and putting them into H&SS, questioning whether Representative Brice was suggesting the department wouldn't follow the statutory direction. Number 0989 REPRESENTATIVE BRICE said the question is not whether the department would but whether the legislature would. He stated these programs also subsidize those centers so things like snacks can be provided for some kids. Representative Brice indicated that the legislature's actions are appropriate because of the legislative process, but he questions is how the administration of these programs is seen and how that will work in the long run. Number 1023 REPRESENTATIVE KOHRING said he didn't think the administration of those programs would change through moving them to H&SS, other than perhaps being run with greater efficiency by being run with similar programs. He reiterated that the legislation doesn't call for any changes in the child care assistance program or the day care program, noting the idea of merging the two came from the budget subcommittee the previous year and could come up again this year. REPRESENTATIVE BRICE emphasized that the Head Start Program is not like those other programs, indicating it provides unique services. REPRESENTATIVE RYAN noted the importance of flexible child care in "welfare to work" programs and urged that the integrity of these programs be kept if transferred. Number 1116 CHAIRMAN ROKEBERG stated he had more questions for the sponsor regarding scoping for the subcommittee, but wished Mr. Lawson to present the fiscal note at this time. Number 1190 TOM LAWSON, Director, Division of Administrative Services, Department of Commerce and Economic Development, came forward to testify with Mr. Henderson of DCRA and Mr. Gerken of the Department of Administration. Number 1205 REMOND HENDERSON, Director, Division of Administrative Services, Department of Community and Regional Affairs, came forward to testify. Number 1208 KEITH GERKEN, Architect, Facilities, Division of General Services, Department of Administration, came forward to testify. Number 1211 MR. LAWSON explained the fiscal note. He stated this fiscal note represented their best estimate of one-time costs and future savings, noting they worked with all the state agencies that would be impacted by HB 400. As a footnote, he said it was a best guess and many of the numbers would need to be "fleshed out." House Bill 400 impacts four state agencies, more than $200 million in programs, and more than 500 state employees. He said it was fairly difficult to quantify the fiscal impacts because of the movement of the programs and the somewhat limited time they have had. Mr. Lawson commented it would be easier to explain page 2 of the fiscal note first and then page 1. The first item is the staff savings. Based on past program movements to different state agencies, he said experience indicates it takes about 24 months (two years) for programs to be fully transferred and operating fairly accurately. One of the commissioners and secretaries would be deleted immediately, an administrative services director would be downgraded to a deputy and the DCRD director would be reduced to a program coordinator. This would result in $208,000 in savings. During the first 12 months of implementation, deleting one of the deputy commissioners, one of the special assistants, and possible downgrades of the division directors would be examined. Mr. Lawson noted they expect the administrative staff workload to increase rather than decrease because of the merger, and, at least during the first 12 months, no administrative staff would be cut. During the second year of implementation the administrative staff in the division of administration, as well as in each of the divisions, would be examined for possible reductions. Number 1415 CHAIRMAN ROKEBERG commented that this was not reflected in the fiscal note. Number 1417 MR. LAWSON replied that this was because they didn't know whether staff would be eliminated or downgraded, this was an estimate they weren't ready to make. Addressing the moving costs, he said they estimate the total cost of the merger to be $1,849,000; which includes costs from three different components: moving costs; one- time computer system costs; and leasing new space, meeting regulations, et cetera. The moving cost is estimated to be $1,695,000. They reached this figure through a two-step process. First, they estimated a moving factor per worker with the help of Mr. Gerken and his shop because they thought multiple moves would be necessary. Mr. Gerken's estimate of $6,100 per person was based on recent moves in both Juneau and Anchorage, and is an increase from the $5,000 per person figure. The second step, on pages 4 and 5 of the fiscal note, was the creation of a grid locating the existing DCED and DCRA employees in both Juneau and Anchorage. Mr. Lawson said they came up with what they think is a reasonable scenario for staff location, noting they felt 259 positions would need to be relocated, resulting in a cost of $1,579,900. He stated the 7 positions of the statewide service delivery program would be relocated from DCRA to DOL. He noted the rest of the spreadsheet indicates the balance of the DCRA and DCED staff that would be moved to the new agency. He said they feel it is necessary to literally have the staff under one roof if they are to meet the intent of the bill, as they understand it, of better coordination, integration, et cetera. The Juneau spreadsheet shows the remaining DCRA staff would be moved to the ninth floor of the State Office Building (SOB). It was felt that, of the divisions within DCED, the Division of Occupational Licensing would best be able to stand alone, and so would be moved into the DCRA building. The idea is to integrate the DCRA and DCED administrative services staffs and programs so they can benefit from co-location. Number 1720 CHAIRMAN ROKEBERG confirmed the top half of the spread sheet showed the existing configuration and indicated there was some confusion about the preferred option shown below. MR. LAWSON explained that 34 people would be moved out of the DCRA building into the SOB, 7 people would be moved out of the DCRA building to the DOL building, and the Division of Occupational Licensing consisting of 37 people would be moved from the SOB to the DCRA building, for a total of 81 moves. He indicated the Anchorage moves were more complex because of the distribution of office space all over Anchorage, referring to page 5 of the fiscal note. The top two rows of the spreadsheet show the transfer of the JTPA Program and the statewide service delivery program transfer to the DOL. He noted there was no room at the DOL's current Anchorage location, but through Mr. Gerken's estimate, they feel there would be no increase in lease costs to find space for these programs. There is no current space with H&SS in the Frontier Building for the ten staff of the child care assistance program currently located at the Post Office Mall, noting page 2 showed that cost. He stated the rest of the inventory showed DCRA and DCED staff, indicating new office space would be the best option for location of the combined staff because of the high cost of leases and upcoming lease expirations in the Frontier Building and the lack of space at the Post Office Mall. No new lease costs are necessary because of the combined current costs of the existing leases. He noted the independent agencies were being left in their current locations because of their independent status. Number 2027 MR. LAWSON stated the fiscal note also did not show movement of DCRA or DCED staff outside Anchorage and Juneau: both agencies have Fairbanks staff, DCED has staff in Tok and Seattle, and DCRA has staff in field offices statewide. He stated there was no effort to merge any of these offices at this point. Referring to page 2 and the top of page 3 of the fiscal note, he said the Division of General Services felt that contracted space design assistance would be necessary because of the size of staff movement. The estimated cost would be $50,000: $25,000 in Juneau and $25,000 in Anchorage. $65,100 is the estimated cost for Frontier building space for the ten child care office staff ($2.17 per square foot over the course of a year). He said the one-time computer system costs are estimated at $125,000, with the major cost being the merger of the two separate DCRA and DCED systems. The other costs were costs for systems for the child care assistance program in Anchorage and for the DOL office in Anchorage. Continuing, he said they don't see a need for two purchasing agents for 1 year, but do feel an individual would be needed half-time for one year or full-time for 6 months at a cost of $29,100. Number 2315 CHAIRMAN ROKEBERG asked for clarification. MR. LAWSON explained the purchasing agent was to make sure regulations were properly followed, et cetera, for leasing bids. CHAIRMAN ROKEBERG asked if there was an interagency charge for leasing services from GSA (ph). MR. LAWSON said they were trying to represent the costs of the bill. He indicated HB 400 was the reason they would be going out to bid for this new office. CHAIRMAN ROKEBERG asked if it was a cost in the time allocation of an existing position. MR. LAWSON replied that it could be, or a temporary position. TAPE 98-27, SIDE A Number 0001 MR. LAWSON summed up his testimony. He referred to the $175,500 "personal services" cost on page 1 of the fiscal note. He said, "That is general fund, that doesn't total the $208,000." ["$280,000" stated on tape] Under the funding source, there is also $32,500 shown as interagency receipts. He explained that as the commissioner's office and the Division of Administrative Services have incurred budget cuts, they have gone to the various divisions for "charge-back" of services. CHAIRMAN ROKEBERG asked if there would be a decrease in charge- backs. MR. LAWSON replied there would be a decrease in charge-backs but indicated there would only be $175,500 of general fund savings because of the charge-backs. He said the $1,849,100 capital expenditures represents the total of the moving costs, computer system costs, and space planning and leasing costs. He indicated the net cost for the first year, FY 1999 would be $1,640,900, under the funding source, and from that point on it would be a savings of $208,200. He added, referring to the chairman's first question, that there might be further savings in the second and third years as they evaluate top management and administrative positions. Number 0208 REPRESENTATIVE RYAN said in his four years as a legislative aide and in his second year as a Representative, he's seen various fiscal notes and he indicated he feels the Administration gives high fiscal notes for legislation it does not like. He referred to Commissioner-designee Sedwick of DCED's confirmation hearing in the House Labor and Commerce Standing Committee on March 4, 1998, noting she had mentioned weekly meetings with her directors. Representative Ryan said he felt the physical location of the various departments was irrelevant because of telephones and the computer network and that the fiscal note was unjustified. In his opinion, the computer system upgrade is a management problem. He indicated he saw a few potential moves but did not agree with majority of moves in the fiscal note, commenting he thought the DOL should come in with an appropriate fiscal note if the department was going to be affected. Number 0475 CHAIRMAN ROKEBERG asked Mr Gerken for an abstract in the form of a recap of every lease covered by the fiscal note, including the square footage, amount of people, et cetera, so the committee could make an analysis of available space within all the affected departments. He asked that this also include things like available space in these buildings, existing leases with no allocation, and progress on the 550 West Seventh Avenue Bank of America building (to be renamed the Robert B. Atwood Building), noting this would assist with the subcommittee proceedings. Chairman Rokeberg asked for Mr. Gerken's basis for the $6,100 per person moving cost and information on the computer systems. Number 0605 MR. GERKEN replied the Department of Administration runs the mainframe computer with the personnel and accounting systems. He believes the systems in question belong to the individual departments. CHAIRMAN ROKEBERG asked if there is any standardized policy for the acquisition of computer hardware and software in the state of Alaska. MR. GERKEN indicated he could provide some information. Number 0640 MR. HENDERSON asked if Mr. Spears with DCRA was still on teleconference in Anchorage. Number 0655 REPRESENTATIVE RYAN indicted the chairman had spoken very much in favor of the acquisition of the 550 West Seventh building ["720 Fifth building" stated on tape] the previous year which was intended to solve the problem of high costs associated with the Frontier Building. He commented on approximately $26 million paid the previous year and asked the chairman when they were going to be able to house some of these people. CHAIRMAN ROKEBERG replied it was an incremental move, asking Mr. Gerken to review the time frame. MR. GERKEN replied he would be happy to provide written information on that status, noting the Frontier Building leases essentially expire in January and September of 2000. CHAIRMAN ROKEBERG noted Mr. Spears was available in Anchorage via teleconference. Number 0730 MR. HENDERSON said there were a number of things he would like to address but noted the specific question had been to data processing, computer hardware and software. He asked Mr. Spears to give a brief explanation of the data processing costs associated with the merger. Number 0760 JOSEPH SPEARS, Data Processing Center Supervisor, Division of Administrative Services, Department of Community and Regional Affairs, testified via teleconference from Anchorage. He indicated he is the director of data processing for that department and explained the cost estimates he put together for the fiscal note. He said the costs are basically broken down into three pieces: 1) A one-time cost of setting up a network site for a child care office. 2) Setting up a similar stand-alone office for the JTPA Program office (JTPO) related staff if room in the DOL's Anchorage lease space is not available. He indicated some infrastructure build-up is necessary when creating two new offices by splitting an existing office into three different entities. 3) Converting DCED's network system to be compatible with DCRA's, or vice versa. He said the first two parts would each be a quarter of the costs and the conversion would be the other half. He noted the absence of a worldwide standard network operating system and indicated that is some explanation for the various computer systems, network operating systems, e-mail and application systems within Alaska's state government. Number 0903 REPRESENTATIVE RYAN asked about the creation of local area networks or connection to wide area networks when an office is established. MR. SPEARS answered in the affirmative, and said that is what these costs reflect. REPRESENTATIVE RYAN asked if they were talking about a router. MR. SPEARS replied that router expenses are part of the new offices for the Child Care Program and JTPO. He said the Division of Information Services (DIS) [now Information Technology Group] basically charges for connecting to the wide area network wherever the office is located. Number 0932 REPRESENTATIVE RYAN referred to his previous question, asking why there has not been uniformity throughout state government in this area and asking if this is due to management decisions. He referred to the antiquity of the legislature's Lotus cc:Mail e-mail system. MR. SPEARS replied he might not be the best person to answer that type of a question. He indicated he didn't know whether the creation and funding of these standards were management or political types of decisions. He noted Lotus cc:Mail is an antique but commented he thinks about eight departments were standardized on that program. REPRESENTATIVE RYAN indicated major corporations use uniform systems, commenting on the use of Microsoft Windows NT, and he couldn't understand why the state of Alaska didn't. He asked for information on who made these decisions, stating he thinks they should make a policy on this. Number 1038 REPRESENTATIVE KOHRING asked why the fiscal note is so much larger than the one for Representative Kelly's bill two years ago, noting the costs then were estimated at $1,600,000 and these costs are $200,000 more. He commented that bill called for moving 161 people and HB 400 calls for moving a maximum of 19 and maybe as few as three. CHAIRMAN ROKEBERG commented that this fiscal note called for 259 positions to be moved. REPRESENTATIVE KOHRING said that was part of his question as well, asking where that number came from and why were they dealing with a much larger fiscal note. He said it seems like an attempt to discredit his efforts. Number 1108 MR. HENDERSON explained he thinks that if the idea is to consolidate services so that the various programs are more efficient, this part of the fiscal note addresses the issue of co- locating those people. As Mr. Lawson indicated, no costs were associated with staff located in various field offices. The costs only reflect moves within the Anchorage and Juneau locations. In summary, if the idea of this bill is to consolidate these programs and services, the people need to be moved so that they are working together. If they are not going to be moved so that they are working in the same environment, he said it begs a question of why do a consolidation. Number 1162 REPRESENTATIVE KOHRING responded, referring to his presentation, that DCED and DCRA are working well in scattered locations throughout the state. He said Mr. Henderson is kind of countering the way the entity currently operates. Representative Kohring said his question in return would be that if it's already working scattered throughout the state, why did they suddenly feel it all had to be consolidated under one roof. Number 1210 MR. HENDERSON replied it was not their bill and the bill says consolidate programs. He stated they think it is working fine right now, there is no duplication, and there is no reason to consolidate the programs. If programs are going to be consolidated for efficiency purposes, the people need to be moved together. Number 1229 CHAIRMAN ROKEBERG asked about the $50,000 space planner estimate, questioning whether that was the administration's problem and addressing the question to "Pete (ph)" in the audience. Chairman Rokeberg indicated he was not sure the committee or the bill sponsor had contemplated moving 259 people, and he feels that is an issue. He confirmed that the Department of Administration and Division of General Services contracted out for those services. MR. GERKEN answered that was essentially correct, and it was anticipated a private architectural firm would be hired for space planning. CHAIRMAN ROKEBERG said, however, the only time a space planner was necessary was when premises were remodeled and staff were relocated in the remodeled premises. He indicated that only a plan based on the utilization of existing space would be necessary in this case. Number 1324 MR. GERKEN indicated that normally, when different groups of people move into different spaces, figuring out how that space needs to be reconfigured for the uses of the new group is necessary, and this the anticipated scope. CHAIRMAN ROKEBERG stated, "So you anticipate that you would have to do a complete reconfiguration of the (indisc.) improvement layout of the particular premise you were dealing with and - and the totality of the premises here I take it." He indicated he did not think that was necessary, based on his 25 years of experience. Additionally, he asked why telephone and telecommunications line items were omitted from the fiscal note. Number 1365 MR. GERKEN indicated that was in the $6,100 per worker moving cost which he was providing more information to the committee on. He said this cost is made up of five elements: physically moving people, moving phones, computer wiring, systems furniture reconfiguration and (indisc.) improvements. CHAIRMAN ROKEBERG asked Mr. Gerken to add a short narrative on the cost of new furniture to the abstract he was providing the committee. MR. GERKEN replied that no new furniture would be purchased, they were simply taking the systems furniture down and setting it back up. CHAIRMAN ROKEBERG confirmed it was a relocation. MR. GERKEN answered in the affirmative. CHAIRMAN ROKEBERG asked why the furniture couldn't just be left in place. MR. GERKEN replied that the existing furniture, in terms of desks and partitions, can be used but, in his experience, will be reconfigured almost every time to accommodate a different group of people. He confirmed that the systems furniture could be taken apart and put back together to do this but there was an associated cost. CHAIRMAN ROKEBERG noted any comments Mr. Gerken had on that which could be helpful to the committee would be appreciated. Number 1428 REPRESENTATIVE KOHRING stated he was absolutely shocked it was being proposed that they spend $1.8 million, with $1.6 in moving costs. He noted his presentation of the bill said they would be moving 19 people and questioned that it would cost $1.6 million to move 19 people, stating that was asinine. Number 1439 CHAIRMAN ROKEBERG indicated they were trying to figure out whether that was what HB 400 required the departments to do, commenting he thinks this is an issue. Additional, Chairman Rokeberg said the bill contemplates the conversion to four divisions and then takes a number of independent agencies and turns them, via amendment he believes, into what the sponsor is calling an office. Chairman Rokeberg indicated that particularly these quasi-judicial or separate agencies have division directors, and he asked if there was a specific salary or compensation level that would be changed by altering the nomenclature in the affected statute. Number 1495 MR. LAWSON replied that the bill as written does created four separate divisions, however there are other divisions set in statue, and, he said, at least the first version of the bill does not mandate that those divisions go away. He indicated the elimination of any of the other divisions is not reflected in the fiscal note. He thinks the sponsor does have amendments to correct that, and the fiscal note would have to be amended to address that. Mr. Lawson said he thinks the chairman is right, that there would be problems with the personnel Act and all that. In essence, the division directors which go away would have to be downgraded to office managers or some such classification. CHAIRMAN ROKEBERG said he is not sure that was the bill sponsor's intention, commenting he was not sure of the sponsor's goals here. He questioned whether changing the names impacted the compensation levels and if there was a problem statutorily. MR. LAWSON responded that he couldn't answer that. Number 1567 CHAIRMAN ROKEBERG asked Representative Kohring for his intention, mentioning the divisions of Insurance; and Banking, Securities and Corporations; as well as the agency directors. REPRESENTATIVE KOHRING responded it was his expectation that the compensation levels would be reduced if the job titles are reduced. CHAIRMAN ROKEBERG noted Representative Kohring's chart did not show this. Number 1601 REPRESENTATIVE KOHRING agreed, stating it is not reflected in their documents. He said it would be his expectation once the bill is implemented that the decrease in the salaries would be reflective of the title changes, and he noted the title changes were contained in one of the three amendments the committee had before it [Note: four proposed amendments were distributed to the committee at this meeting]. Number 1615 CHAIRMAN ROKEBERG stated he was concerned about that, noting he wanted to know if it was the sponsor's intention to demote these people, and if so, he said it should be reflected in the sponsor's cost savings analysis. Number 1626 REPRESENTATIVE KOHRING responded that it is not really intention but it is his expectation that there would be a change in title and a commensurate change in salary and benefits package, noting a division director is certainly expected to make much more than an office manager. Number 1639 CHAIRMAN ROKEBERG indicated the committee is working with what the bill requires, not necessarily with intentions or expectations, and that is what the committee is trying to figure out. Number 1648 REPRESENTATIVE KOHRING indicated that once the amendment is adopted the bill would reflect the fact that the division directors become office managers. He stated that whatever happens from that point on is up to the department and whatever the department chooses to pay those individuals based on the new titles. CHAIRMAN ROKEBERG suggested they might talk about it later. Number 1664 REPRESENTATIVE RYAN said he was going to suggest probably the same thing. He indicated grievances and other problems could result and a modification to the statute might be necessary so that the downgrading could occur. CHAIRMAN ROKEBERG suggested the sponsor speak with the chairman about that. Number 1696 REPRESENTATIVE ALAN AUSTERMAN came forward to testify. From a philosophical point, he indicated he thinks more of these types of efforts will come from legislators as they look more at combining and the efficiency of government. He noted, referring to Representative Kohring's consolidation effort, that he sees efficiencies coming out of consolidation but he doesn't see efficiencies in number of people coming out of anything they are being given. Representative Austerman said he would think "putting all these people in one building and bring them under one umbrella" would result in some kind of efficiencies; he stated he would like to see something regarding the real plan in bringing all these people together and why there are no efficiencies. Number 1759 CHAIRMAN ROKEBERG stated that was one thing he would address shortly. He said Representative Kohring indicated his desire in his presentation to delete certain personnel positions and asked if that wasn't reflected in the legislation. Number 1779 MR. HENDERSON replied he thinks the Administration's fiscal note reflects that there will be an analysis after or during the first 12 months to determine what additional positions could be deleted, looking at programmatic and administrative positions. He also noted there are some examples where they can show there are differences of opinion in terms of the sponsor's fiscal note and cost savings that are not really attributable to consolidation of some of these positions. For example, he said, there is an identification of a $71,000 cost savings through elimination of a special assistant in DCRA. He stated none of those funds are general fund dollars, they are funded from interagency receipts. Mr. Henderson said he would like an opportunity sometime to point out those types of things and talk about the sponsor's fiscal note. Number 1832 CHAIRMAN ROKEBERG said he appreciated Mr. Henderson bring the issue up and requested a memorandum from him to the committee. He said DCED had a similar situation and the committee would be interested in knowing any positions or other funds. REPRESENTATIVE RYAN stated the charge-backs could be traced in the various department budgets and general fund savings could be realized. Number 1853 CHAIRMAN ROKEBERG commented unless they were federal funds or something like that, noting DCRA received "ag" funds or other federal funds for rural economic development. He noted identification of those would be helpful. He also stated he was concerned the bill does not contain any transitional provisions, and stated he thinks the bill needs more statutory direction regarding what the bill is requesting and what needs to be done. He noted he feels this may be helpful and asked if they thought if more specific time frames, methods of consolidation including premises even, and the elimination of particular positions including time frames, would be more helpful. He asked if more specificity would be a positive or negative to the two departments. Number 1928 MR. LAWSON replied he thought that would be very helpful because he thinks they have struggled with some of the sponsor's statements versus what the language of the bill. He indicated any specificity in terms of time frames, methods, and a quick overview of any proposed amendments was movement toward that goal. Number 1953 CHAIRMAN ROKEBERG indicated he feels the original bill version lacks direction to the departments. He indicated he also wanted to look at ways to reorganize the responsibilities of the remaining commissioner in relation to the number of boards and positions in the new department, noting that most provided for designees. There has also been a question, he said, about DCRA's Division of Energy's (DOE) location in the new department, commenting he thinks there is a split between the DOE rural projects and the "four dam pool." He asked if DOE goes into AIDEA, indicating that would be a problem. He also asked what happens to the statewide assessor, referring the question to Mr. Krieber. Chairman Rokeberg asked if the fact that both the commissioner of DCED and the commissioner of DCRA both sit on the Coastal Policy Council had been addressed. He commented, as the chairman of the House Labor and Commerce Standing Committee, he is not happy with the way the bill takes existing independence away from certain groups and agencies for the sake of creating another division. He stated he thinks that is a mistake and will be "generating more heat than light by doing that because these - these are really stand-alone agencies," noting the examples of APUC; AIDEA; the Division of Insurance; and the Division of Banking, Securities and Corporations. He noted these entities, as examples, are not integrated to the functions of either department. He said it would be his preference to keep those as independent agencies, not line agencies, and he noted the existence of statutory mandates. Chairman Rokeberg indicated he thought leaving these agencies independent would not harm the bill or its concept, noting there weren't any reductions in those areas in the sponsor's initial fiscal management plan. He referred the discussion about maybe doing that, commenting he felt it was unnecessary and that these agencies be on a stand-alone direction out of the commissioner's office. He asked Mr. Lawson for his comments on the responsibilities of those particular groups and their present relationship with the commissioner, questioning whether they were just involved in the weekly director's meeting. Number 2146 MR. LAWSON agreed, stating the policies, work tasks, et cetera, for the independent agencies are set either by the commission, as in the case of APUC, or by the boards, giving the example of AIDEA. He noted DCED probably has more independent agencies than any other state department with some directors attending a weekly directors' meeting, but he indicated that is about the extent of DCED's involvement. He noted the divisions are line divisions under DCED. Number 2180 CHAIRMAN ROKEBERG indicated the Aerospace Development Corporation (AADC) in Representative Austerman's district was one of the entities concerned. He asked rhetorically if this director would be known as the office manager on his business cards, commenting he didn't think they wanted this to happen. Number 2192 REPRESENTATIVE KOHRING said this was certainly something that could be adjusted to alleviate that concern. He emphasized the focus of what they were trying to accomplish is simply saving money by eliminating some of the upper bureaucracy and he has no problem with maintaining the integrity of programs like AIDEA, AADC and APUC. Number 2219 CHAIRMAN ROKEBERG indicated Representative Kohring showed there is true commonality in the area of economic development and he would like the subcommittee to look into this. He commented he has always been philosophically troubled by the two separation between rural economic development and mainstream economic development, like DCED has been doing "big" projects and rural development has been doing "little" projects, or subsidized or federally-funded ones. He commented he thinks there are synergies there, savings can be made in those areas through consolidation and the two areas are better off cooperating rather than separate. He noted that if one area in the two departments really goes together, it is that one. Number 2269 REPRESENTATIVE RYAN commented he thought the chairman was correct, noting they have been very fortunate to have Willis Kirkpatrick as the director of the Division of Banking, Securities and Corporations for a long time, also mentioning David Walsh [previous director] and Marianne Burke [current director] at the Division of Insurance. He said, "The 'departments' are humming along, and I think you'd be remiss in lowering those people because I don't know if they would want to stay." Mentioning the statewide assessor, he referred to his time on the borough assembly and his dissatisfaction with what he considered were imprecise methods for determining the assessment for education, noting he felt there should be a better way. Number 2313 CHAIRMAN ROKEBERG assigned HB 400 to a subcommittee, appointing Representative Cowdery as chairman, Representative Ryan and Representative Kubina to that subcommittee. ADJOURNMENT Number 2326 CHAIRMAN ROKEBERG adjourned the House Labor and Commerce Standing Committee meeting at 5:40 p.m.