03/29/2016 08:00 AM House STATE AFFAIRS
| Audio | Topic |
|---|---|
| Start | |
| HB368 | |
| HB24 | |
| Adjourn |
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 368 | TELECONFERENCED | |
| *+ | HB 24 | TELECONFERENCED | |
| + | TELECONFERENCED |
ALASKA STATE LEGISLATURE
HOUSE STATE AFFAIRS STANDING COMMITTEE
March 29, 2016
8:04 a.m.
MEMBERS PRESENT
Representative Bob Lynn, Chair
Representative Wes Keller, Vice Chair
Representative Louise Stutes
Representative David Talerico
Representative Liz Vazquez
Representative Jonathan Kreiss-Tomkins
Representative Ivy Spohnholz
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
HOUSE BILL NO. 368
"An Act relating to the preparation, electronic distribution,
and posting of reports by state agencies; limiting the number of
special assistants in the executive branch; changing the amount
of the required employee contribution to health care premiums
for certain state employees; establishing an award for state
employees who report or suggest certain efficiencies; relating
to retirement incentives for members of the defined benefit plan
of the Teachers' Retirement System of Alaska and the defined
benefit plan of the Public Employees' Retirement System of
Alaska; and providing for an effective date."
- HEARD & HELD
HOUSE BILL NO. 24
"An Act relating to the procurement of architectural,
engineering, or land surveying services under state-funded
contracts."
- HEARD & HELD
PREVIOUS COMMITTEE ACTION
BILL: HB 368
SHORT TITLE: RIP PUBLIC EMPLOYEES & TEACHERS/E-REPORTS
SPONSOR(s): REPRESENTATIVE(s) HUGHES
02/24/16 (H) READ THE FIRST TIME - REFERRALS
02/24/16 (H) STA, L&C, FIN
03/29/16 (H) STA AT 8:00 AM CAPITOL 106
BILL: HB 24
SHORT TITLE: PROF. SERVICES IN STATE-FUNDED CONTRACTS
SPONSOR(s): REPRESENTATIVE(s) KITO
01/21/15 (H) PREFILE RELEASED 1/9/15
01/21/15 (H) READ THE FIRST TIME - REFERRALS
01/21/15 (H) STA, L&C
02/11/16 (H) STA AT 8:00 AM CAPITOL 106
02/11/16 (H) -- MEETING CANCELED --
03/29/16 (H) STA AT 8:00 AM CAPITOL 106
WITNESS REGISTER
REPRESENTATIVE SHELLEY HUGHES
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Presented HB 368, as prime sponsor.
GINGER BLAISDELL, Staff
Representative Shelley Hughes
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Presented proposed committee substitute
(CS) for HB 368, Version 29-LS1476\W, Wayne, 2/25/16, on behalf
of Representative Hughes, prime sponsor.
KATE SHEEHAN, Director
Division of Personnel & Labor Relations
Department of Health and Social Service (DHSS)
Juneau, Alaska
POSITION STATEMENT: Answered questions on HB 368.
KATHY LEA, Chief Pension Officer
Division of Retirement and Benefits (DRB)
Department of Administration (DOA)
Juneau, Alaska
POSITION STATEMENT: Answered questions on HB 368.
REPRESENTATIVE SAM KITO
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Presented HB 24, as prime sponsor.
DALE NELSON
Alaska Professional Design Council (APDC)
Anchorage, Alaska
POSITION STATEMENT: Testified in support of HB 24.
CATHERINE FRITZ, Architect
Alaska Professional Design Council (APDC)
Juneau, Alaska
POSITION STATEMENT: Testified in support of HB 24.
ACTION NARRATIVE
8:04:56 AM
CHAIR BOB LYNN called the House State Affairs Standing Committee
meeting to order at 8:04 a.m. Representatives Vazquez, Kreiss-
Tomkins, Talerico, Stutes, Keller, and Lynn were present at the
call to order. Representative Spohnholz arrived as the meeting
was in progress.
HB 368-RIP PUBLIC EMPLOYEES & TEACHERS/E-REPORTS
8:05:33 AM
CHAIR LYNN announced that the first order of business would be
HOUSE BILL NO. 368, "An Act relating to the preparation,
electronic distribution, and posting of reports by state
agencies; limiting the number of special assistants in the
executive branch; changing the amount of the required employee
contribution to health care premiums for certain state
employees; establishing an award for state employees who report
or suggest certain efficiencies; relating to retirement
incentives for members of the defined benefit plan of the
Teachers' Retirement System of Alaska and the defined benefit
plan of the Public Employees' Retirement System of Alaska; and
providing for an effective date."
8:06:14 AM
CHAIR LYNN, in response to Representative Keller, indicated that
the committee would be considering [proposed committee
substitute (CS) for HB 368, Version 29-LS1476\W, Wayne,
2/25/16].
8:06:27 AM
REPRESENTATIVE SHELLEY HUGHES, Alaska State Legislature,
presented HB 368, as prime sponsor. She relayed that the
proposed legislation was drafted in response to the state's
budgetary concerns. She went on to say that HB 368 would give
the state administration additional management tools focused on
human resources, to bring down cost. She cited the three
principals of management - time, resources, and scope - and
relayed that a great project is completed on or before the
allowed time, on or under budget, and meets or exceeds the
required scope. Representative Hughes related these principles
to state government by saying that "scope" represents the size
of state government, "time" refers to the limited time for
addressing the state's challenges before essential services
would need to be shut down, and "resources" are state
government's human resources. She said that for this
legislation, she and her staff considered a retirement incentive
program (RIP), a restriction on upper management positions,
statutory healthcare contributions shared by employees, furlough
options, the personal services line item, efficiency incentives,
and paper reduction.
8:11:35 AM
GINGER BLAISDELL, Staff, Representative Shelley Hughes, Alaska
State Legislature, presented a proposed committee substitute
(CS) for HB 368, Version 29-LS1476\W, Wayne, 2/25/16, on behalf
of Representative Hughes, prime sponsor. She explained that
under Version W, two additional provisions would be added to HB
368 - one related to furlough and one to transfers into or out
of the personal services line item in the budget.
8:12:24 AM
REPRESENTATIVE KELLER moved to adopt the proposed committee
substitute (CS) for HB 368, Version 29-LS1476\W, Wayne, 2/25/16,
as a work draft.
REPRESENTATIVE STUTES objected for purpose of discussion.
MS. BLAISDELL referred to the section analysis in the committee
packet, which highlights the seven areas of proposed statutory
changes to provide new management tools to the administration
for saving money or managing employees differently. She said
that the first area of proposed change is "Paper Reduction" and
would be for the purpose of cost savings. She stated that the
[federal] Paperwork Reduction Act requires that state agencies
provide statutorily required reports electronically and five
paper copies to the library distribution center. She specified
that the changes are in Section 2, Section 3, Section 15, and
Section 16. She offered that there is a memo from Legislative
Legal and Research Services stating that the paper reduction
section of HB 368 would probably not be acceptable under the
Single Subject Rule.
8:14:04 AM
MS. BLAISDELL said that the second area of proposed change,
"State Employee Furlough," would be a mandatory furlough for 10
days or 80 hours, but that the number of days or hours is
subject to the committee's recommendation.
REPRESENTATIVE HUGHES commented that the legislature might want
to adjust the proposed ten-day furlough to a five-day furlough
for exempt employees.
MS. BLAISDELL claimed state statute allows that only employees
who fall under the State Personnel Act (SPA), most of whom are
exempt and partially exempt (PX), may be required to take
furlough days. She said that Section 4 of HB 368 would exclude
furlough as being subject to collective bargaining, so that as
union contracts are renegotiated, the prohibition for furlough
would not be part of the contracts. She went on to say that
Section 8 includes new furlough language to the compensation
allowance and leave section and lists exceptions for specific
employee groups.
8:15:47 AM
MS. BLAISDELL referred to the third area of proposed change,
"Personal Services Line Item," in Sections 5 and 6 of HB 368,
and explained that the objects of expenditure in the personal
services line item in a budget include personal services,
travel, contractual and professional services, commodities,
grants, and miscellaneous. She maintained that the overall cost
for personal services for the State of Alaska in the operating
budget alone, after excluding formula programs, is slightly more
than 50 percent of expenditures. She said that the Office of
Management & Budget (OMB) reported that $29 million was moved
out of personal services to other lines items in its last fiscal
year report. She maintained that this represents funding that
the legislature provided for personal services, to pay
employees, but used for other purposes.
8:18:01 AM
REPRESENTATIVE HUGHES commented that an example of how this
occurs is when a funded position is left open after an employee
leaves and the money for salary is used elsewhere. She stated
that the proposed legislation would not allow this to happen.
MS. BLAISDELL mentioned that restricting transfers into or out
of the personal services line item would also ensure that when
the legislature asks for an unallocated reduction in personal
services, that reduction would actually occur in the personal
services line item. She further stated that the new state
accounting system, Integrated Resource Information System
(IRIS), will track the personal services line item by fund
source beginning in November, eliminating any issue with trying
to redistribute the correct funding for each position. She
added that if there is an issue with tracking specific fund
sources for positions, the Legislative Budget & Audit Committee
could probably resolve the issue upon requests from departments
to reallocate fund sources, with the exception of general funds.
8:19:57 AM
MS. BLAISDELL said that the next area of proposed change is
"Reduce the number of Special Assistants." She referred to
Sections 9, 10, and 11 in HB 368 and relayed that the proposed
legislation would limit the number of special assistants for
state departments to one.
CHAIR LYNN asked if that would be across the board.
MS. BLAISDELL replied yes. She stated that the next area
addressed in HB 368 is "Efficiency Incentive Program." She
offered that currently there is no incentive for an employee to
propose an outstanding way to save money, save time, or make the
process better. She referred to Sections 12 and 14, which would
allow the governor to establish an efficiency program in which a
state employee could be rewarded for coming up with a great
idea. She added that the incentives would vary.
CHAIR LYNN relayed that the U.S. Air Force had a similar program
which proved successful.
MS. BLAISDELL related that some agencies have found a way to
recognize outstanding employees, but the proposed legislation
would give specific recognition.
8:23:03 AM
REPRESENTATIVE KREISS-TOMKINS asked Ms. Blaisdell which agencies
recognized outstanding employees.
MS. BLAISDELL responded that the Department of Transportation &
Public Facilities (DOT&PF) purchases Carhartt jackets for
employees as recognition for outstanding recommendations for
improvements to business or for savings.
8:23:28 AM
MS. BLAISDELL went on to state that the next area of proposed
change is "Health Care Contribution," found in Section 13 of HB
368. Employees covered under the State Personnel Act, exempt
and PX employees, would be required to pay 20 percent of their
healthcare coverage, and the state would cover the remaining 80
percent. She added that this change would not involve
bargaining unit contracts.
8:24:09 AM
MS. BLAISDELL said that Section 17 of HB 368 discusses the last
area of proposed statutory change, which is the Retirement
Incentive Program (RIP). She mentioned that already there has
been a great deal of interest from employees regarding a
possible RIP. She stated that a RIP is a management tool that
could be offered to incentivize employees, who are within three
years of their normal retirement date, to retire early. She
added that the RIP is not a mandatory offering. She went on to
say that in the event of an employee taking advantage of a RIP,
management has the option of leaving the position vacant or
filling it with an employee entering at a lower step - in either
case, saving the state money. The RIP would require an agency
to offer a specific window of opportunity during which its
qualified employees could apply for a RIP.
8:25:32 AM
MS. BLAISDELL continued by saying that an employee who is within
three years of his/her normal retirement date could apply to the
commissioner of the agency between July and September. Those
individual employee applications would be sent to an actuary to
determine the savings, if any, the state would achieve by
approving early retirement. The actuary would look at
birthdate, retirement date, range and step, and intent of the
department - whether it is going to fill it, leave it vacant, or
delete the position - to decide whether the state will save
money.
8:26:40 AM
CHAIR LYNN asked if the sponsor has experienced any informal
support or opposition to the RIP program.
MS. BLAISDELL replied that the sponsor has not heard from any
groups for or against a RIP but has had a number of employees,
who possibly qualify, show an interest in applying for early
retirement.
MS. BLAISDELL went on to say that the commissioner would decide
whether the position would be filled immediately, deleted, left
vacant, or reclassified. She said that if the employee is
approved for the RIP, he/she would have a specific period of
time in which to retire or the application process would have to
begin again. She added that typically that period would be the
60 days after the actuary's report.
8:28:01 AM
CHAIR LYNN requested if there would be a bonus for that employee
for retiring early.
MS. BLAISDELL responded that no bonus was provided in the
proposed legislation. She offered that the employee would
receive his/her pension based on time earned without any
additional years and would receive healthcare coverage.
CHAIR LYNN mentioned that some organizations offer a small bonus
incentive for early retirement.
MS. BLAISDELL answered that she was not aware of any employer
who offers a bonus incentive. In response to Chair Lynn, she
said she would check into that possibility.
MS. BLAISDELL relayed that the State of Alaska has offered three
retirement incentive programs - one in the 1980s, one in 1996,
and House Bill 329 from the Twenty-Third Alaska State
Legislature, which didn't pass. She said that Legislative
Budget and Audit did perform an audit in conjunction with the
1996 RIP but only looked at two specific employee groups. The
University of Alaska identified 784 employees who would have
been eligible to retire early, of which only 377 participated.
She added that not everyone wants to leave state service early.
The University of Alaska reported $17.8 million in savings
resulting from the 377 early retirees. The actual savings were
unknown because 140 of them returned to work as part-time
employees. She offered that there is potential for savings.
MS. BLAISDELL related that the second group, included in the
audit, was the Information Technology Group (ITG), now called
Enterprise Technology Services (ETS), within the Department of
Administration (DOA). There were 27 employees eligible for the
RIP program at ITG, 14 elected to retire early, and ITG reported
a savings of $1.2 million. She declared that none of the 14
came back as part-time employees. She added that ITG chose to
leave the positions vacant for the remainder of the year, before
rehiring.
8:31:39 AM
MS. BLAISDELL said that the State of Alaska Workforce Profile
Fiscal Year 2015, an annual report published by the Division of
Personnel, reported that there are a total of 15,576 active
employees in the state's retirement system. Of those, 1,960
have less than one year to retire, and 1,502 are between one and
five years of retirement, together comprising 22 percent of
current employees.
8:33:17 AM
REPRESENTATIVE KREISS-TOMKINS asked for a history of employee
furlough programs in the past as background and baseline
reference to understand the effect of the proposed legislation.
MS. BLAISDELL responded that the only furlough program, of which
she was aware, occurred to employees governed by the State
Personnel Act - exempt and PX employees. She said that she knew
of one agency that did ask their members to take a furlough, and
they took two days last fall. She stated that the State
Personnel Act includes the Department of Law (DOL),
commissioners' office staff, directors, the legislature, the
court system, and the university. She added that for these
employees to be furloughed, each of these agencies would have to
initiate their own furlough. She said that almost all other
employees of the state are covered by collective bargaining and
would not be eligible for furlough unless their bargaining
contract stated that they could be.
8:35:09 AM
REPRESENTATIVE KREISS-TOMKINS noted that some departments have
more than one deputy commissioner, defined as a special
assistant in HB 368, and expressed his concern for large
departments with complex responsibilities needing a high level
of management. He cited the Department of Natural Resources
(DNR), tasked with executing the Alaska LNG Project, and the
effect of taking away the ability to have a high level person
working with the commissioner on a project of that complexity.
He asked which agencies would be affected by the proposed
statutory language and if the sponsor had contacted them, and he
suggested approaching the reduction of special assistants
through the budget process.
MS. BLAISDELL responded that agencies now have deputy
commissioners and assistant commissioners who also act as
directors in some divisions. She claimed that almost every
department has two or more deputy commissioners and possibly
some assistants. There is a wide variety. She conceded that
they all have important roles but asserted that the sponsor's
constituency has advocated for a reduction in upper management
positions. Since these positions are created in statute, the
proposed legislation would be needed to change the statutory
requirement in order to reduce upper level management.
MS. BLAISDELL, in response to the second part of the question,
stated that the legislature appropriates funds, not positions,
and although the legislature could reduce the budget by a
specific amount and request that it be applied to the
elimination of a specific position control number (PCN), in the
end, the agency is free to decide to keep the position and apply
the reduction elsewhere.
8:38:11 AM
REPRESENTATIVE KREISS-TOMKINS asked if reductions in the
allocation for a commissioner's office budget are not specific
enough for that purpose.
MS. BLAISDELL answered that a budget reduction is monetary only
and does not require an agency to remove a position.
REPRESENTATIVE KREISS-TOMKINS mentioned that in his experience
on the DNR finance subcommittee, a reduction allocated to the
commissioner's office budget, although not specific to a PCN,
could be targeted, but he conceded that ultimately it was the
commissioner's decision where to make the budget cut.
REPRESENTATIVE KREISS-TOMKINS referred to page 5, lines 30-31,
and noted that current statute limits to two the number of
special assistants in the commissioner's office of a principle
department of the executive branch. He referred to Ms.
Blaisdell's statement that some departments have more than two
assistants and asked if that had been addressed.
MS. BLAISDELL replied that she had been referring to deputy and
assistant commissioners and did not know of any department with
more than two special assistants.
8:40:10 AM
REPRESENTATIVE KELLER asked if Ms. Blaisdell had a definition
for special assistant.
MS. BLAISDELL said that Section 9, which would amend AS
39.25.120, discusses all of the positions that are included in
the partially exempt service but doesn't include a definition of
special assistant. She added that special assistant is a
specific job class code and includes special assistant to the
commissioner I and II, reflecting two different salary ranges.
She reasoned that a department could choose to have only one
special assistant.
8:41:56 AM
REPRESENTATIVE KELLER asked to flag page 3, line 29, to bring to
the sponsor's attention the terminology "leave" when talking
about a furlough - his understanding being that leave implies
"with pay." He asked for clarification of page 2, line 9, which
would change the number of copies of a state publication
required for the publication distribution center from four to
five.
MS. BLAISDELL answered that the change from four to five copies
was proposed in response to the fact that no other printed
copies would be available to the public, and the publication
distribution center considered five copies to be more adequate.
8:43:10 AM
CHAIR LYNN asked if DNR, which represents the state's primary
income, and the Department of Public Safety (DPS), which is
charged with the public's safety, are included in the reduction
of the number of deputy commissioners.
MS. BLAISDELL responded yes, the reduction would include the two
mentioned departments, but added that both have a variety of
directors under them who would be in contact with the
commissioner and deputy commissioner.
CHAIR LYNN opined that considering the projects that Alaska is
pursuing, such as the gas pipeline, the departments might be
better off with an assigned amount of money allowing the
commissioner or governor to decide how to best manage it and who
they need to hire, rather than micromanaging.
8:45:15 AM
REPRESENTATIVE SPOHNHOLZ asked for the rationale for the
proposed limit on special assistants to the commissioner besides
constituent concern for bloated upper management. She noted
ample research on best management practices and questioned the
rationale for such a very specific number in the proposed
legislation. She questioned whether, in light of some of the
extensive projects that the state asks the commissioners and
their teams to accomplish, HB 368 would not be impeding their
efforts.
MS. BLAISDELL responded that concerns from constituents and
other legislators prompted the proposed limit on special
assistants as one tool to reduce upper management in state
government.
8:47:38 AM
REPRESENTATIVE KREISS-TOMKINS referred to Section 14, which
would amend AS 44.19.018, and noted the "may versus shall"
discrepancy in the language. He mentioned that subsection (a)
read, "The governor may award...a pin..." and subsection (b)
read, "The governor shall make arrangements for the pin..."
REPRESENTATIVE KREISS-TOMKINS referred to the proposed health
care contribution change, Section 13, page 7, line 31, and asked
what cost shifting would result as far as savings to the state
and what an employee would be paying per month if required to
contribute [20 percent] of health care coverage costs.
MS. BLAISDELL responded to the question on the governor's
efficiency incentive program by saying that the governor "shall
implement a program" but would have the option of awarding a
pin, a merit increase, or cash award.
MS. BLAISDELL, in response to Representative Kreiss-Tompkins'
second question on the cost implication for changing the
contribution basis of the healthcare cost, deferred to the
representatives from the Department of Administration to answer
that question, but conceded that these representatives may not
have had the opportunity to fully vet the fiscal impact, which
explained the absence of a fiscal note.
8:50:14 AM
REPRESENTATIVE VAZQUEZ referred to the fiscal note, OMB
component number 58 dated 3/25/16, and asked for the amount of
related expenditures or savings.
MS. BLAISDELL deferred the question to the DOA representative.
REPRESENTATIVE KELLER declared that there was a representative
from the Division of Personnel Labor & Relations (DPL&R), Kate
Sheehan, to testify.
REPRESENTATIVE VAZQUEZ asked Ms. Blaisdell if the sponsor and
her staff have identified, in dollar terms, how much the
proposed legislation could potentially save the state.
MS. BLAISDELL responded no, that they had not identified an
actual dollar savings. She offered that based on historical
information, the retirement incentive program could possibly
save the State of Alaska a significant amount. She went on to
say that a RIP could give any public entity - school districts,
municipalities, the state, and the university - the option to
make that offering. She stated that a significant caveat is
that not every person who might be eligible for a RIP may want
to retire. She added that some divisions may not want to offer
a RIP even if it is available. She cited the example of a
school district that after spending $100,000 to recruit a school
superintendent, might not want that superintendent to RIP
because of the expense of replacement. She suggested that the
actuaries could take that into consideration. She reiterated
that the actuaries would be able to calculate a potential cost
savings for a particular RIP candidate. She mentioned that the
1996 audit suggests potential savings for the State of Alaska.
8:53:02 AM
REPRESENTATIVE VAZQUEZ asked if those drafting the RIP portion
of HB 368 considered prohibiting departments or divisions from
issuing contracts to individuals who RIP.
MS. BLAISDELL said that the terminology "retire rehire" refers
to the scenario Representative Vazquez described. She said an
employee who works for the state under contract provides his/her
own healthcare, taxes, and administrative overhead. She offered
that such an arrangement could offer cost savings to the state.
She added that the state could rehire an individual for a
limited time period - for training or seasonal work - which
could be beneficial to the state. She said that when an
employee retires and is then rehired for the same position,
there could be a morale issue in regard to another employee who
might have wanted to apply for or be promoted into the position
but would not have that opportunity. She claimed that including
both the personal services line item change and the RIP in HB
368 would make it difficult to replace employees with someone
under contractual services, because money could not be shifted
from personal services to contractual.
REPRESENTATIVE VAZQUEZ added that the morale issue includes the
resentment of employees over what is considered as "double-
dipping." She said that the same issues also exist in regard to
rehiring the RIP retirees for part-time employment as well as on
contract.
8:56:20 AM
REPRESENTATIVE VAZQUEZ opined that the section in HB 368
limiting the number of special assistants to the commissioner
could work with smaller departments but would not be feasible
for the larger departments, for example, the Department of
Health and Social Services (DHSS) with over 3,000 employees.
8:57:32 AM
REPRESENTATIVE VAZQUEZ referred to the fiscal note on HB 368 and
asked for the costs and savings in regard to the proposed
legislation.
8:57:54 AM
KATE SHEEHAN, Director, Division of Personnel & Labor Relations,
Department of Health and Social Service (DHSS),stated that the
fiscal note represents the cost of an extra merit step or pay
increase for five employees awarded by the governor each year
under the proposed legislation.
REPRESENTATIVE VAZQUEZ stated that the fiscal note refers to one
feature of HB 368, and asked why the other features of HB 368
were not considered in the fiscal note.
MS. SHEEHAN responded that her understanding was that OMB was
working on a fiscal note for the other sections. In response to
Representative Vazquez, she confirmed she was referring to the
fiscal note included in the committee packet, labeled OMB
component number 58, dated 3/25/16, which solely represents the
five employees who could get the extra merit step.
8:58:56 AM
REPRESENTATIVE KELLER asked if the proposed reduction of the
state's share of the cost of healthcare for employees had been
analyzed or if it is forthcoming in the additional OMB analysis.
MS. SHEEHAN responded that the proposed change in healthcare
contribution in HB 368 had not been analyzed by the Division of
Personnel and stated that she does not know if it is part of the
OMB analysis.
9:00:07 AM
REPRESENTATIVE KREISS-TOMKINS asked what 80 percent of an
employee's healthcare [coverage costs] would be and what fiscal
savings could be expected from the proposed statutory change.
9:00:30 AM
KATHY LEA, Chief Pension Officer, Division of Retirement and
Benefits (DRB), Department of Administration (DOA), responded
that the Division of Retirement and Benefits is developing the
fiscal notes for HB 368, including an actuarial fiscal note for
the RIP and an analysis on the healthcare costs and savings, and
both will be available early next week.
REPRESENTATIVE KREISS-TOMKINS asked if Ms. Lea could provide him
with an estimate of 80 percent of healthcare cost for a state
employee.
MS. LEA responded that her expertise was in pensions, so she did
not readily have that information.
REPRESENTATIVE KREISS-TOMKINS asked who could give him the
information on healthcare cost.
MS. LEA responded that Michele Michaud, the chief health
official, would have that information.
REPRESENTATIVE KELLER offered that the language in HB 368
reflects that the commissioner would have to provide projections
for the cost of healthcare and then calculate 80 percent of that
amount.
MS. BLAISDELL cited the last bargaining unit contract, which
shows that the state pays between $1,300 and $1,400 per person
for healthcare. She added that under the proposed legislation,
[80 percent of that amount would be the state's portion and 20
percent the employee portion]. She mentioned that there are
more expensive healthcare plan options.
9:03:01 AM
CHAIR LYNN asked Ms. Blaisdell to give the committee members a
broad review of the sponsor's expectations in regard to HB 368.
REPRESENTATIVE KELLER referred to page 11, lines 15-18, [under
Section 44.99.250. Electronic distribution and posting], and
related that at times, legislative committees would want
firsthand reports. He suggested an amendment to add "except
upon request of a standing committee of the legislature."
9:04:16 AM
REPRESENTATIVE SPOHNHOLZ requested that the cost that would be
shifted to retirement cost, as a result of a RIP, be calculated
and included in the total cost implication.
9:04:53 AM
CHAIR LYNN opined that HB 368 is a good bill, yet would be
difficult to pass because it covers so many different areas. He
asked what the sponsor's plan was for the proposed legislation
over the interim.
MS. BLAISDELL responded that the reason HB 368 was drafted with
"so many moving parts" was because the areas of the proposed
legislation were related in that they would provide cost savings
to the state, would require statutory change, and could not be
accomplished solely through the appropriation process. She
stated that HB 368 was brought forward to start the conversation
on the parts of the proposed legislation. She conceded that
areas of HB 368 might more appropriately fit into other
legislation or stand-alone legislation, but she offered that
they are related in that they are all statutory changes that
would provide the state administration more management tools to
save money.
[HB 368 was held over.]
9:06:45 AM
The committee took an at-ease from 9:07 a.m. to 9:09 a.m.
HB 24-PROF. SERVICES IN STATE-FUNDED CONTRACTS
9:09:29 AM
CHAIR LYNN announced that the final order of business would be
HOUSE BILL NO. 24, "An Act relating to the procurement of
architectural, engineering, or land surveying services under
state-funded contracts."
9:09:49 AM
REPRESENTATIVE SAM KITO, Alaska State Legislature, presented HB
24, as prime sponsor. He stated that HB 24 would require a
municipality that receives state funding for a construction
project to utilize Qualifications-Based Selection (QBS) in
selecting a design professional for the design component of the
project.
CHAIR LYNN asked Representative Kito to define Qualification-
Based Selection.
REPRESENTATIVE KITO responded that there are already quite a few
municipalities that require Qualifications-Based Selection. He
explained that Qualifications-Based Selection of a design
professional means that when hiring an architect, an engineer, a
lands surveyor, or a landscape architect, the contracting person
must issue a request for proposal (RFP) based on the
individual's or firm's qualifications, as opposed to the price
of the services. He explained that one of the key components
driving QBS is the Brooks Act [Selection of Architects and
Engineers statute, a U.S. federal law passed in 1972] requiring
that federal procurement for design professionals utilize
Qualifications-Based Selection. He said that the State of
Alaska has a "mini" Brooks Act requiring state-funded projects
use Qualifications-Based Selection, which is already being used
with Department of Transportation & Public Facilities (DOT&PF)
construction projects in the state.
CHAIR LYNN asked for clarification that Qualifications-Based
Selection refers to the consideration of professional
qualifications for procurement as opposed to price only.
REPRESENTATIVE KITO responded that HB 24 requires that
qualifications be the selection factor for design services for
projects that are funded by the State of Alaska. He gave
himself as an example: As a civil engineer whose expertise is
in coastal and transportation engineering, if he were to submit
a proposal for a building foundation, even though he is
technically qualified to do the work, his skills and experience
would not make him the most efficient. He went on to say that
HB 24 would require that if the state provides money to a
municipality for a capital project, the contracting person must
look at the qualifications of the individuals that are proposing
the design of the project.
9:13:58 AM
CHAIR LYNN asked, "Would not the RFP specify the requirement for
qualification in a certain type of construction, as well as
price?"
REPRESENTATIVE KITO responded, "Not necessarily, although it
does happen at times." He said that an owner, with a
construction budget of $100 million for a project, budgets for
the design, which is typically four to eight percent of the cost
of the project. He said that design costs could be higher if
the project is a very complex structure. He went on to say that
after selection of the designer with the best qualifications,
the owner then starts negotiating the price. If the designer
comes back asking for a design cost that is 20 percent of the
cost of the project, then the owner has to reassess.
Representative Kito maintained that the owner still has complete
control over the design cost of the project. He said the design
cost could range as high as ten or 12 percent depending on the
complexity of the project.
9:15:57 AM
CHAIR LYNN mentioned that he remembered Representative Kito
discussing this concept with him before Representative Kito
became a representative.
REPRESENTATIVE KITO agreed that he has worked actively with a
group called the Alaska Professional Design Council through
which various design entities collaborate and lobby to the
legislature on various issues that are important to them.
9:16:40 AM
REPRESENTATIVE KELLER asked if HB 24 was a risk management tool
and, if so, what risk would be managed.
REPRESENTATIVE KITO voiced his belief that the proposed
legislation would offer a management tool for municipalities in
their attempt to spend public money most efficiently in the face
of a declining budget. He added that the proposed legislation
would ensure that appropriate qualified professionals are being
utilized for projects paid for with public funds, therefore
decreasing the overall construction cost of a project.
REPRESENTATIVE KELLER repeated Representative Kito's claim that
the proposed legislation was not so much a risk management tool
as a tool to promote efficiency. He asked what the efficiency
would be and mentioned specifically the effect HB 24 might have
on nonprofits that receive state money but operate on a limited
budget.
REPRESENTATIVE KITO stated his expectation that an entity
soliciting for the design of a project funded by state money
would select the most qualified architect, who is accustomed to
working on smaller commercial buildings and can be more
efficient than another who doesn't have that experience. He
said that HB 24 would also be a risk management tool in that an
appropriately qualified designer poses less risk for that
project to go over budget or to be constructed incorrectly.
9:20:07 AM
REPRESENTATIVE KELLER opined that if procurement is in the
position to define qualifications, then the scope of qualified
professionals becomes narrower. He stated that he appreciated
the concern for qualified professionals but wondered if the
competition would be diminished.
REPRESENTATIVE KITO stated his belief that competition would not
be diminished under HB 24. He opined that most engineers,
architects, and land surveyors are accustomed to competing for
work, and competition creates a healthy environment for the
profession. He added that HB 24 would keep professionals
engaged in their field, resulting in greater efficiency in their
design work. He added that in the engineering profession, of
which he is familiar, a new engineer is mentored by a more
experienced engineer to gain experience and, ultimately, brings
that experience to his/her proposals.
9:23:15 AM
REPRESENTATIVE TALERICO referred to page 2, line 18-21, which he
claimed would use price as an added factor in awarding bids, and
read as follows:
In order for the contracting person to include price
as a factor in selection, a majority of the persons
involved by the contracting person in evaluation of
the proposals shall be registered in the state to
perform architectural, engineering, or land surveying
services.
REPRESENTATIVE TALERICO stated his concern for school districts
and municipalities in rural locations, where the selection
process is generally done by committee or city council. He
opined that he is not sure how many professionals would be
available to serve on a selection committee, making it difficult
to select based on qualifications.
9:25:32 AM
REPRESENTATIVE KITO gave a two-part answer to Representative
Talerico's question. He explained that cost selection can be
used for services that are repetitive in nature, like structural
inspections or surveys, and the language in HB 24 follows
language from the Department of Transportation & Public
Facilities (DOT&PF) procurement regulations, which require the
appropriate design professional on the selection team.
REPRESENTATIVE KITO cited the example of school construction in
the second part of his answer to Representative Talerico. He
said that there is current law requiring school districts
utilize Qualification-Based Selection, and the appropriate
professionals are invited to participate in the selection
process. He added that typically schools are not looking for a
cost-type procurement where they are soliciting for a repetitive
service, but they would be using QBS. The statutes and
regulations also provide that for schools wanting to do an
alternative procurement - that is, design-build, construction-
manger, general contractor, or some combination of design and
construction together - the department can engage with the
school district to make sure the technical aspects of that
procurement are being done appropriately.
9:27:59 AM
REPRESENTATIVE VAZQUEZ asked what this bill tries to prevent
that is a current problem.
REPRESENTATIVE KITO stated that the concern that prompted him to
introduce the bill is the concern that any state money put into
public projects would serve the purpose of the project as
efficiently and inexpensively as possible and avoid design and
construction failures.
9:29:18 AM
REPRESENTATIVE VAZQUEZ referred to AS 36.90.110, in Section 1 of
HB 24, and the existing statute AS 36.90.100, which mentions
landscaping, and asked why landscaping architectural services
are omitted from HB 24.
REPRESENTATIVE KITO responded that he didn't know why except
that state-funded projects for municipalities were typically not
landscaping projects but building and infrastructure projects.
9:30:39 AM
REPRESENTATIVE VAZQUEZ asked Representative Kito to define
landscape architectural services.
REPRESENTATIVE KITO explained that landscape architects are
individuals who work on the grounds around facilities and open
spaces within infrastructure projects. He added that landscape
projects include vegetation and retaining walls.
9:31:36 AM
REPRESENTATIVE VAZQUEZ reiterated that the proposed legislation
omits landscape architectural services and asked if there was a
reason or if that was an oversight.
REPRESENTATIVE KITO said he was not sure if it was omitted but
claimed that there are very few grants from the State of Alaska
awarded specifically for landscaping.
REPRESENTATIVE VAZQUEZ opined that landscaping architectural
services would be an important inclusion.
REPRESENTATIVE KITO agreed and related his experience as a new
engineer trying to find landscaping components for the
embankment of a roadway and to determine which types of
vegetation were best suited based on a variety of variables. He
maintained that landscape architects typically work for other
design professionals within larger projects and would not be the
primary applicant for a project.
REPRESENTATIVE VAZQUEZ asked if it made sense to add landscape
architecture to the proposed legislation.
REPRESENTATIVE KITO agreed to consider doing that.
9:34:14 AM
REPRESENTATIVE VAZQUEZ said that the concept [of HB 24] appears
valid but asked how "sideboards" could be incorporated so that
one doesn't get carried away and not look at the price tag.
REPRESENTATIVE KITO stated the most important consideration is
understanding the budget starting out and trying to contain it.
He maintained that it is important to budget the amount of money
available to complete the design and to pay attention to the
work so that the budget is not exceeded. He added that if the
budget is exceeded, then it is important to know why. He
claimed that project management includes paying attention to the
overall process to keep costs down.
REPRESENTATIVE VAZQUEZ reiterated that she liked the concept of
HB 24 but was uneasy with the lack of sideboards assuring that
the price tag is not disregarded.
9:36:06 AM
REPRESENTATIVE STUTES asked Representative Kito to expound on
the mentoring programs offered by architectural firms.
REPRESENTATIVE KITO responded that he could speak specifically
to his profession. He said a graduate with a civil engineering
degree does not have the ability to "hang out a shingle." He
relayed that in order to become licensed in Alaska as a
professional engineer, a person would need to demonstrate to the
licensing board that he/she has had four years of increasing
levels of responsible charge under a licensed engineer.
9:37:56 AM
REPRESENTATIVE KELLER referred to page 2, line 30, and mentioned
that HB 24 discusses contracting with regional education
attendance areas (REAA) and asked if REAAs offer contracts.
REPRESENTATIVE KITO responded yes, on a regular basis. He
stated that from his experience working with the Department of
Education & Early Development (DEED), the REAAs, or school
districts, will hire an architect or engineer to do specific
school projects. He added that the REAA board would review the
proposals and hire the architect or engineer for the project.
9:38:51 AM
DALE NELSON, Alaska Professional Design Council (APDC),
testified in support of HB 24. He relayed that he is a
registered professional civil engineer and has practiced in
Alaska since 1967. He declared that he represents the Alaska
Professional Design Council, as chair of the Legislative Liaison
Committee, and is testifying in support of HB 24. He said APDC
is a nonprofit organization, started in the 1970s, and includes
a number of member organizations representing many licensed
engineers. He noted APDC has been very involved with
communities, the University of Alaska, and with the Science,
Technology, Engineering and Mathematics (STEM) teaching program
in schools.
MR. NELSON asserted that HB 24 is needed. He said that APDC
works with communities who are responding to pricing-first RFPs
and assists with the selection process. He emphasized that QBS
has real value. He cited the four supporting principles of the
American Public Works Association (APWA) are to: lower overall
cost, promote technical innovation and quality, benefit small
firms, and satisfy project owners. He stated that the main
advantage of QBS is that it promotes a collaborative spirit
between the design professional and the client in maximizing the
quality, value, cost-effectiveness, and usefulness of the final
product. He maintained that the mandate for managers is to be
good stewards of the funding provided to the communities for
development. He stated that as a registered professional
engineer, his oath is to support the health, safety, and welfare
of the public. He asked for the committee's support of HB 24.
9:44:25 AM
CHAIR LYNN asked why, if Mr. Nelson and the APDC have been
promoting the concept behind HB 24 for several years, it has
never passed.
MR. NELSON responded that education is needed and ongoing and,
as in the present hearing in the House State Affairs Standing
Committee, APDC strives to promote understanding of the
requirements of the state procurement code and what QBS would
accomplish.
9:45:28 AM
REPRESENTATIVE KELLER asked if APDC has standard designs that
can be used across the state, citing the reuse of previously
approved designs in the Matanuska-Susitna School District as an
example, and if reusing designs is in the scope and mission of
APDC to cut costs.
9:46:21 AM
MS. NELSON replied no, that APDC's scope does not include that
level of involvement in design recommendations. He stated that
APDC's role is in understanding the process and value of looking
for a qualified designer. He said that for a school district,
the designer would be an architect, as the lead, and would have
the support of structural, civil, mechanical, electrical, and
landscaping architects. He added that once the qualified
architect is identified, he/she collaborates with the school
district to define the scope, and together they work toward the
objective.
9:47:36 AM
REPRESENTATIVE SPOHNHOLZ asked and received clarification on the
four criteria by which the APDC supports the QBS process.
9:48:19 AM
CATHERINE FRITZ, Architect, Alaska Professional Design Council,
testified in support of HB 24. She relayed that she was a
practicing architect in Juneau who began working in the
architectural field in 1983 and has been licensed since 1990.
She reiterated Representative Kito's claim about the time it
takes to become a licensed design professional. She made
reference to her letter in the committee packet. She pointed
out that there is an existing statute on Qualified-Based
Selection, and the proposed legislation is similar to that
statute but would ensure that the provisions already practiced
in the state are carried down to the municipal levels and local
units who use state funds. She contested that implementing HB
24 is an issue of fairness in procurement. She related that the
goal of any government procurement process is to have extensive
competition that is open, fair, rigorous, and appropriate for
the project, and she opined that this should be true at all
levels of government.
MS. FRITZ said that she has recently been working on projects
for the Federal Aviation Administration (FAA) and stated that
the FAA, along with most federal agencies, requires QBS for
selecting design teams. She said that HB 24 would close a
loophole. She maintained that design is not like construction
but is more a service than a commodity. She offered that if a
project is clearly defined, then a price can be appropriately
associated with the project. She claimed that a pricing-first
selection process attracts a bid without a scope, so that a
facility, built using the cheapest bid, will reflect less time
spent with the design team, less opportunity for innovation, and
less consideration for efficiency in ongoing maintenance.
MS. FRITZ asserted that the Quality-Based Selection process
offers an opportunity for collaboration between the owner and
the design team. She said that after identifying the
qualifications that are important for a project and selecting
the best design team for the project, an owner can negotiate a
price with the design team. She maintained that if the owner
and design team cannot decide on a price, then the owner can use
the second choice team. She added that a contract for services
would not be written until the negotiation is complete. She
described QBS as a two-step process, resulting in clear
expectations, collaboration, relationship building, and a design
team that understands the owner's personal goals.
[HB 24 was held over.]
9:56:26 AM
ADJOURNMENT
There being no further business before the committee, the House
State Affairs Standing Committee meeting was adjourned at 9:56
a.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| 01 Blank CS HB 368 v.W 2-26-2016.pdf |
HSTA 3/29/2016 8:00:00 AM |
HB 368 |
| 02 HB 368 v.A.PDF |
HSTA 3/29/2016 8:00:00 AM |
HB 368 |
| 03 Sponsor Statement HB 368 ver W 3-1-2016 (002).pdf |
HSTA 3/29/2016 8:00:00 AM |
HB 368 |
| 04 Section Analysis HB 368 ver W 3-1-2016 (002).pdf |
HSTA 3/29/2016 8:00:00 AM |
HB 368 |
| 05 HB 368 ver W Description of Changes 3-25-2016.pdf |
HSTA 3/29/2016 8:00:00 AM |
HB 368 |
| 06 HB 368 Fiscal Note - DOA 3-25-2016.pdf |
HSTA 3/29/2016 8:00:00 AM |
HB 368 |
| 01 HB 24 ver A.pdf |
HSTA 3/29/2016 8:00:00 AM |
HB 24 |
| 02 HB 24 Sponsor Statement.pdf |
HSTA 3/29/2016 8:00:00 AM |
HB 24 |
| 03 HB 24 Sectional Analysis.pdf |
HSTA 3/29/2016 8:00:00 AM |
HB 24 |
| 04 HB 24 Supporting Documents-Leg Research Report.pdf |
HSTA 3/29/2016 8:00:00 AM |
HB 24 |
| 05 HB 24-DOA-DGS-02-05-16.pdf |
HSTA 3/29/2016 8:00:00 AM |
HB 24 |
| 06 HB 24 ACEC qbs_matrix 2013.pdf |
HSTA 3/29/2016 8:00:00 AM |
HB 24 |
| 07 HB 24 Supporting Documents-Presentation ACEC Aug 2011-.pdf |
HSTA 3/29/2016 8:00:00 AM |
HB 24 |