Legislature(2025 - 2026)BELTZ 105 (TSBldg)
04/29/2025 01:30 PM Senate COMMUNITY & REGIONAL AFFAIRS
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| Audio | Topic |
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| Start | |
| Overview: State of Alaska Payment Processes | |
| SB129 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| += | SB 129 | TELECONFERENCED | |
ALASKA STATE LEGISLATURE
SENATE COMMUNITY AND REGIONAL AFFAIRS STANDING COMMITTEE
April 29, 2025
1:34 p.m.
MEMBERS PRESENT
Senator Kelly Merrick, Chair
Senator Forrest Dunbar, Vice Chair
Senator Elvi Gray-Jackson
MEMBERS ABSENT
Senator Donald Olson
Senator Robert Yundt
COMMITTEE CALENDAR
OVERVIEW: STATE OF ALASKA PAYMENT PROCESSES
- HEARD
SENATE BILL NO. 129
"An Act establishing a 30-day deadline for the payment of
contracts under the State Procurement Code; establishing
deadlines for the payment of grants, contracts, and
reimbursement agreements to nonprofit organizations,
municipalities, and Alaska Native organizations; relating to
payment of grants to named recipients that are not
municipalities; and providing for an effective date."
- HEARD & HELD
PREVIOUS COMMITTEE ACTION
BILL: SB 129
SHORT TITLE: PAYMENT OF CONTRACTS
SPONSOR(s): SENATOR(s) KAWASAKI
03/12/25 (S) READ THE FIRST TIME - REFERRALS
03/12/25 (S) CRA, L&C
04/01/25 (S) CRA AT 1:30 PM BELTZ 105 (TSBldg)
04/01/25 (S) Heard & Held
04/01/25 (S) MINUTE(CRA)
04/08/25 (S) CRA AT 1:30 PM BELTZ 105 (TSBldg)
04/08/25 (S) Heard & Held
04/08/25 (S) MINUTE(CRA)
04/29/25 (S) CRA AT 1:30 PM BELTZ 105 (TSBldg)
WITNESS REGISTER
ERIC DEMOULIN, Director
Finance Division
Department of Administration (DOA)
Juneau, Alaska
POSITION STATEMENT: Participated in and answered questions
during the overview of payment processes in the State of Alaska.
HANNAH LAGER, Director, Division of Administrative Services
Department of Commerce, Community, and Economic Development
Juneau, Alaska
POSITION STATEMENT: Participated in and answered questions
during the overview of payment processes in the State of Alaska.
PAM HALLORAN, Assistant Commissioner
Department of Health
Juneau, Alaska
POSITION STATEMENT: Participated in and answered questions
during the overview of payment processes in the State of Alaska.
TOM MAYER, Chief Procurement Officer
Office of Procurement and Property Management
Department of Administration
Juneau, Alaska
POSITION STATEMENT: Answered questions during the overview of
payment processes in the State of Alaska.
SENATOR SCOTT KAWASAKI, District P
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Sponsor of SB 129.
ACTION NARRATIVE
1:34:15 PM
CHAIR MERRICK called the Senate Community and Regional Affairs
Standing Committee meeting to order at 1:34 p.m. Present at the
call to order were Senators Gray-Jackson, Dunbar and Chair
Merrick.
^OVERVIEW: STATE OF ALASKA PAYMENT PROCESSES
OVERVIEW: STATE OF ALASKA PAYMENT PROCESSES
1:34:33 PM
CHAIR MERRICK announced an overview of the State of Alaska (SOA)
payment processes by the Department of Administration (DOA),
Department of Commerce, Community and Economic Development
(DCCED), and Department of Health (DOH).
1:35:41 PM
ERIC DEMOULIN, Director, Finance Division, Department of
Administration (DOA), Juneau, Alaska, said he would begin by
addressing questions he previously received from the committee
regarding payments. He explained that departments approve their
own payments as outlined in the Alaska Administrative Manual
(AAM 35). The manual states that all departments are responsible
for developing department-level payment approval and payment
processes. This is supported through the Integrated Resource
Information System (IRIS). He explained that payment eligibility
requirements vary. Contractor (for-profit entities) agreements
are not typically governed by spending restrictions or program
performance. Federal funding is dispersed to non-profits
(delivering services to the public) through pass-throughs. He
briefly described this process. Due to the multifaceted approach
to payments, there is no single answer to the question of why
payments are delayed in one area versus the other. The payment
processes are decentralized; therefore, there is a lack of
detailed information regarding specific delays. He pointed to
program compliance as one reason for delays. He explained that
each federal granting agency has a cognizant agency that it
works with at the state level - and the payment and compliance
requirements vary for each.
1:38:53 PM
MR. DEMOULIN explained that each year, the legislature
appropriates funds to departments. The departments then have the
legal authority to spend those funds. He stated that, when
working to increase payment efficiency, DOA looks to the lowest
signature authority within the department and seeks to ensure
the process is done with the greatest possible efficiency. He
explained how each department determines signature approvals and
identifies signature authorities. Once signature approval is
received, the payments to the legal appropriations can be
processed. The signed approvals may then be submitted to a
central agency. He noted that shared services processes payments
on behalf of agencies for payments that are within scope. He
explained that this process applies to most private (for-profit)
agencies. He explained that grant funding typically falls
outside of scope and is therefore paid at the division level. He
stated that, regardless of the approval path, payments are
entered into IRIS and processed for payment the following day.
Most payments made across the state are through Automated
Clearing House (ACH) transfers. Checks are run in a nightly
batch cycle, printed each morning, and sent out.
1:40:44 PM
CHAIR MERRICK asked for examples of for profit and not for
profit organizations that DOA works with.
MR. DEMOULIN replied that DOA is primarily a passthrough agency.
He said the best example of a private entity is Microsoft. Those
are multiple year contracts. DOA does not have many dealings
with non-profits; however, a non-profit may receive passthrough
funding from DOA for public services. He briefly explained how
different departments deal with federal grant funding, noting
that they must remain compliant. He added that it is a
reimbursement mechanism, requiring proof that the activities
occurred before payment is made.
1:42:52 PM
MR. DEMOULIN emphasized that payments primarily move through the
administrative arm of the cognizant agency that manages grant
payments. He said DOA does process some grant payments. He
stated that the average processing time for state agencies is
less than 5 days. With respect to prompt payment requirements,
he expressed confidence that payments are made quickly. He said
that invoice routing and payment approvals are found in AAM
30.060. Each agency must develop approvals and procedures that
meet organizational requirements.
1:45:45 PM
HANNAH LAGER, Director, Division of Administrative Services,
Department of Commerce, Community, and Economic Development
(DCCED), Juneau, Alaska, said DCCED administers hundreds of
grant programs under a wide variety of statutory authorizations.
She listed several of these and said it is a roughly $1 billion
grant portfolio. This is a mix of general fund and federal
grants. DCCED is subject to multiple state statutes related to
purchases and AAM guidance. Different staff are responsible for
different payment review levels. She provided a brief overview
of the grant payment process, which includes a program
compliance review. Invoices are received by staff in multiple
divisions. Staff review and approve invoices, then submit them
to Shared Services of Alaska (SSoA). DCCED directly processes a
small number of invoices. Staff use purchasing cards (p-cards)
when possible, which keeps the approval at the lowest level and
ensures prompt payment. DCCED has department-wide systems and
approvals processes in place and a minimum of two people are
involved in each transaction. She noted a variety of checks and
balances in place to ensure fraud does not occur.
1:48:10 PM
MS. LAGER said that [SB 129] highlighted some datapoints that
DCCED does not currently track, which made gathering data for
comparison difficult. For instance, DCCED does not track the
date a request was mailed. Similarly, the date a request is
received is noted on the paper copy but is not tracked in
DCCED's accounting system. Instead, DCCED tracks the invoice
date - which helps to avoid duplicate payments. She said DCCED
does not track communication dates and opined that this is
something worth monitoring.
MS. LAGER said that she noted inconsistencies with some of the
data and surmised that this was related to incorrect data entry.
She said SB 129 highlighted challenges and areas that DCCED will
seek to improve going forward. She said that for FY 24 and FY
25, 97 percent of the operating grant payments were made within
30 days. She noted challenges related to invoice dates relative
to appropriation effective dates and offered an example. Early
data entry can create the impression that payments are late when
they are timely. She added that 90 percent of non-travel and
non-purchase card (p-card) activity is also paid within 30 days.
She said invoices are sent to shared email inboxes, thus
ensuring payments do not get lost or forgotten during employment
changes. She reiterated that p-cards are used when possible. She
indicated that improvement efforts would continue.
1:51:58 PM
MS. LAGER expressed appreciation to the committee for the
opportunity to review the payment process and see what is
working and where improvements are needed.
1:52:17 PM
SENATOR GRAY-JACKSON sought confirmation that a purchase card
(p-card) is a credit card.
MS. LAGER replied yes.
SENATOR GRAY-JACKSON asked who pays the credit card fees.
MS. LAGER replied that DCCED pays the credit card fees. She said
the operating budget contains adjusting language that allows
DCCED to cover those. She stated that the fees are incidental,
equaling less than $400,000 in 2024.
1:52:58 PM
SENATOR GRAY-JACKSON asked for confirmation that the total
amount of fees is $400,000.
MS. LAGER recalled that in 2024 credit card fees were close to
$400,000. She added that this is for a high volume of fees from
business and professional licensing in addition to outgoing
transactions.
1:53:28 PM
SENATOR GRAY-JACKSON asked whether DCCED has considered having
the vendor pay the credit card fees.
MS. LAGER deferred to Director Demoulin.
1:54:07 PM
MR. DEMOULIN replied that there are several options for managing
statewide credit card programs. DOA has not considered fee
passthroughs but has worked to limit fees in general. He
expressed hope that different technologies and forms of payment
will result in increased efficiency. He said he would gather
information on historic fee amounts and p-card contract benefits
and distribute it to the committee.
1:54:59 PM
SENATOR GRAY-JACKSON asked about p-card contract benefits.
MR. DEMOULIN replied that he would follow up with this
information.
SENATOR GRAY-JACKSON commented that she receives [airline miles]
as a benefit for her credit card use and wondered about the
benefits the State of Alaska receives.
1:56:23 PM
PAM HALLORAN, Assistant Commissioner, Department of Health
(DOH), Juneau, Alaska, said the Department of Health (DOH) is
committed to timely payments and considers grantees and
contractors to be partners in the work. She said DOH is
committed to improving the payment process. SB 129 helped DOH to
identify delays and gaps in the payment process. Capacity is one
concern, and the high volume of contracts and grants is a
significant factor in delays. Invoice quality (e.g. ensuring
that goods and services are properly outlined) can also cause
delays. Staff training is also a factor. She noted high burnout
and turnover rates. She emphasized staffing improvements and
said that new training modules ensure staff are aware of
programmatic expectations and reporting requirements. This helps
to ensure that vendors are paid on time. She indicated that
initial meetings with grantees would occur in summer 2025.
1:59:11 PM
MS. HALLORAN turned her attention to committee questions.
Regarding payment processing, she explained that each agency has
a centralized email inbox for contracts that administrative
staff manages. The payments are sent to a project manager who
oversees the contract and approves the payment before sending it
on for payment processing. Grants are advanced quarterly. Grants
funded with capital monies are paid via reimbursement.
1:59:49 PM
MS. HALLORAN explained that, for payments, the vendor uses an
online portal to choose between electronic payment or payment by
check. She explained the difference between processing contract
payments and processing grant payments. Contract payments are
reviewed and approved by the project manager and forwarded to
the accounting system for payment. Payments for operating and
capital grants are reviewed and approved by a division program
manager and the grants administrator. Once approved, the grants
administrator processes the payments in the accounting system.
She provided the average processing time for contracts compared
to grants. DOH is an average of 31 days late for contract
payments (this data is based on contract payments made in FY
24). DOH is averaging 11.2 days to process quarterly grant
payments (after grantees submit reports, which are then reviewed
by the project manager). She reiterated that grant payments are
processed quarterly and added that the payment is 25 percent for
quarters 1-3 while the final quarter is 20 percent. 5 percent is
withheld in the final quarter to ensure that grantees submit
final reporting.
2:02:02 PM
SENATOR DUNBAR asked whether the average payment processing time
provided for contract payments is derived from the mean or the
median. He surmised that certain contracts take much longer to
pay and would thus skew the average.
MS. HALLORAN shared her understanding that this information was
compiled using the mean. She agreed that contract payments can
take a very long time, with some payments taking over 200 days.
2:02:46 PM
SENATOR DUNBAR sought clarification that "contracts" refers to
for-profit contracts and not grants.
MS. HALLORAN replied yes.
SENATOR DUNBAR asked how often payments that are delayed 200
days or more result in litigation. He surmised that such a
lengthy delay is a breach of contract and asked how often the
State of Alaska pays damages.
MS. HALLORAN replied that she is not aware of any litigation
related to grants.
2:03:42 PM
MR. DEMOULIN deferred the question.
2:04:01 PM
TOM MAYER, Chief Procurement Officer, Office of Procurement and
Property Management, Department of Administration, Juneau,
Alaska, said he is not aware of any claims related to late
payments. He explained that contract claims would be filed in-
agency and appeals would be considered by the commissioner.
2:04:33 PM
SENATOR DUNBAR clarified that he is referring to for-profit
vendors and asked why contracts that have not received payment
for 8 months or more do not litigate. He opined that the vendor
would have a clear case and wondered if the contract contains
language that prevents this or if vendors may be concerned about
jeopardizing future contracts.
MR. MAYER indicated that he is not familiar with the details of
this process. He surmised that concern about jeopardizing future
contracts may impact whether vendors choose to litigate. He
emphasized that DOA does not consider past contracts (including
any previous contract claims) unless there is a judgment against
a particular entity. He suggested that one additional reason
vendors choose not to litigate could be because they know the
state will pay eventually.
2:06:22 PM
SENATOR DUNBAR directed his question related to late contract
payments and litigation to Ms. Halloran.
MS. HALLORAN replied that one vendor contacted her directly. She
stated that escalating in this way does help, as the department
can then work to determine what is causing the delay and create
a plan to pay the vendor. She said she is not familiar with the
specific circumstances of the contracts from FY 24 that
experienced extreme delays. She stated that all contractors are
valuable partners.
2:07:43 PM
SENATOR DUNBAR whether the same is true of grantees.
MS. HALLORAN replied that, in the case of grantees, DOH is at an
advantage because DOH can advance payments (while other
departments pay grantees via reimbursement). She stated that DOH
works hard to forge a positive relationship with grantees.
2:08:33 PM
MR. DEMOULIN commented that such lengthy payment delays are
rare. He asked how many grantees DOH manages.
MS. HALLORAN replied 448 grantees.
MR. DEMOULIN commented that this is a large number of grantees
and managing them is a group effort. He briefly discussed the
grant structure within the accounting system (which also exists
for contracts), encumbered funds, appropriations, and processing
timely payments. He reiterated that most grantees do not
experience long payment delays. He said some long delays stem
from discrepancies in services provided and offered an example.
He emphasized that many different scenarios could result in
payment delays and the details are not always available.
2:10:58 PM
CHAIR MERRICK asked what type of vendor DOH is paying 200 days
late.
MS. HALLORAN replied that she is fairly new to the department
and her knowledge of vendors is limited. She said the vendor
that contacted her directly represents multiple information
technology vendors.
SB 129-PAYMENT OF CONTRACTS
2:11:49 PM
CHAIR MERRICK announced the consideration of SENATE BILL NO. 129
"An Act establishing a 30-day deadline for the payment of
contracts under the State Procurement Code; establishing
deadlines for the payment of grants, contracts, and
reimbursement agreements to nonprofit organizations,
municipalities, and Alaska Native organizations; relating to
payment of grants to named recipients that are not
municipalities; and providing for an effective date."
2:12:06 PM
SENATOR SCOTT KAWASAKI, District P, Alaska State Legislature,
Juneau, Alaska, expressed appreciation for the discussion
related to contracts and late payments. He pointed out that
several states do have prompt payment legislation. He offered
New York State as an example and shared about an annual report
outlining how well payment processes are working within the
State of New York. He commented that current payment timeframes
in the State of Alaska are similar to those of New York State.
He acknowledged that there are many different reasons for late
payments. He opined that budget challenges create additional
tension. He expressed support for the non-profit agencies that
rely on prompt payment to provide services. He opined that, if
state agencies, the administration, and the State's non-profit
partners work together, a solution is possible. He indicated
that the discussions surrounding SB 129 have been a step toward
finding a solution.
2:15:01 PM
CHAIR MERRICK held SB 129 in committee.
2:15:13 PM
There being no further business to come before the committee,
Chair Merrick adjourned the Senate Community and Regional
Affairs Standing Committee meeting at 2:15 p.m.
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