Legislature(1997 - 1998)
04/08/1997 06:09 PM FIN
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
MINUTES SENATE FINANCE COMMITTEE April 8, 1997 6:09 P.M. TAPES SFC-97, # 87, Sides 1 & 2 (000-590, 590-000) SFC-97, # 88, Side 1 (000-225) CALL TO ORDER Senator Bert Sharp, Cochair, Senate Finance Committee, reconvened the meeting at approximately 6:09 P.M. PRESENT In addition to COCHAIR SHARP, SENATORS PHILLIPS, TORGERSON, PARNELL and ADAMS were present when the meeting was reconvened. COCHAIR PEARCE and SENATOR DONLEY arrived as the meeting was in progress. Also Attending: SENATOR LYDA GREEN, SENATOR RICK HALFORD, SENATOR JOHNNY ELLIS, MICHAEL MORGAN, Facilities Section Manager, Department of Education; LARRY WIGET, Director, Government Relations, Anchorage School District; CARL ROSE, Executive Director, Alaska Association of School Boards; JEFFREY BUSH, Deputy Commissioner, Department of Commerce and Economic Development; SHARON BARTON, Director, Administrative Services, Department of Administration (DOA); KAREN MORGAN, Deputy Director, Division of Information Services, DOA; WENDY REDMAN, University of Alaska; MARYLOU BURTON, Director, Statewide Budget Office, University of Alaska; MIKE GREANY, Director, Legislative Finance Division; fiscal analysts and aides to committee members. SUMMARY INFORMATION SB 11 SCHOOL DEBT REIMBURSEMENT SENATOR HALFORD, Sponsor, testified on behalf of the bill. Also testifying were MICHAEL MORGAN, LARRY WIGET and CARL ROSE. SENATOR PHILLIPS MOVED Amendment #1. SENATOR DONLEY objected, then withdrew his objection. SENATOR PARNELL objected. Amendment #1 was ADOPTED by a 5 to 1 vote. SENATOR TORGERSON MOVED Amendment #2. There being no objection, Amendment #2 was ADOPTED. SB 11 was HELD for further consideration. HB 58 CIVIL ACTIONS/ATTY FEES/INSURANCE Testimony was heard from JEFF BUSH. HB 58 was HELD for further consideration. HB 75 APPROPRIATIONS: OPERATING BUDGET HB 76 APPROPRIATION: MENTAL HEALTH PROGRAM SENATOR PARNELL, Chair of the Information Technology Subcommittee, testified on behalf of the subcommittee's recommendations. Also testifying were SHARON BARTON, KAREN MORGAN, WENDY REDMAN, and MARYLOU BURTON. SENATOR PARNELL MOVED to incorporate the recommendations into HB 75. SENATOR ADAMS objected. The MOTION CARRIED on a vote of 6 to 1. HB 46 MINING: CREDITS/LEASES/REC. AREA This bill was scheduled but not heard. SENATE BILL NO. 11 "An Act relating to state aid for school construction debt; and providing for an effective date." COCHAIR SHARP noted that representatives from the Department of Education were present to speak to the bill, as was the bill sponsor. He invited Senator Halford to address the committee. SENATOR HALFORD indicated he was available for questions. SENATOR ADAMS inquired about the retroactivity clause and its effect on long term financial goals. SENATOR HALFORD responded that retroactivity applied to reimbursement of up to seventy percent for bonds sold with prior approval. It would apply to Mat-Su and Anchorage, and there had been a question regarding North Slope projects. It was not intended to apply to anything that had already been accomplished. It would apply to projects that had been approved but not yet had bonds sold. If bonds had already been sold, but departmental approval had not been received, they could go back to the department to get approval. SENATOR ADAMS had another concern which was covered in a draft amendment being copied for submittal to the committee, according to SENATOR HALFORD. SENATOR ADAMS asked for comments on a proposal to reduce the percentage from seventy-five to fifty. SENATOR HALFORD responded that fifty percent of something was worth more than seventy-five percent of nothing. SENATOR ADAMS expressed interest in merging other legislation into the bill so there would be equity among school districts, particularly for rural Alaska. SENATOR HALFORD responded briefly about the nature of the problem. MICHAEL MORGAN, Facilities Section Manager, Department of Education, testified in opposition to the legislation based on two reasons. The first related to continued advocacy for legislation that addressed statewide needs, whereas SB 11 only addressed needs for communities with the ability to bond. The other reason was that it ignored the prioritization process currently used by the department which the legislature put in statute. In response to a question from SENATOR ADAMS about a proposal to reduce the percentage to fifty, MR. MORGAN supported it because it potentially freed up money for communities not addressed by the bill. In response to a question from SENATOR PHILLIPS, he said he was speaking on behalf of the department and not the entire administration. There were requests for the department's priority list of projects. MR. MORGAN informed the committee that the department had been recommending $100 million annually for statewide construction. SENATOR PARNELL brought up an April 15 ballot in Anchorage with a list of school projects to be 100 percent funded by city taxpayers. The retroactivity clause would make some of the projects available for reimbursement. He questioned the wisdom of reimbursement versus using the money to further fund additional projects. SENATOR HALFORD provided additional explanation. LARRY WIGET, Director, Government Relations, Anchorage School District, addressed the committee. He brought up the issue of willingness of a community concerning overall indebtedness. By providing retroactive reimbursement at seventy-five percent, it lowered bonded indebtedness which would allow communities to take on greater debt in the future, or increase bond capacity. Research showed there would be greater likelihood for voters to support bond measures if they knew the funds were available. There was additional discussion about departmental approval of projects. MR. MORGAN offered explanation of timing differences concerning approval. In response to a question from SENATOR PARNELL, MR. MORGAN explained there was no cap and districts could bond for as much as they chose. There had been a statutory limit in the past. With the cap there had been a prioritization process, but under the legislation there would be none, so communities could submit the projects they chose. In response to a question from SENATOR ADAMS, MR. MORGAN stated the fiscal note addressed a portion of the retroactivity clause but did not include the proposed amendments which had been discussed. There was additional discussion about the indeterminate amount of the fiscal note. SENATOR ADAMS believed the North Slope Borough would be eligible, but the bill still needed to be made equitable for rural schools. He reiterated his concern about how it would impact the long range financial goal. The presence of Senator Donley was noted. SENATOR HALFORD informed the committee about the applicability of the amendment. It was not intended to pay back prior expenditures and had a narrow window. COCHAIR SHARP called for further questions or comments. There being none, SENATOR PHILLIPS MOVED Amendment #1 and explained that it dropped the reimbursement percentage from seventy-five percent to fifty percent. SENATOR DONLEY objected for sponsor comment. SENATOR HALFORD briefly reiterated his position. SENATOR DONLEY then withdrew his objection. SENATOR PARNELL objected. A roll call vote was taken on the MOTION to adopt Amendment #1. IN FAVOR: Donley, Adams, Phillips, Torgerson, Sharp OPPOSED: Parnell Amendment #1 was ADOPTED by a 5 to 1 vote. SENATOR TORGERSON MOVED Amendment #2. There being no objection, Amendment #2 was ADOPTED. A request was made of the department by COCHAIR SHARP to provide additional information regarding other school districts with bond issues that would be eligible under the retroactivity clause. He announced that SB 11 would be HELD for further consideration. CARL ROSE, Executive Director, Alaska Association of School Boards, addressed the committee, commenting that the bill had been somewhat divisive because it created haves and have nots. He didn't oppose the legislation, but noted it left out a large portion of the membership he represented, namely in the rural areas, because they lacked the capacity to issue bonds. The main issue was fairness and equity. Brief discussion followed MR. ROSE'S comments. The presence of COCHAIR PEARCE was noted. COCHAIR SHARP stated that SB 11 would be HELD for further consideration and took up HB 58. CS FOR SPONSOR SUBSTITUTE FOR HOUSE BILL NO. 58(FIN) am "An Act relating to civil actions; relating to independent counsel provided under an insurance policy; relating to attorney fees; amending Rules 16.1, 41, 49, 58, 68, 72.1, 82, and 95, Alaska Rules of Civil Procedure; amending Rule 702, Alaska Rules of Evidence; and amending Rule 511, Alaska Rules of Appellate Procedure." SENATOR PHILLIPS brought up a letter from Bruce Cain requesting a teleconference on the bill. He reiterated the request. COCHAIR SHARP indicated that an attempt had been made to teleconference but the operators were unavailable for the evening meeting. JEFFREY BUSH, Deputy Commissioner, Department of Commerce and Economic Development, represented the administration concerning HB 58, the tort reform bill. He was optimistic that the negotiations going on between the interested parties regarding the issues would result in a compromise. He pointed out that the governor introduced similar legislation developed by the task force on civil justice reform and to the extent that HB 58 was consistent, they supported it. He expressed some disappointment that the task force proposals received little attention by the legislature. The task force approach was that the problem was primarily one of the cost of the system to the parties involved. As much as sixty percent of damages paid are eaten up by the system in court costs, attorney fees, expert witnesses, et cetera. There were two ways to save money, either to cut costs in the litigation process or cut off a person's right to recover. The task force decided the second option was inappropriate and unfair. They wanted to make sure people's rights were retained and to save money in the process by settling cases more quickly and to insure a higher percentage of the money went to the deserving victim rather than the attorneys and witnesses. He believed HB 58 was faulty in that regard. It contained provisions that had been unanimously rejected by the task force because they were not deemed to be fair to the litigants. End SFC-97 #87, Side 1, Begin Side 2 In response to a question from SENATOR ADAMS, MR. BUSH discussed the task force requirements to get a recommendation or proposal to move forward. SENATOR ADAMS inquired which were the high points of the task force that were missing in HB 58. MR. BUSH responded that the most significant missing pieces dealt with the process of litigation. There had been a proposed pilot program for alternative dispute resolution in an effort to achieve quick resolution before they went to trial. Another recommendation was that the District Court jurisdiction be raised from $50 thousand to $100 thousand and have an expedited process that required the litigants to go to trial within one year. According to the sponsor, the reasons they were not included in HB 58 was because the court system said they would cost too much money. He disagreed with the court system analysis. In response to a question from SENATOR PHILLIPS, MR. BUSH stated that of the 21 members of the task force, 9 held law degrees. COCHAIR SHARP announced that HB 58 would be HELD for further consideration. He called for a brief recess and turned the gavel over to COCHAIR PEARCE. CS FOR HOUSE BILL NO. 75(FIN) am(brf sup maj pfld) "An Act making appropriations for the operating and loan program expenses of state government, for certain programs, and to capitalize funds; making an appropriation under art. IX, sec. 17(c), Constitution of the State of Alaska, from the constitutional budget reserve fund; and providing for an effective date." CS FOR HOUSE BILL NO. 76(FIN) "An Act making appropriations for the operating and capital expenses of the state's integrated comprehensive mental health program; and providing for an effective date." COCHAIR PEARCE reconvened the meeting after a few minutes. She noted the remaining budget to close out on today's schedule was the Information Technology Subcommittee, headed by SENATOR PARNELL. SENATOR PARNELL addressed the committee. He explained that the subcommittee was charged with pulling all the information technology expenditures out of each department, including the university, and examining the combined budgets that totalled between $120-140 million. The administration had commissioned a Compass America study which conducted an in-depth review of the state's information environment. Some of the noted findings included random, uncoordinated purchases of technology throughout state government, wide disparity of available technology among departments, and the fact that the state is comparatively more technologically advanced, but wasn't fully utilizing equipment in many cases. The subcommittee recommended a reduction of all agency expenditures on computer equipment on a proportional basis for a total reduction of $1.25 million. SENATOR PARNELL further explained that they would like the Department of Administration (DOA) to set up an account of $500 thousand for new computer purchases. The next major component was a reduction to DOA's Division of Information Services of $350 thousand, via the reduction of rates for services to other departments. SENATOR PARNELL summarized by noting the total reduction by the subcommittee was $1.1 million. COCHAIR PEARCE inquired whether the Compass America report specifically addressed the university. SENATOR PARNELL replied that it did not. He explained the university's concerns about contributing to the $500 thousand account and competing for a portion of the funds. SENATOR ADAMS inquired how departments would justify new technology and updated equipment when technology changes so quickly. He also requested a copy of the Compass America study. SENATOR PARNELL responded that the attempt was to slow down uncoordinated random purchases of computer equipment. As an example, he referred to the Telecommunications Information Council (TIC) which had just established a standard software suite for all of state government that would allow volume purchase. It basically changed the decision-making process. SENATOR ADAMS requested testimony from the university regarding a $459 thousand reduction and expressed his hope that it did not hurt students because of insufficient computers to handle their work load. SHARON BARTON, Director, Administrative Services, DOA, spoke about the departmental reductions, many of which would end up as an unallocated reduction from budgeted amounts that may have been for priority FY98 purchases. She suggested they not slow down on those purchases, although the intention was good. She agreed with the concept of buying smarter and taking advantage of volume purchases. Regarding the $500 thousand fund, the priority of the department and the TIC was to set standards for state government. The fund would be valuable to the anticipated difficult transition. MS. BARTON elaborated on a bigger concern for her department, that being the chargeback reduction and the complexity of the internal service fund. She referred to a multiplier effect of a $350 thousand reduction to the Division of Information Services that would result in a service level reduction of $1.4 million and provided additional information. In response to a question from COCHAIR PEARCE, MS. BARTON responded that the Information Services fund was very dynamic in that money was flowing in and out of it on a daily basis. KAREN MORGAN, Deputy Director, Division of Information Services, DOA, responded to the same question. She noted that they operate the fund at a zero balance level because of the accounting requirements to not make a profit. The federal government disallows a balance to be carried over sixty days. She further described the cash flow of the fund as it related to the fiscal year. SENATOR ADAMS asked for further explanation of the structure of the proposed fund. SENATOR PARNELL responded by describing the composition of the TIC. He added that it would have oversight of a limited pool of funds as an effort to get a handle on this area. In response to a question from COCHAIR SHARP about rates charged by the division, there was lengthy explanation and discussion from MS. MORGAN and MS. BARTON. SENATOR ADAMS restated his request to hear about the impact of a $459 thousand reduction on the university. WENDY REDMAN, University of Alaska (UA), stated that they had no difficulty with the chargeback portion for provided services, as they represented a small amount. She provided written information to the committee (copy on file) regarding the impact of the overall reduction, noting that the university's share totaled 37 percent, adding that it had been based on a study that didn't include the university. She pointed out that the university already had an integrated system and software standards. She called attention to a difficulty regarding the national standard of twenty students per computer, noting the university average was currently closer to fifty students per computer, so they were far behind in student computing. That was a major concern with regard to the reductions. End SFC-97 #87, Side 2 Begin SFC-97 #88, Side 1 MARYLOU BURTON, Director, Statewide Budget Office, UA, spoke briefly in response to a question from SENATOR ADAMS about a recalculation of what reduction the university could stand. MS. REDMAN commented that they were supportive of the TIC, but many of their discussions did not apply to the university. In response to a question from COCHAIR PEARCE, she further explained how they control spending through their integrated standards. SENATOR PARNELL requested an explanation from Mike Greany regarding how the university number was arrived at. MIKE GREANY, Director, Legislative Finance Division, testified that they treated the university similar to other agencies with regard to identifying a base amount for equipment and explained in detail. He acknowledged that the university didn't do their budget in the same way as other state agencies, so they made their best attempt to fit the university into the main scheme, purposely taking a conservative approach. He stated there was a policy question on whether or not the university should be included within this type of review. In response to a question from SENATOR ADAMS, MR. GREANY explained that the Legislature and Court System were excluded because they were separate branches of government with their own needs and governing structure. SENATOR PARNELL added that another distinction was that they were not voting members of the TIC. SENATOR PARNELL MOVED to incorporate the subcommittee recommendations into HB 75. SENATOR ADAMS objected. A show of hands was taken on the MOTION. IN FAVOR: Donley, Torgerson, Phillips, Parnell, Sharp, Pearce OPPOSED: Adams The MOTION CARRIED on a vote of 6 to 1. COCHAIR PEARCE announced upcoming committee agendas. ADJOURNMENT The meeting was adjourned at approximately 8:03 P.M.