Legislature(1997 - 1998)
03/06/1997 09:55 AM Senate FIN
| Audio | Topic |
|---|
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
MINUTES
SENATE FINANCE COMMITTEE
March 6, 1997
9:55 A.M.
TAPES
SFC-97, # 49, Side 1 (000-547)
CALL TO ORDER
Senator Bert Sharp, Cochair, Senate Finance Committee,
convened the meeting at approximately 9:55 A.M.
PRESENT
In addition to COCHAIR SHARP, COCHAIR PEARCE, SENATORS
DONLEY, PHILLIPS, TORGERSON, PARNELL and ADAMS were present
when the meeting was convened.
Also Attending:
SENATOR JERRY WARD; Sponsor, CRAIG JOHNSON, Legislative Aide
to Senator Ward; DON ETHERIDGE, Union Local 71; MIKE
MCMULLEN, Division of Personnel, Department of
Administration; PAM LA BOLLE, President, Alaska State
Chamber of Commerce; and aides to committee members.
SUMMARY INFORMATION
SB 68 TASK FORCE ON PRIVATIZATION
SENATOR WARD testified on behalf of the bill. CRAIG
JOHNSON answered questions of committee members. DON
ETHERIDGE spoke in favor, but expressed concern over
fair representation. MIKE MCMULLEN had concerns
regarding feasibility study provisions of collective
bargaining contracts. PAM LA BOLLE testified in
support of the bill. After a brief recess, COCHAIR
SHARP announced SB 68 would be HELD for changes.
SENATE BILL NO. 68
"An Act relating to the Task Force on Privatization; and
providing for an effective date."
SENATOR JERRY WARD, Sponsor, called attention to the sponsor
statement and back-up information in committee files.
Privatization has been discussed over the years and
currently, there is consideration for privatizing the Alaska
Railroad, prisons, Marine Highway system, and other portions
of state government. He contacted other states to see how
they handled it. There were two approaches. One was a
piecemeal fashion, picking out weak portions of government
to privatize. Sometimes it works and provides initial cost
savings, but it can create a monopoly that rises to the same
level of funding. The approach of SB 68 is to form a task
force for the purpose of looking at government. It is
broken into two parts because of the extreme size of
government. Even though there are only four components in
the first year's review of Health and Social Services,
Transportation and Public Facilities, Corrections and
Contracting, the total dollar volume represented is $1.5
billion. The following year the rest of government will be
looked at. Other privatization task forces were not so much
for an in-depth look at where dollars go, but to establish
guidelines regarding whether it is in the best interest of
serving the public and whether it saves money. Just because
it saves money doesn't necessarily mean it would be in the
best interest of the public. The intention of the bill is
to look at every dollar in state government and whether they
are being properly spent or could be better spent somewhere
else. It provides for a systematic way to look at it via a
committee process. SENATOR WARD introduced his staff
person, CRAIG JOHNSON, who had researched privatization, and
indicated they were both available for questions.
SENATOR PHILLIPS asked what the total sum was for
implementing SB 68. SENATOR WARD replied it was $26,000,
which he believed was a modest amount that could save the
state more than that figure. MR. JOHNSON added that there
are studies that are required by some of the collective
bargaining agreements that probably would not be addressed
in the bill. Some of the fiscal notes have asterisks
indicating they are forthcoming. Depending how many studies
are coming and how they are lumped together, it would be a
different number. SENATOR PHILLIPS stated for clarification
that they would first be doing DOT&PF, Corrections and
Health and Social Services. SENATOR WARD added that
Contracting was also included. They selected those because
they were the three largest departments.
SENATOR PHILLIPS suggested nine task force members would be
better than ten. SENATOR WARD said they attempted to make a
good balance and model after other privatization task forces
that worked. The number ten came from three or four states,
although the range was between six and fifty people.
SENATOR PHILLIPS wanted to prevent a five/five tie and make
sure decisions would be made. SENATOR WARD noted Senator
Donley had expressed a similar concern.
SENATOR PARNELL asked if the task force would accomplish its
work without additional staff. SENATOR WARD confirmed that
was the intention. Public members would receive travel and
per diem.
SENATOR PHILLIPS asked if the findings and intent in the
legislation was required because he didn't want to clutter
up the statutes. SENATOR PARNELL indicated he would like to
strip them out. SENATOR DONLEY pointed out that the
language only goes in the Session Laws rather than the
permanent statutes. There was additional discussion about
the intent of the legislature being followed.
SENATOR ADAMS pointed out an updated fiscal note of $16.4
based on changes in the State Affairs Committee. He then
expressed interest in addressing other areas in addition to
the three departments, such as the Alaska Railroad, Court
Services officers, and AHFC. He didn't want the task force
limited in its first year. He also suggested the two public
members appointed by the speaker and president should be
Independent candidates, neither Republican nor Democrat.
SENATOR WARD suggested Commerce could be added in the first
year to look at the railroad.
SENATOR ADAMS brought up the reporting date of November 15,
noting that it is normally January 15, after the legislature
convenes. MR. JOHNSON responded that the reason was to
include the governor's budget. SENATOR ADAMS pointed out
that the operating budget was, by law, required no later
than December 16. SENATOR TORGERSON stated that all
recommendations by the task force would require legislation
and questioned any impact on the governor's budget without
legislation. He was uncertain whether he favored the
legislation because as subcommittee chair he was looking at
what could be privatized, but legislation was required.
There were a lot of good ideas, but they depend on the will
of the body, and the task force report does not give the
body any greater will. He was unsure that the bill did
anything more than give some people per diem.
SENATOR WARD said it was not his intention to form another
committee and spend his summer doing this. The frustration
of finding spots for privatization in subcommittee and
committee process and then "something doesn't come to
factor" was the reason for introducing the bill. He
believed a formula was needed to get to privatization and
that was why he looked at the other states to see how they
did it. When it came to looking at government, it always
required a highlighting of privatization to find out if,
when, and where it should be done.
SENATOR DONLEY believed this was a reasonable way to proceed
on the issue of privatization, although he shared Senator
Torgerson's concern with the necessity of statutory changes.
The problem is that it is all through the statutes, "little
things spread out through departments everywhere." He
envisions the task force giving a list of suggestions and
thought it would be helpful to have the expertise of other
people to give the legislature something to work off of.
The only thing similar were 1985 Budget and Audit
suggestions. SENATOR DONLEY had some concerns about
resources for the task force because he wanted them to be
sufficient to do a good job. He noted the sponsor was
trying to be efficient and frugal with the implementation,
but felt additional resources would be needed to do it right
because it was a tremendous project with a short time line.
He looked forward to seeing what suggestions came back from
the task force.
SENATOR TORGERSON agreed with much of those statements. He
pointed out that only about ten percent of Budget and Audit
recommendations had been followed. He said there were many
privatization suggestions that nothing had been done with.
His objections to the bill would be satisfied if there was a
commitment to do something with the report.
SENATOR PHILLIPS recounted that over the past four years the
legislature has implemented every Budget and Audit
recommendation they could on the legislative side. What was
left was the administrative side. SENATOR TORGERSON
clarified that he was speaking only of privatization.
SENATOR WARD stated he had another meeting to attend and
concluded his testimony. He had no problem with changing
the number of task force members. He agreed with Senator
Torgerson and didn't want to do something unless it was
going make it better.
DON ETHERIDGE, Union Local 71, spoke in favor of the bill,
but had concern with being fairly represented in the task
force. He had seen many times where the state contracted
out particular jobs that could be done cheaper but the job
wasn't completed or done right and the state had to correct
it. He gave an example of maintenance on a Southeast
airport runway that air carriers have refused to land on and
the state had to come in and grade it. He wanted to make
sure that when jobs are looked at, the whole job is
considered, not just the bids for the project. Another
example was a community that wanted to bid on a project and
do road maintenance for the same cost as the state, but they
would only grade it, excluding doing the beds, culverts, and
everything else that goes with it. He reiterated that the
only concern was that they were looked at fairly and when
jobs were compared, it was the whole job, not just part of
it.
SENATOR PHILLIPS asked if Mr. Etheridge's concern was with
language on page 2, lines 3-4, "nominees submitted by labor
organizations." MR. ETHERIDGE clarified that he would like
to see two representatives from the labor group, one blue
collar and one white collar, because their jobs are
different and don't overlap. SENATOR PHILLIPS agreed and
shared the concern that blue collar workers would be
outnumbered. He did not want that to happen.
SENATOR DONLEY echoed the same concerns. He noted the
employees represented by Local 71 were a different group of
people from the ASEA group. He thought it was appropriate
that there was one of each to represent the separate
interests and have input.
SENATOR PARNELL saw it differently. He noted that labor is
the only public group that is assured representation because
they not only have a designated seat appointed by the
governor, but they also have the possibility for other seats
appointed by the president and speaker. He felt there was
more than fair representation.
MIKE MCMULLEN, Division of Personnel, Department of
Administration, spoke of current restrictions of collective
bargaining contracts, and wanted to assure that the
committee had an understanding of what it will mean to the
process. He handed out copies of worksheets that describe
contract provisions of six bargaining agreements regarding
contracting. The common thread is the provision for a
feasibility study or cost benefit study and that current
employees not be laid off unless the study showed there
would be a savings to the state to have it done through a
contractor. The cost of the studies average between $20,000
to $50,000 each. The sequence would be that the task force
would be formed, there would be a report in time to draft
legislation and influence the budget for the next session.
The budget would necessarily have to fund the formal
feasibility studies that the contracts require. It was his
understanding that the task force would not be doing that
level of detail. At the same time the funding for the
studies are being requested, legislative changes will be
considered. The rub comes after that where a study may come
up with a different conclusion than the task force. At that
point, the collective bargaining agreements would prohibit
the contracting out of work that causes displacement of
employees. Meanwhile, the legislation may have changed and
there will be a conflict. Mr. McMullen's concern was with a
formal study reaching a different conclusion than the task
force recommendation and he wanted to make sure the
committee was aware of the potential time bomb factor.
SENATOR PHILLIPS brought up contractual versus statutory
provisions. MR. MCMULLEN referred to the first case that
went to arbitration on contracting out. It was when the
legislature changed social services in the Kawerak-Norton
Sound area and it was provided by pass-through money and
replaced state employees. The state said that was the law,
that's the way it was appropriated, that's the way we're
going to spend it, and did not do a formal study. The
arbitrator said they were required to do the study and they
had to pay double for a period of time. Agencies are now
aware of having to do studies. He noted that Corrections is
about to notify unions because of the lease-purchase
question in contemplation that it will displace state
employees. They need to trigger the contractual processes
to make sure there is no conflict down the road. He wanted
the committee to take the potential conflict into account
regarding different results by the task force and
feasibility studies.'
SENATOR TORGERSON asked how many state employees were
covered under this. MR. MCMULLEN responded there were
approximately ten to twelve thousand out of the total of
twenty thousand.
PAM LA BOLLE, President, Alaska State Chamber of Commerce,
spoke in favor of SB 68. Privatization of appropriate
government services has been one of the highest priorities
of the ASCC for a few years. The last two years they held
summer seminars devoted to the subject. The first year they
looked at what was happening in other states, what potential
there was for privatization in education, transportation,
corrections, et cetera. Last year they focused on the
Department of Transportation and Public Facilities. She
recalled a presenter from British Columbia that discussed
privatizing their road maintenance department and she was
willing to share that information with the proposed task
force.
SENATOR PHILLIPS asked if the Marine Highway system was
discussed. MS. LA BOLLE replied that they had looked at it.
MS. LA BOLLE read a portion of a resolution passed by the
ASCC, "ASCC asks the legislature to forge a plan by the end
of 1997 and implement a program to privatize all applicable
services currently provided by government." The task force
is exactly what they were hoping for. She gave the example
of an upside-down pyramid with the base being the tax-
providing private sector supporting the top-heavy government
and that it will all crumble one of these days. There are
functions that only government can do well, but there are
things that government has taken on as a matter of
convenience that could easily be done by the private sector.
She had a few words of caution. The ASCC championed the
Long Range Financial Planning Commission with the idea that
they would come up with recommendations that the legislature
would made decisions on based on public input. Instead, the
commission came up with THE plan, and one was either for or
against it, and it wasn't a pretty picture. She wanted to
be sure the duties of the task force were to recommend
suggestions only.
SENATOR TORGERSON asked Mr. McMullen what the time estimate
was for the feasibility studies and if any had been done in
the past. MR. MCMULLEN responded that the time varies
depending on the size and complexity of the services being
considered for privatization. The print shop in the
Department of Administration was studied for $20,000. A
time estimate would vary between two to six months. The
state has done several studies. SENATOR TORGERSON suggested
they be dusted off and looked at because they probably
haven't changed that much.
MR. MCMULLEN explained the sequence of the process that
triggers the study. After the study, the union generally
has an option to put in their own bid on how they can meet
the savings. There were no studies that had been completed
that were not implemented to his knowledge. One approach
which was rejected by the sponsor was to have the task force
perform the studies.
COCHAIR SHARP called a five minute recess at 10:39 A.M. He
reconvened the meeting at 10:44 A.M.
COCHAIR SHARP recommended holding the legislation to work
with the sponsor on possible changes to the make-up of the
task force. SB 68 was HELD in committee.
Upcoming committee and subcommittee meetings were announced.
ADJOURNMENT
The meeting was adjourned at approximately 10:44 A.M.
| Document Name | Date/Time | Subjects |
|---|