Legislature(2015 - 2016)BELTZ 105 (TSBldg)
01/27/2015 01:30 PM Senate LABOR & COMMERCE
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| Audio | Topic |
|---|---|
| Start | |
| Overview: Department of Administration | |
| Overview: Department of Commerce, Community & Economic Development | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
ALASKA STATE LEGISLATURE
SENATE LABOR AND COMMERCE STANDING COMMITTEE
January 27, 2015
1:29 p.m.
MEMBERS PRESENT
Senator Mia Costello, Chair
Senator Cathy Giessel, Vice Chair
Senator Kevin Meyer
Senator Gary Stevens
Senator Johnny Ellis
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
OVERVIEW: DEPARTMENT OF ADMINISTRATION
- HEARD
OVERVIEW: DEPARTMENT OF COMMERCE, COMMUNITY & ECONOMIC
DEVELOPMENT
- HEARD
PREVIOUS COMMITTEE ACTION
No previous action to record
WITNESS REGISTER
SHELDON FISCHER, Commissioner
Department of Administration
Anchorage, Alaska
POSITION STATEMENT: Presented an overview of the Department of
Administration (DOA).
FRED PARADY, Acting Commissioner
Department of Commerce, Community and Economic Development
Juneau, Alaska
POSITION STATEMENT: Presented an overview of the Department of
Commerce, Community and Economic Development (DCCED).
KATE SHEEHAN, Director
Division of Personnel and Labor Relations
Department of Commerce, Community and Economic Development
Juneau,
POSITION STATEMENT: Answered a question about confidential
employees in the Department of Commerce, Community and Economic
Development (DCCED).
ACTION NARRATIVE
1:29:03 PM
CHAIR MIA COSTELLO called the Senate Labor and Commerce Standing
Committee meeting to order at 1:29 p.m. Present at the call to
order were Senators Stevens, Giessel, Ellis, Meyer and Chair
Costello.
^OVERVIEW: DEPARTMENT OF ADMINISTRATION
OVERVIEW: DEPARTMENT OF ADMINISTRATION
1:30:05 PM
CHAIR COSTELLO announced that the first presentation would be by
Commissioner Fischer from the Department of Administration.
1:30:35 PM
SHELDON FISCHER, Commissioner, Department of Administration
(DOA), introduced Kate Sheehan from the Division of Personnel
and Labor Relations. He began by highlighting DOA's mission and
organization and then showed a map of DOA services across
Alaska, which cover most of the state. He noted that DOA is
divided into to two functions, service to the public and service
to state agencies. There are over 1,000 employees at DOA.
COMMISSIONER FISCHER turned to the services offered to the
public and highlighted the divisions that most people recognize,
the Division of Motor Vehicles (DMV) and the Division of
Retirement and Benefits (DRB). He said that the Public Defender
Agency (PDA) and the Office of Public Advocacy (OPA) have their
own challenges and mandates. There are also five semi-
independent commissions that are administered by DOE: Alaska
Public Offices Commission (APOC), Alaska Public Broadcasting
Commission (APBC), Office of Administrative Hearings, and the
Violent Crimes Compensation Board (VCCB).
COMMISSIONER FISCHER listed the five services DOA provides to
state agencies. The Division of Finance (DOF) has an audit
function and is in the middle of an upgrade. One of the Division
of Personnel and Labor Relation (DOPLR) functions is to
negotiate labor contracts. The Division of General Services
(DGS) manages buildings, leases and purchasing. Enterprise
Technology Services (ETS) is the centralized manager of IT
services. Also providing services to state agencies are the
Divisions of Risk Management (DRM) and Administrative Services
(DAS).
COMMISSIONER FISCHER spoke of areas that he thinks require the
most attention within DOA because of a desire to address cost
issues in the budget. He said personnel costs is one of the
largest expenses in the budget and one of the most important
areas to look at. DOA manages collective bargaining agreements
contract and health care expenses. He said he sees an
opportunity to improve productivity by instigating a quality and
productivity initiative. He noted that the reduction of the
health care unfunded liability remains a big issue, although a
lot of progress has been made.
He related that the state spends about $2.5 billion to $3
billion on procurement of goods and services, and he has
targeted procurement savings as a goal. The state spends about
$220 million on (IT) and DOA will be looking at improving
services and cost. Finally, in order to improve facility
management, DOA will seek better use of space.
1:35:11 PM
SENATOR GIESSEL asked if AOGCC is a stand-alone entity.
COMMISSIONER FISCHER characterized AOGCC as independent, but
with administration by DOA.
SENATOR STEVENS voiced concern about reducing health care costs
without reducing benefits to members.
COMMISSIONER FISCHER said Aetna Health Care costs in Alaska are
significantly higher than other states; however, under the new
agreement with health care providers they are able to deliver
the same services at a reduced cost. There are some "best
practices" issues that are still being discussed with the goal
being a fair balance.
SENATOR STEVENS asked if Alaska's health care is self-insured.
1:37:45 PM
COMMISSIONER FISCHER said yes. He addressed DOPLR bargaining
contracts, three of which expire in June 2015, and three other
contracts that have not yet been finalized from last year. He
noted that the LTC contract involves a substantial number of
employees. In 2016 contracts that make up the bulk of state
employees will expire.
He noted the average yearly base salary of various state
employees.
SENATOR GIESSEL asked about the Confidential Employees
Association membership.
KATE SHEEHAN, Director, Division of Personnel and Labor
Relations (DPLR), Department of Administration, said that most
confidential employees are staff from DPLR, the Division of
Finance, and the Alaska Marine Highway, who deal with
confidential payroll information.
COMMISSIONER FISCHER discussed the labor bargaining process and
negotiations, as mandated by the Public Employment Relations
Act. He noted a statutory requirement to submit monetary terms
th
of contracts to the legislature by the 60 day of the session.
He listed scenarios which might lead to labor strikes. He
defined Strike Class 1 employees as police and fire protection,
correction, and hospital employees; they may not strike. Strike
Class 2 employees are public utility, snow removal, sanitation,
and educational institution employees other than school
districts, and Alaska Marine Highway System employees; they may
strike after mediation, subject to a vote, for a limited time.
Strike Class 3 employees are all other public employees; they
may strike after a majority vote.
1:41:50 PM
COMMISSIONER FISCHER showed a bargaining road map for
negotiations. He said DOA's approach is to try to reach an
agreement.
He drew attention to a table of cost-of-living allowances (COLA)
over time. Generally, the rate of inflation increase was
followed.
COMMISSIONER FISCHER listed the five monetary contracts up for
renegotiations. The Master, Mates, and Pilots (MEBA) contract
agreement awaits ratification by its members. An agreement has
not been reached with the Marine Engineers' Beneficial
Association (MEBA) and a discussion with them continues. A
tentative agreement has been reached with the Alaska
Correctional Officer Association (ACOA). He said DOE is
currently in negotiations with Labor, Trades and Crafts (LTC)
and with the Teachers' Education Association of Mt. Edgecumbe
(TEAME).
He noted that DOE must submit the monetary terms of a collective
th
bargaining agreement by the 60 day of the session and then the
legislature decides whether to fund the contract. Rejection of
the terms would require renegotiation.
1:44:43 PM
COMMISSIONER FISCHER discussed the monthly health insurance
benefit credits. A graph of the credits shows a fairly dramatic
increase in health care costs from 2006 to 2014. In the last
three years, there has been a decline in costs. He stressed the
importance of reducing costs, in light of the $3.6 billion
unfunded liability in the retirement plan associated with health
care costs. He said recent cost-savings are as a result of the
new TPA agreement.
CHAIR COSTELLO requested a definition of TPA.
COMMISSIONER FISCHER explained that since the state is self-
insured, it hires a third party administrator (TPA) for health
care. Under a new request for proposal (RFP) Aetna was selected
as the new administrator. He said a large part of the savings
was driven by the new network of providers. He estimated that
there has been roughly $40 million to $45 million in savings the
first year.
CHAIR COSTELLO asked for the reason behind the savings.
COMMISSIONER FISCHER said it was due to a large network with a
great amount of purchasing power and the ability to negotiate
good rates.
CHAIR COSTELLO spoke of a discussion last session about the need
for transparency of health care costs for consumers. She
requested Commissioner Fischer's opinion about whether it would
result in savings to the state.
COMMISSIONER FISCHER said he has had discussions in that area,
but did not know if it would result in savings.
CHAIR COSTELLO said everyone is familiar with the high cost of
health care which sometimes results in travel outside of the
state to seek cheaper care.
SENATOR STEVENS asked how often the state changes the TPA and
how it is awarded. He noted it takes a while for the new
provider to figure out the process.
1:49:14 PM
COMMISSIONER FISCHER said there have been 4 or 5 TPA's in the
past years. Aetna was evaluated by how much it would cost to
administer and by what the cost of benefits would be. The RFP
was awarded based on a combination of the two. He agreed that
there was a period of time for Aetna to learn the state system.
SENATOR STEVENS asked about the length of the contract.
COMMISSIONER FISCHER said it was for three years.
1:51:12 PM
COMMISSIONER FISCHER turned to graphs depicting PERS/TRS
retirement benefits and the state's assistance to pay down the
unfunded liability. He stressed the urgency of addressing costs
early on.
He spoke of the nearly $60 million in savings in state
purchasing by the Division of General Services (DGS) in FY14.
The goal is to continue to save in FY15.
He explained the pursuit of the Integrated Resource Information
System (IRIS), a tool that will allow the state to better manage
information.
He discussed a web site in DOF called Vendor Self Service (VSS)
for business opportunities - solicitations that will allow
vendors access to all business forms and opportunities as a way
to increase competition in purchasing.
1:54:09 PM
COMMISSIONER FISCHER talked about Enterprise Technology Services
(ETS) - service and IT cost issues. Of the $218 million total
spent for IT, ETS spent $38 million. DOA is looking for
solutions for improving services in a department-centric IT
culture, and lowering costs.
CHAIR COSTELLO commented on the importance of allowing
departments to talk to each other. She asked if Commissioner
Fischer has had conversations about that happening.
COMMISSIONER FISCHER said yes. He encouraged a balance; there
are times that the expertise must be within the department and
certain times it can be shared using a standardized IT approach.
He agreed it was an important vision.
CHAIR COSTELLO related that constituents suggest finding
efficiencies between departments. She asked Commissioner Fischer
to comment on any ideas he might pursue.
COMMISSIONER FISCHER said there were a lot of ideas, such as
making web capabilities more user-friendly and in the areas of
reducing purchasing and health care costs. He requested that the
legislators submit ideas on this topic.
1:57:41 PM
SENATOR MEYER asked if there could be one system everyone could
use within state government. Currently, every agency has its own
system and there is a lot of duplication of effort.
COMMISSIONER FISCHER agreed, except for certain areas specific
to a department that can't be standardized. A lot of areas can
be standardized.
He showed a list of the buildings that are managed by DOA. He
said they are looking to minimize lease costs by moving
employees into state-owned buildings. He discussed the Universal
Space Standards (USS) Initiative intended to consolidate space
and save money. There has been frustration by employees about
the new space standards. He said it is important to try to get
employees into state-owned space.
2:01:15 PM
COMMISSIONER FISCHER explained that DOA is self-insured for
casualty insurance, and DRM had to draw from insurance in
several instances last year in Petersburg and in Kodiak.
He described building updates: the Nome State Office Building,
the Douglas Island Building, and the Geologic Materials Center.
CHAIR COSTELLO asked about the Commissioner's vision as to DOA's
role in cutting the budget.
COMMISSIONER FISCHER spoke of five areas where he anticipates
budget cuts: 1.) Improve productivity in the labor force and
better manage labor costs by taking advantage of process
improvement techniques to redefine and improve management. 2.)
Reduce health care costs. 3.) Be more effective and efficient in
the purchasing process. 4.) Promote cost savings in IT and
organize more effectively throughout state. 5.) Manage
facilities more effectively.
SENATOR MEYER asked if Amy Erickson is the DMV director. He
pointed out that DMV is the one department that is making money
for the state. He suggested using more contracted services.
COMMISSIONER FISCHER said Ms. Erickson is the director and he
agreed DMV is making money. He noted that for many people, DMV
is their only experience with the state and they judge all of
state government based on that experience. He suggested using a
PR campaign to continue to improve the level of service there.
CHAIR COSTELLO thanked Commissioner Fischer.
2:06:49 PM
At ease
^OVERVIEW: DEPARTMENT OF COMMERCE, COMMUNITY & ECONOMIC
DEVELOPMENT
OVERVIEW: DEPARTMENT OF COMMERCE, COMMUNITY & ECONOMIC
DEVELOPMENT
2:09:05 PM
CHAIR COSTELLO reconvened the meeting and introduced Acting
Commissioner Parady, Department of Commerce, Community and
Economic Development (DCCED).
FRED PARADY, Acting Commissioner, Department of Commerce,
Community and Economic Development, presented an overview of the
Department of Commerce, Community and Economic Development
(DCCED). He began by describing DCCED's organization and
mission. He said the Governor has named Chris Hladick as the new
Commissioner of DCCED, but he won't begin the job for several
weeks. He listed the core divisions within the department:
Administrative Services, Banking and Securities, Community and
Regional Affairs, Corporations, Business & Professional
Licensing, Economic Development and Insurance. He noted there
are also seven independent corporate entities: Alaska Energy
Authority (AEA), Alaska Gasline Development Corporation (AGDC),
Alaska Industrial Development & Export Authority (AIDEA), the
Alaska Railroad Corporation, Alaska Seafood Marketing Institute
(ASMI), Alcoholic Beverage Control Board (ABC Board), and the
Regulatory Commission of Alaska (RCA).
ACTING COMMISSIONER PARADY showed a snapshot of the department's
$215,000 million budget with a funding distribution between
corporate agencies (59 percent) and core divisions (41 percent),
and about 576 employees. He stated that of core services funding
planned for FY15, 17 percent goes to consumer protection, 14
percent to strong communities, 29 percent to economic growth,
and 40 percent to affordable energy. He noted the Power Cost
Equalization funds of about $40 million flow through the
affordable energy area.
ACTING COMMISSIONER PARADY described the economic growth plan
for the Division of Economic Development (DED) where support for
tourism and fisheries resides. Under DED there are 261 loans for
$29.1 million across 10 loan programs to Alaska-owned
businesses, including 237 in the Commercial Fishing Revolving
Loan Fund. He said $15 million flow through tourism from DED.
The Economic Development Initiative is a $400,000 appropriation
by the legislature in the capital budget, which is now included
in the operating budget. Given current budget constraints, the
division will have to find a way to absorb that fund because the
initiative is so valuable. He gave examples of how the fund was
used.
ACTING COMMISSIONER PARADY discussed the role of AIDEA, which
recently approved a $17.6 million FY16 dividend, returning funds
to the state general fund. There are nearly $700 million in
private sector investments leveraged in AIDEA's loan portfolio.
The projects and investments will create or retain nearly 1,500
construction jobs and over 1,000 permanent jobs. He provided as
an example - the completed first phase of the Mustang Oil Field
development project. The board recently approved the second
phase. AIDA consists of loans, project development, revenue
bonds, and the promotion of economic activity by using financing
tools.
ACTING COMMISSIONER PARADY explained that ASMI is the heart of
the fisheries industry, which is the number one employer in the
state with 63,100 jobs. He focused on the Responsible Fisheries
Management Initiative, saying there has been a substantial
effort by the Marine Stewardship Council to create a record of
who has sustainable fisheries and who doesn't. Their definition
of "sustainable fisheries" differs from Alaska's definition, as
seen when they certified the Russian Pollock catch which
devalued Alaska's Pollock catch. He emphasized that ASMI has
created a Responsible Fisheries Management Initiative and has
succeeded in winning acceptance of the initiative by major
procurers, such as Walmart.
2:15:25 PM
SENATOR MEYER said he has heard that fisheries is the number one
employer in Alaska, but he wondered if the jobs are seasonal and
if the jobs are held by Alaskans.
ACTING COMMISSIONER PARADY offered to follow up with the answers
to those questions.
SENATOR MEYER stated that he wants Alaskan jobs to go to
Alaskans.
SENATOR STEVENS agreed that fisheries is seasonal, but he gave
credit to canneries for trying to make it a year round business.
He commended ASMI for attacking the Russian Pollock issue.
ACTING COMMISSIONER PARADY introduced Michaela Fowler,
Legislative Liaison for DCCED.
2:18:03 PM
CHAIR COSTELLO noted in the Governor's State of the State
address the mention of giving departments more "flex authority"
to move monies around within or between departments. She
inquired when that might that be used in DCCED and how the
legislature might provide direction for department priorities.
ACTING COMMISSIONER PARADY said he is a newcomer to state
government. As a business executive, he said he is surprised
about the inability to move funds around within the state
system. He provided as an example, the FY15 supplemental budget
regarding the marijuana initiative. He maintained that given
current strictures, flexibility is needed.
ACTING COMMISSIONER PARADY turned to affordable energy. Under
AEA, the Power Cost Equalization Grant payments of nearly $40
million went to 188 communities in FY14. He said 53 of 114 rural
power system upgrades were completed and there are 22 projects
funded through the Emerging Energy Technology Fund. He talked
about fuel savings from creative projects in the Renewable
Energy Fund.
He reported that AGDC is working to synchronize the timing of
AKLNG and ASAP projects. They completed the ASAP Class 3 cost
estimates on the pipeline.
SENATOR STEVENS asked the size of the ASAP line.
SENATOR GIESSEL replied that the AKLNG line is 42 inches; the
ASAP line is 36 inches.
2:23:28 PM
ACTING COMMISSIONER PARADY spoke of strong communities and the
tasks within the Division of Community and Regional Affairs,
which falls under his responsibility. He spoke of the
constitutional duty of the state to provide support for local
government and his joy in helping to do so. He observed that the
Local Government Specialists (LGS) in the Division are the "tip
of the state's spear;" they visited roughly 190 communities in
the last year. Some of the programs in the division are the
Rural Utility Business Advisor and the Local Boundary
Commission. The LGS's provide problem solving in many
communities during this time of fiscal restraint. The LGS's are
in six regional offices.
SENATOR GIESSEL requested a definition of LGS.
ACTING COMMISSIONER PARADY said they are Local Government
Specialists. He added that the Division has 1,840 grants
totaling close to $2 billion flowing to local communities.
CHAIR COSTELLO voiced appreciation about the scope of work the
Division of Community and Regional Affairs does. She asked the
Commissioner if he found the scope of work too challenging.
ACTING COMMISSIONER PARADY said he finds it challenging, but not
too challenging. He maintained that there is synergy within
several divisions within DCCED. He wanted to see more efficiency
and a reduction in overhead.
He added that DCRA distributes $85 million to 307 communities
through revenue sharing and other programs. He noted the first
incorporation of a new community - Edna Bay - which was given a
$50,000 grant to get started, followed by a $25,000 grant.
2:28:29 PM
ACTING COMMISSIONER PARADY turned to the area of consumer
protection. He reviewed data from the Alcoholic Beverage Control
Board (ABC) which now falls under DCCED. He opined that the
transition went well and that Cindy Franklin is the right leader
of the ABC Board, as a former municipal prosecutor of Anchorage.
She straddles the "fault line" between public health and the
industry well.
He related that there would be a Title 4 rewrite this session
that will show compromise and a strong foundation that will
serve well for marijuana regulation.
SENATOR MEYER asked whether the ABC Board should be in Public
Safety or in DCCED.
ACTING COMMISSIONER PARADY opined that the Board is working well
where it is because the constituent groups are working well
together. He recommended that the Marijuana Control Board work
parallel with the ABC Board and that they both be served by the
same agency personnel.
2:31:50 PM
SENATOR MEYER cautioned about opening up Title 4.
ACTING COMMISSIONER PARADY agreed.
CHAIR COSTELLO inquired if expertise is being sought from other
states.
ACTING COMMISSIONER PARADY reported that a contingent recently
attended a symposium in Colorado seeking information. DCCED has
also been in contact with Oregon about all aspects of marijuana
including banking, sanitation of kitchens, edibles, and
laboratory conditions. Both Oregon and Colorado had previously
established medical marijuana regulations, which Alaska has not
done.
2:33:40 PM
ACTING COMMISSIONER PARADY described the Regulatory Commission
of Alaska's (RCA) role in consumer protection. RCA has
significantly improved processes and minimized costs to
ratepayers and companies by moving to an electronic system for
filing for utilities. RCA also collaborates with AEA on the
Power Cost Equalization Fund, which applies to the first 500
kilowatt hours into a residence.
ACTING COMMISSIONER PARADY discussed the Division of Banking and
Securities role in consumer protection. He noted their
substantial role with the Alaska Native Claims Settlement Act
(ANCSA). He said the division generates $13 million in fees and
has a budget of about $3.6 million. It consists of twelve
programs making up a soundly regulated financial system.
ACTING COMMISSIONER PARADY turned to the Division of
Corporations, Business and Professional Licensing (DCBPL). He
related that there are about 68,000 business licenses, 65,000
corporation licenses, and 67,000 professional licenses. He said
DCBPL has worked hard to reduce investigation time, and it
reduced indirect overhead by $1 million. DCBPL has been the
subject of LB&A hearings over the last year.
2:36:17 PM
CHAIR COSTELLO asked if there is a plan to grow businesses in
Alaska.
ACTING COMMISSIONER PARADY replied that growing businesses falls
more under the Division of Economic Development and AIDEA. He
pointed out that business licenses are up eight percent. He
noted a need for IT work in DCBPL.
ACTING COMMISSIONER PARADY explained the work of the Division of
Insurance, which is to regulate market and review market
conduct. He gave an example of an area of fiscal constraint that
could be addressed in the division. Where insurance markets are
healthy and there is a competitive industry, instead of
requiring pre-approval of filings, market conduct could simply
be reviewed. He said there were $3.4 billion in total premiums
written in calendar year 2013, and $64 million in taxes and fees
were collected in FY14. The Division of Insurance has a $7.7
million budget.
He noted that the investigation function is an important
assurance to the public.
2:38:42 PM
SENATOR STEVENS asked if the state is proactively attempting to
have unorganized boroughs become parts of organized boroughs.
ACTING COMMISSIONER PARADY said it would be a reach to say that
they are being pro-active. He opined that there is great
opportunity to assess that situation and decide how to encourage
organized boroughs and find solutions to the problem of unmet
service needs. He noted the process of local government creation
is difficult in Alaska, but it is an area of opportunity. He
said Lieutenant Governor Mallott has established a task force to
work on this issue.
SENATOR STEVENS pointed out that some communities would have a
tax base, but do not contribute to their local schools as an
unorganized borough. He suggested this should be looked at.
ACTING COMMISSIONER PARADY replied that as the former Chief
Operating Officer of the North Slope School District, and as a
former legislator in another state that was dominated by school
finance issues, he is keenly aware of the issue. Also, the
Ketchikan Borough lawsuit has implications. The issue is a
perception of fairness with everyone pulling their own weight.
He opined that the time is right for an innovative solution
because the court will not accomplish it.
SENATOR STEVENS asked if the Local Boundary Commission falls
under the Division of Community and Regional Affairs.
ACTING COMMISSIONER PARADY said yes. He added that the Municipal
Land Trustee Program does as well.
CHAIR COSTELLO requested information on DCCED's plan for job
creation.
ACTING COMMISSIONER PARADY said in the Division of Economic
Development there is an effort to increase jobs in industries
that are adapting to change, such as in the Maritime Support
Sector or drone industry. There is a strategy to build up such
Alaskan industries. He opined that there is tremendous
opportunity in Arctic Design, such as the Cold Climate Housing
work at UAF.
CHAIR COSTELLO noted one of the proven ways to grow the economy
is through innovation and entrepreneurship.
2:43:58 PM
There being nothing further to come before the committee, Chair
Costello adjourned the Senate Labor and Commerce Standing
Committee meeting at 2:43 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| 20150127 L&C Agenda and Materials.pdf |
SL&C 1/27/2015 1:30:00 PM |
|
| Presentation on {Jan 27, 2015} by {Commissioner Sheldon Fisher}.pdf |
SL&C 1/27/2015 1:30:00 PM |
|
| Presentation on {Jan. 27, 2015} by {Acting Commissioner Fred Parady}.pptx |
SL&C 1/27/2015 1:30:00 PM |