HSCR 2 Disapproving Executive Order No. 87. HSCR 2 was reported out of Committee with "no recommendation" and with a zero fiscal note by the House Finance Committee for the Department of Transportation and Public Facilities and with two zero fiscal notes by the House Finance Committee for the Department of Administration. HOUSE SPECIAL CONCURRENT RESOLUTION NO. 2 Disapproving Executive Order No. 87. REPRESENTATIVE RAMONA BARNES gave a brief overview of HSCR 2. She stated that HSCR 2 was introduced to disapprove the Governor's order (EO 87) to transfer leasing responsibilities to the Department of Transportation and Public Facilities. She stressed that the Department of Transportation and Public Facilities has "repeatedly ignored the desires and mandates of the Legislature regarding budget reductions to specific programs within the Department." She brought to members attention an attached memorandum from Legislative Finance Division dated February 10, 1993 to Rep. Eldon Mulder regarding the FY 93 budget for the Design and Construction components of DOT/PF (Attachment 1). Representative Barnes noted that the Department of Transportation and Public Facilities intends to establish a sinking fund to be managed by a Board of Directors with monies appropriated for leasing. She asserted that, "the Legislature would virtually have no control over this fund or how it is spent once money is transferred into it." She pointed out that under the State of Alaska Constitution, the Legislature has sole power of appropriation. KIT DUKE, ASSISTANT COMMISSIONER, DEPARTMENT OF TRANSPORTATION AND PUBLIC FACILITIES spoke in opposition to HSCR 2. She noted that an organization was formed, Alaska State Facilities Administrators (ASFA) to assess the condition of the State's building inventory. It was determined by ASFA that the State's deferred maintenance backlog is approximately $250.0 million dollars and that the State's buildings are deteriorating due to a lack of 2 sufficient maintenance. There are currently eight executive branch agencies with responsibility for building maintenance. The Department of Transportation and Public Facilities has responsibility for approximately one-third of the State's buildings. She noted that the State must comply with the Americans with Disability Act (ADA). She asserted that the State needs to conserve energy. She noted that the State spends $20 million a year on energy consumption. Ms. Duke stressed that the State must also improve its management of leased facilities to assure safe, healthy buildings. The Department anticipates that savings can be found to defer expenses the State is facing. She noted that compliance with ADA could cost $400.0 million dollars. She maintained that the State cannot afford to allow Departments to separately address ADA compliance. She asserted that a statewide maintenance plan must be developed. She avowed that a centralized plan would allow the State to accomplish more for the same amount of funding. Representative Brown asked the status of legislation which is being drafted to implement an authority. Ms. Duke replied that the Department of Law has produced a draft which is being reviewed. Ms. Duke assured Representative Brown that Legislators will be able to review the draft legislation prior to a vote. Representative Brown questioned how EO 87 will affect land disposal. Ms. Duke stated that EO 87 clarifies that the Department of Transportation and Public Facilities has authority to purchase and dispose of land for public facilities. She elucidated that the purpose of the language is to allow the Department to acquire land for construction of public facilities. Co-Chair MacLean inquired further into the Department's authority to acquire and dispose land. She noted that the Department would have broad authority. Ms. Duke assured her that the Department's regulation requires due process. She was not aware of any lands that the Department would be disposing. She noted that the Department of Health and Social Services will construct juvenile facilities through the Department of Transportation and Public Facilities. The Department of Transportation and Public Facilities will be the overall authority for construction of new facilities by other departments. Representative Hoffman spoke in support of HSCR 2. He referred to problems within his district concerning the Department of Transportation and Public Facilities' maintenance of airport facilities. He asserted that the Department has not provided sufficient support to rural 3 facilities. Representative Brown asked if EO 87 would change agencies lease/purchase arrangements. She noted that the Legislature would have authority over leases of more that $1 million dollars a year. The Department of Transportation and Public Facilities would have authority over smaller lease arrangements. This represents a transfer of authority from the Department of Administration to the Department of Transportation and Public Facilities. Representative Navarre spoke in support of a uniform policy for cost control and allocation of state facilities. He noted that the Department of Transportation and Public Facilities has not received sufficient funding for deferred maintenance. He expressed concern with the creation of an additional authority. Representative Hoffman felt that the Department of Transportation and Public Facilities has not given sufficient priority to rural areas. Representative Navarre pointed out that some funding within the Department of Transportation and Public Facilities cannot be shifted. Representative Barnes and Representative Navarre discussed FY 93 funding to the Department of Transportation and Public Facilities' Design and Engineering Component. Representative Grussendorf noted that the Department of Transportation and Public Facilities is the State's "most complex and complicated division." He acknowledged the difficulty the State has had to clean up the Department's accounting for projects and reappropriations. He was hesitant to add new authority to the Department. Representative Brown noted that a fact sheet provided by Ms. Duke states that, "The merger will prevent additional expense to the Budget. It will be less costly to comply with ADA and code upgrade requirements with consolidated management than if many agencies are each separately responsible." Representative Brown asked how EO 87 affects ADA compliance. She noted that an administrative order gives authority to agencies to comply with ADA. Ms. Duke stressed that the administrative order would not be affected by EO 87. She emphasized that the Department of Transportation and Public Facilities will focus and plan for ADA compliance. Each agency will retain overall responsibility for ADA compliance. Representative Parnell asked for specific projections of cost and efficiency savings resulting from EO 87. He noted that the State will expend $200.0 thousand dollars for the 4 consolidation of services in the Department of Transportation and Public Facilities. Ms. Duke stated that the Department is endeavoring to identify savings to the State. She gave as an example a pilot project which will combine personnel of four agencies to complete maintenance projects as a team. She noted that the Department is also using FY 93 CIP funds for energy management to predict energy savings to the operating budget. Representative Barnes asked if agencies other than the Department of Transportation and Public Facilities could perform energy studies. Ms. Duke replied that one focus point would more efficiently accomplish the task. Representative Navarre reiterated his concern that there is no coordination in the statewide leasing program. He added that other factors such as; down time, moving and reconfiguation costs are not included in calculations of cost savings. He gave as example a case involving a lease by the Department of Fish and Game in Kenai. Representative Therriault observed that fiscal notes for EO 87 are zero. He asked why fiscal notes do not reflect the costs involved. Ms. Duke stated that the proposed legislation forming an authority will reflect the fiscal costs. NANCY BEAR-USERA, COMMISSIONER, DEPARTMENT OF ADMINISTRATION spoke in support of EO 87. She acknowledged that the Department of Administration has had a difficult time managing the State's leasing program. She noted that leases have been short-funded in an effort to force the Department to better manage the program. The Department has analyzed the leasing program. She emphasized that the procurement code and the competitive bidding process has made management difficult. Commissioner Usera stressed the need to coordinate the State's leasing program. She observed that lease expenses are not included as expenses in all department's budgets. She recommended a lease or facility cost charge-back system to assure that departments evenly share the burden of these costs. She agreed that both the Department of Transportation and Public Facilities and Department of Administration have had problems in managing lease programs. She acknowledged that EO 87 would only be a first step. (Tape Change, HFC 93-29, Side 1) Commissioner Usera stated that programs and departments would do cost accounting on the amount of space they occupy and overhead costs. She emphasized that the Department of 5 Administration supports EO 87. If EO 87 is not accepted the Department of Administration will need to reconsider management changes to improve the lease and state owned facilities program. Commissioner Usera did not know the composition of the proposed Board of Directors. Representative Navarre encouraged the Legislature to address the lease and deferred maintenance problem. Commissioner Usera agreed with Representative Navarre. She stressed that changes in the program's structure are needed. Representative Navarre noted that the Legislature mandated that the Department of Transportation and Public Facilities use FY 93 CIP receipts for the Design and Engineering component. Representative Barnes asserted that a reappropriation occurred allowing the Department to add back $1.5 million dollars into the Design and Engineering Component, after Conference Committee deliberations. Representative Parnell stressed that more information is needed regarding potential cost savings. Ms. Duke emphasized that savings will be realized in gained efficiencies. She stressed that savings cannot be assessed until the Department has an opportunity to test the consolidation effort. She underscored that an authority is important to guarantee accountability. She assured members that the Department does not intend that funds will be outside of legislative oversight and action. Ms. Duke discussed the proposed sinking fund. She observed that monies will be appropriated to agencies. Agencies will deposit funds for deferred maintenance in the sinking fund. The sinking fund allows monies for repair and major maintenance beyond the fiscal year. This will permit agencies to plan for major maintenance and repair activities. Ms. Duke clarified that the State would only perform maintenance on leased buildings if the State's contract contained provisions for maintenance. Representative Brown asked how rent is affected by where the function is performed. Ms. Duke agreed that where the function is performed would not affect the rent paid. Members discussed parliamentary proceedings regarding House Special Concurrent Resolutions. Representative Hoffman MOVED to report HSCR 2 out of Committee with individual recommendations and with the accompanying fiscal note. There being NO OBJECTION, it was so ordered. 6 HSCR 2 was reported out of Committee with "no recommendation" and with a zero fiscal note by the House Finance Committee for the Department of Transportation and Public Facilities and with two zero fiscal notes by the House Finance Committee for the Department of Administration.