HOUSE BILL NO. 400 "An Act combining parts of the Department of Commerce and Economic Development and parts of the Department of Community and Regional Affairs by transferring some of their duties to a new Department of Commerce and Rural Development; transferring some of the duties of the Department of Commerce and Economic Development and the Department of Community and Regional Affairs to other existing agencies; eliminating the Department of Commerce and Economic Development and the Department of Community and Regional Affairs; relating to the Department of Commerce and Rural Development; adjusting the membership of certain multi-member bodies to reflect the transfer of duties among departments and the elimination of departments; and providing for an effective date." Representative Kohring spoke in support of HB 400. He maintained that HB 400 would save the state money by merging the Department of Community and Regional Affairs and the Department of Commerce and Economic Development. He emphasized that both departments are economically related. The merger would eliminate one of the commissioner's offices. He stated that the legislation would save approximately $1,054 million dollars and cost $192 thousand dollars to implement. He asserted that there would be minimal costs for moving personnel. Personnel would remain in place for the most part. He maintained that functions would remain in tact. He provided members with information showing overlapping functions of the two departments and a chart demonstrating how the new Department of Commerce and Rural Development would be setup (copy on file). There would be four Divisions: Rural Affairs Division, Statewide Economic Development Division, Division of Administration, and Independent Agencies. Independent Agencies would be divided into Corporations and Regulatory. The Regulatory component would be divided into Occupational Licensing, Insurance, Alaska Public Utilities Commission, and Investment Division. Representative Kohring explained that childcare programs would be transferred to the Department of Health and Social Services. Job related programs would be transferred to the Department of Labor. Representative Kohring noted support for the legislation. He referred to a letter by Don Tanner, former Deputy Commissioner, Department of Community and Regional Affairs (copy on file). Mr. Tanner wrote in support of the legislation. He read from a letter by Don Eller in support of the legislation (copy on file). Mr. Eller stated that HB 400 promotes a unified and comprehensive system for rural development. Representative Kohring reiterated that the legislation would allow reductions without eliminating programs. He maintained that government would be restructured to deliver services more efficiently. He added that the legislation would result in more than $1 million dollars in annual savings for a one-time cost. MIKE KRIEBER, STAFF, REPRESENTATIVE KOHRING added that the legislation would move the Office of International Trade to the Governor's Office. JEFF BUSH, DEPUTY COMMISSIONER, DEPARTMENT OF COMMUNITY AND REGIONAL AFFAIRS stated that the Administration is opposed to the legislation. He emphasized that the agencies' functions are very different and should not be merged. He maintained that the legislation would dilute the Department of Commerce and Economic Development's mission to promote commerce and economic development. Mr. Bush observed that there is a wide difference in the estimated fiscal impact between the Department and the Sponsor. The legislation estimates reductions from elimination of several Administrative Services Division employees. He stated that these cuts are unrealistic. The sponsor fiscal note assumes a minimum amount of movement of personnel. He stated that this is not consistent with the goal and purpose of the legislation. If the goal is to allow persons with similar functions to work together they need to be located in the same building. One time moving estimates by the Department are based on Department of Administration's analysis. The Administration's estimate is approximately ten times the estimate by the Sponsor. The Administration maintains that the cost of the legislation is greater than short-term savings. REMOND HENDERSON, DIRECTOR, DIVISION OF ADMINISTRATIVE SERVICES, DEPARTMENT OF COMMUNITY AND REGIONAL AFFAIRS agreed with the comments of Mr. Bush. He added that there would be an adverse impact on rural Alaska. He emphasized that the Department of Community and Regional Affairs is small and efficient. He asserted that there would be an impact on delivery of programs transferred to larger agencies. He expressed concern with the elimination of some of the administrative positions. A bottleneck would be created by the reduction. The legislation does not contain a transition period. He observed that other mergers and consolidations have taken a period of time to accomplish. Representative Kelly questioned if the fiscal note has changed from the one attached to a similar bill that he introduced two years ago. Mr. Bush replied that moving costs in the fiscal note have increased. HB 400 was HELD in Committee for further consideration.