SENATE BILL NO. 76 "An Act relating to long-term plans of certain state agencies and recommendations regarding elimination of duplication in state agency functions." CS FOR SENATE BILL NO. 76(STA) "An Act relating to results-based government and the state budget; relating to state agency program and financial plans; relating to the withholding or reduction of appropriations to a state agency; and relating to state agency performance and other reports." Co-chair Sharp invited Senator Parnell to review his sponsor statement for the committee. Senator Parnell said under this legislation the Legislature would establish policy by issuing mission statements and desired results for each State agency to achieve. The results would be reported quarterly to the Legislature for continuity and effective oversight. The bill would enable government to be more responsive to the needs and priorities of Alaskans. Senator Adams referred to page one, lines nine and ten, lines eleven and twelve of CSSB 76(STA). He said one should take a look at what other States are doing and noted that this type of performance does not work. He felt this was premature and felt the executive budget accomplished what was trying to be set out in missions and measures. He further felt it would not work for all agencies. Senator Parnell responded and said they have done far more with the budget discussions and mission statements and found them to be very useful. Senator Adams referred to page three, line thirty-one and quoted: "The copies shall be accompanied by a statement of "Truth in Budgeting prepared under (e) of this section.". He felt the public should be informed of what this meant. He said the Administration should put a fair budget before the public. The Legislature, who has the appropriation powers, should also be included in "truth and budgeting". Senator Phillips responded to Senator Phillips and explained how public policy is measured. Jack Fargnoli, Senior Policy Analyst, Automated Budget Development Project, Office of Management and Budget was invited to join the committee. He noted the importance of this bill to Ms. McConnell, Director, Office of Management and Budget and Governor Knowles. He noted much effort spent working on this piece of legislation and also with Senator Parnell. He said they agreed basically with everything in the bill and the intent of the sponsor. The only difference was with respect to the timing of it. Mr. Fargnoli said they wanted to work out a few operational concerns with the bill so there would be no disruption to anyone. He told the committee that Mr. Jim Baldwin was present to answer any legal questions. Senator Adams referring to page five, line fifteen asked who would pay to gather opinions? Mr. Fargnoli said that information may not be available and it was rather expensive to search for information. Senator Parnell advised the committee that departments already do customer surveys and there would be no additional costs. Jim Baldwin, assistant Attorney General, Department of Law was invited to join the committee. He explained how they would advise the Governor regarding this bill if it were presented. He noted some issues raised in the last committee of referral. He concurred with Mr. Fargnoli and said the main question was how this bill was going to be implemented. Mr. Baldwin described a present litigation with the Legislature regarding proper responses to the Legislature with respect to intent language inserted in the budget. His main concern was the Legislature's intent with respect to SB 76 to include the framework for the results- based government into the budget itself. He felt this was a legal issued the committee should directly consider and explained that it was exactly what was being raised in the present litigation he had referred to. What kind of operative effect can intent language have as far as binding agencies to a particular action? Many jurisdictions implementing the results-based budgeting do not have the kind of provisions in their constitutions that Alaska has. Therefore, the ability of the Legislature is limited to do certain things within budget bills. He referred specifically to the "Confinement Provision, Article II". It read: "Appropriation bills shall be confined to appropriations." He continued to explain the Governor's counterclaim. He said he feared the very worthwhile effort of the Legislature to implement results-based budgeting would get bound up in a long running legal dispute. Therefore, goals would not be achieved. (Tape #80 switched to side B at log 591.) Mr. Baldwin, in continuing, said money could be moved between allocations, and felt the bill was merely a guideline. However, he said it was somewhat ambiguous and should be meant to have flexibility as a guideline or allocation, which may be acceptable and not violate some of the provisions he previously alluded to. But he thought the legislative intent was that the agency shall follow the goals to the maximum extent possible. Without intending any offense to the committee and its jurisdiction, formulation of a budget is assigned in the Constitution to the Governor. There are certain things, however, the Legislature can do, i.e., specify the time the budget is to be submitted. They cannot tell the Governor how he is to prepare his budget. In another litigation case in the State, the Court did decide the Legislature could properly specify when certain budget documents were open to the public. He did not read that case that the Legislature had the power to tell the Governor how to exercise his constitutionally assigned power to form the budget. He continued to voice his concern that the truth in budgeting provision may go beyond what is necessary pointed that out for the committee. Senator Parnell noted there were several options open to the Legislature. He felt they could work with the Governor and the executive branch in what the missions were, what the desired results were and what was trying to be achieved with the dollars spent. He said it should not be a problem for the Governor to use the law as a guideline for action. If there was intent language not vetoed by the Governor then that intent language could be used as a guideline. With reference to truth in budgeting he did not feel they were telling the Governor what to do. Senator Adams asked for a time line on the settlement of the mentioned litigation. Mr. Baldwin said they recently entered into a stipulation with the attorneys and the case was ripe for presentation to the Superior Court by early summer. However, he expected one side or the other would appeal the decision for what it involves. That decision, appealed to the Supreme Court, could be a year away. Senator Parnell MOVED amendment #1. Senator Adams OBJECTED for purpose of discussion. Richard Vitale, staff to Senator Parnell was invited to join the committee. He said the amendment would clarify the original intent of the legislation in that the reporting of quarterly reports would only be on the results and the measurements that were done, including the results of that measurement, and not on the lines that followed after that. Senator Adams WITHDREW his objection. Therefore, WITHOUT OBJECTION, amendment #1 was ADOPTED. (pause on record) Co-chair Sharp asked Senator Parnell to comment on the fiscal note from the Department of Health and Social Services, which proposed to add two individuals to the department. Senator Parnell said the fiscal notes related to the prior version of the bill and not the one now before the committee. He asked the Senate Finance Committee to issue a zero fiscal note. There were no additional duties placed on the agency. Co-chair Sharp asked about the fiscal note from OMB and if it should be the only one attached to the bill. Mr. Vitale, advised the Co-chair that all the fiscal notes should read zero. (at ease - return) Mr. Fargnoli was recalled to join the committee. He explained the fiscal note submitted by OMB and said that the work cannot be done without impact. Senator Parnell said agencies participate in the budget process each year and it is built into the base of their budget. Results-based budgeting was being implemented in the committee and it does take time. He continued to argue the fiscal notes should be zero as stated by Mr. Vitale. The original bill had a long-range planning component to it, which required the agencies to do five years of planning. The present form of the bill indicates that the Legislature will establish the missions and desired results for the agencies and issue them guidelines. There would be no additional cost doing that at this time, based upon the already ongoing process. There is cost to doing it and already the work is being done as part of the budget process. Senator Adams, in referring to section one, that mission statements and desired results should represent the priorities of the majority of Alaska residents, and some way that information needs to be gathered. He felt that in gathering this information there was a cost involved outside the agencies. Mr. Fargnoli concurred with Senator Adams. He noted there were external costs needed to implement the missions and measures. Also the internal costs as related to information system and what kinds of information were to be gathered generally have had to have substantial retellings. And that is not in any agencies' base at this time. This is the largest hidden cost in the results-based government. Otherwise one runs the risk of using proxy information. It cannot be represented to be cost free in anyone's budget. Senator Parnell MOVED that a zero fiscal note be attached to the current bill. Senator Adams OBJECTED. A roll call was taken and by a vote of 4 yeas and 1 nay (Adams) the motion PASSED. Co-chair Sharp said a zero fiscal note would be attached to the bill as passed out of committee. Senator Parnell MOVED CSSB 76(FIN) with attached zero fiscal notes and individual recommendations. Senator Adams OBJECTED. By a roll call vote of 4 yeas and 1 nay (Adams) CSSB 76(FIN) was REPORTED OUT with zero fiscal notes and individual recommendations.