SB 129-CHILD CARE CTRS: STATE EMPLOYEES & OTHERS  9:33:11 AM CHAIR WIELECHOWSKI announced the consideration of SB 129. It would allow child care centers to be located in office buildings owned or leased by the State of Alaska. GENEVIEVE WOJTUSIK, staff, Senator Lesil McGuire, offered to answer questions regarding SB 129, on behalf of the sponsor. VERN JONES, Chief Procurement Officer, Division of General Services, Department of Administration, answered questions related to SB 129. SENATOR MEYER said he supports the bill. He inquired about the cost of the day care program to the state. He suggested that the property could be leased and revenue brought in. He asked if the legislation was fair to small business day care centers. 9:35:33 AM MR. JONES said he thought it was not accurate to say there was no cost for the state to implement child care in its facilities or in leased facilities. It is more accurate to say it is not possible to choose a number; therefore, the fiscal note is indeterminate. He said there is a requirement in the bill to include new centers if a new facility is built, that houses more than 250 employees. He estimated the cost if day care centers were added to the last three buildings the state acquired. For the Atwood Building, the cost would have been a little over $2 million. It is assumed rent would be charged to the day care provider, so there would be no operational loss of funds. MR. JONES addressed Senator Meyer's question about "opportunity costs". The state typically operates a state facility and charges a tenant operating costs at less than market rates. He referred to the Atwood Building as an example where the operating costs are about half the market rate. Also difficult to factor in is the fact that an agency could be displaced by the day care center and would have to pay the open market rate. It is difficult to predict many costs. SENATOR MEYER noted that day care centers can be justified as an employee benefit. He questioned if providing a day care would displace agencies. He wondered who would pay custodial and utility costs of future centers. MR. JONES explained that a different agency deals with those costs. He said the Division of General Services would likely try to recoup operating costs. He addressed Senator Meyer's question about competition with the private sector. He did not see undue favoritism to a day care provider. There are strict rules regarding charge-back rates which could be cheaper than market rates. The division typically does not keep track of how many people inhabit a facility. However, the division is undergoing an efficiency study and has learned that only two buildings have over 250 people; the State Office Building and the Atwood Building. Also, four leased facilities currently have over 250 in them. 9:43:44 AM SENATOR GIESSEL asked for clarification about the amount charged for operating costs - "about half the fair market value." MR. JONES replied that state agencies are charged about half of market value for leases because of strict federal rules for operating costs and depreciation. The Atwood and SOB are charged roughly half of what could be gotten on the open market. SENATOR GIESSEL pointed out that a private company would be leasing the space for a child care center. She said she wondered if they would qualify for the same lease price break the state receives. MR. JONES said the state was allowed to charge rent based on federal guidelines, but could also charge the market rate to a non-state entity. He said he would have to check on that. The fiscal note does not make any assumptions about the rate. SENATOR GIESSEL spoke of a private company running a restaurant in the Atwood Building. She asked what rate they are being charged. MR. JONES said he thought they were being charged an equivalent rate, but he would have to check on it. Future day care centers would not be state-run businesses; an RFP would be issued for open market competition. CHAIR WIELECHOWSKI said SB 129 would be held over. ^OVERVIEW: ALASKA NON-PROFIT ECONOMY  9:47:36 AM CHAIR WIELECHOWSKI announced the Foraker Group presentation on Alaska's nonprofit economy. Alaska relies on nonprofit groups to provide a wide range of public services. As economic conditions in Alaska have tightened and the legislature has sought to constrain state spending, many of these organizations are struggling to meet public needs and accomplish their missions. CHAIR WIELECHOWSKI introduced Dennis McMillian, president and CEO of the Foraker Group. He said that Mr. McMillian has devoted his professional career to helping nonprofit organizations better meet the needs of their communities. Mr. McMillian came to Alaska in 1992 to lead the United Way of Anchorage, and since then, he has helped build the state's philanthropic infrastructure through his work with United Ways across the state, and through his support in developing the Alaska Community Foundation. He is a strong advocate for Alaska's nonprofit sector. In 2001, Mr. McMillian led the effort to start the Foraker Group with the mission of building sustainability and organizational capacity in Alaska's nonprofits. At ease from 9:49:01 a.m. to 9:49:53 a.m. 9:49:53 AM KATHIE WASSERMAN, Executive Director, Alaska Municipal League (AML), Board Member, Foraker Group, contributed to the discussion of Alaska Nonprofit Economy. She spoke of the benefits to AML and to Alaska from the Foraker Group. The Foraker Group has been instrumental in assisting AML's board operate more effectively. Non-profits that do a good job have become much stronger and more effective due to the efforts of the Foraker Group. 9:52:09 AM DENNIS MCMILLIAN, President & CEO, Foraker Group, presented an overview entitled "Alaska Non-Profit Economy." He predicted that non-profit requests would escalate in the future. The Foraker Group provides training and research for non-profits in Alaska. They do research every three years to establish base-line data. MR. MCMILLIAN reported on the total number of Alaska nonprofits in 2010 in Alaska. He showed a graph made by Institute of Social and Economic Research (ISER) showing the number of registered and non-registered nonprofits. There were 4,727 registered nonprofits and 2,300 other nonprofits. He commented on which groups do not show up under the 4,727 that are registered. The best guess is that there are 7,000 nonprofits operating in Alaska currently. MR. MCMILLIAN showed the expenditures of nonprofits operating in Alaska. It is a $4.5 billion industry, three-quarters of which are 501(c)(3) charitable nonprofits. 9:57:39 AM MR. MCMILLIAN reported on the composition of Alaska public charities. Nine percent of the organizations, the health subsector, represents 61 percent of employment and 60 percent of expenditures. He showed how the largest ten public charities rank by expenditures. He noted that all ten were related to health care and all but three were Native entities. He added that the data was from 2007 and not particularly good; it was ISER's best guess. He detailed the public charity composition of revenues in Alaska as compared to those in the entire United States. U.S. Government grants make up 43 percent of revenues in Alaska, as compared to only 9 percent nationally. The charitable contributions/other category in Alaska is 18 percent versus 23 percent nationally. He noted a trend in Alaska since 2003 - government grants have dropped from 53 percent of total revenues to 43 percent. Alaska is disproportionally supported by foundations and corporations. The state is overly dependent on one industry for charitable contributions. The Click, Pick, Give program has helped to increase individual giving. 10:02:39 AM CHAIR WIELECHOWSKI noted tax breaks in Alaska for companies that contribute to education. He asked how that type of donation is counted. MR. MCMILLIAN said that was IRS data. CHAIR WIELECHOWSKI wondered if that type of donation increased the number for government spending. MR. MCMILLAN guessed that it did. MR. MCMILLIAN turned to the trends in Alaska that would be affecting charitable funding in the future. A funding crisis is inevitable due to the drop in contributions from federal earmarks and from organizations turning to the state for funding. He emphasized that the nonprofits have been warned that this was coming. He addressed the "crash of the herd" crisis, which he described as an over population issue - one nonprofit for 28 people. He spoke of baby boomer population trends leading to not enough people to serve on, and staff, non-profits in order to maintain 7,000 nonprofits. MR. MCMILLIAN discussed new nonprofit structures such as networked institutions with new ways of partnering and merging. He noted the Foraker Group was here to serve Alaska. 10:09:36 AM SENATOR MEYER agreed that in tough times, companies and nonprofits will tend to merge. He asked how religious groups qualify as nonprofits. MR. MCMILLIAN said they are all nonprofits and are a part of the 7,000. SENATOR MEYER said that was good because they work together to provide food banks and soup kitchens. MR. MCMILLIAN noted that in the nonprofit sector, competition does not work. SENATOR MEYER suggested that when nonprofits request funding from the state, they should also have other matching funds. MR. MCMILLIAN talked about capital campaigns. He opined that the state will have to have a different strategy for funding nonprofits. He predicted that nonprofits will need 67 percent from one donor when they seek funding from the state. 10:14:03 AM SENATOR MEYER appreciated the work Foraker does. He said that nonprofits often require business-related assistance. CHAIR WIELECHOWSKI asked for specific steps the legislature could take to strengthen nonprofits and ensure their sustainability in Alaska. MR. MCMILLAN referred to a handout called "Nonprofit Sustaining Guidelines." He suggested four things to look for in a nonprofit to determine how sustainable it will be: having focus or clear understanding by the nonprofit of itself and its goals - being strategic and thinking ahead; having the right people involved - working together in partnership; being fluent in partnerships and in collaborations; generating unrestricted cash and making a profit.