SB 171-DOA PAYMENTS; REPEAL OTHER DOA DUTIES  8:33:27 AM CHAIR STOLTZE announced the consideration of SB 171. 8:33:55 AM JOHN BOUCHER, Deputy Commissioner, Alaska Department of Administration (DOA), Juneau, Alaska, introduced SB 171 stating the following: The genesis of this bill essentially was an examination of the statutes covering the department and during the course of last summer and we found certain statutes that we thought it was appropriate to either repeal or amend, simply due to the evolution of processes as they've occurred in the department right now. We've identified essentially five or six things that we'd like to address in that process. SB 171 was essentially an act relating to the duties of the department in relating to how we handle certain administrative functions. 8:36:43 AM SCOT AREHART, Director, Division of Finance, Alaska Department of Administration (DOA), Juneau, Alaska, provided a sectional analysis of SB 171 as follows: Section 1, it is a change to the way judgements are routed through the state. Judgements come in and currently they go through the Department of Administration which then get routed over to the Department of Law, who then dispositions those judgements through already, appropriations, or looks for payments through the Legislature. What this does is takes the Department of Administration out of that loop as an intermediary and streamlines efficiencies within state governments. We changed it from the Department of Administration to the Department of Law and added one sentence that says, "Which shall seek approval for payment of the judgement." One thing that has come up is we get in the Department of Administration, questions about these judgements, we have to then catalog them, send them to the Department of Law, who then has to disposition them, and then any questions that come up are then routed through from the plaintiff or their attorneys though the Department of Law. We would just like to direct them straight to the Department of Law. 8:38:01 AM SENATOR WIELECHOWSKI joined the committee meeting. CHAIR STOLTZE addressed the judgement on a settlement involving a mining project and asked that Mr. Arehart describe the case's process and how the process would be changed by the bill. MR. AREHART replied that he was not familiar with the case. CHAIR STOLTZE responded that he presumed that the DOA handled the case and noted that the settlement was a $350,000 item proposed in the budget. MR. AREHART explained that judgements that the DOA receives are routed back to the Department of Law who then follows through on the judgement and applies the appropriation. He summarized that the DOA simply routes judgements over to the Department of Law. CHAIR STOLTZE asked Mr. Boucher to verify that there was no discussion on a $350,000 issue. He remarked that the state was going through a tight-budget time and he was trying to figure out how the bill would change the process. 8:40:32 AM MR. BOUCHER explained that an appropriation would be identified in the settlement process through the Department of Law. He detailed that the Department of Law does the settlement negotiations and the DOA largely plays the accounting function in the process. CHAIR STOLTZE stated that he was trying to figure out the rationale of involving the DOA in the process. He speculated that the involvement of the DOA was due to a concern for a safeguard or an extra review process. He pointed out that the testimony lacked historical context and understanding. MR. BOUCHER replied that he did not know what the original intent was. He reiterated that the DOA more or less acts as a pass-through for the settlement process. SENATOR WIELECHOWSKI quoted the section that would be repealed as follows: The Department of Administration shall examine and audit every receipt, account, bill, claim, refund, and demand on the funds in the state treasury, it shall determine whether or not the obligation is incurred in accordance with laws and regulations adopted under authority. He remarked that the section was not being replaced with similar type of language. He asked Mr. Arehart to verify that the replacement language was very different than the requirement to audit receipts, accounts, bills, etc. MR. AREHART asked if the committee had moved on to Section 2. CHAIR STOLTZE replied no. He specified that the committee was still on Section 1 and asked that the question posed by Senator Wielechowski be answered. 8:43:52 AM MR. BOUCHER replied that Mr. Arehart may have been asking if the committee had moved past the original question. He disclosed that Section 2 was directed at Senator Wielechowski's question. MR. AREHART explained that there are system functions that take into account the items that are being repealed. He specified that there were items within the financial system that performs the different items as far as making sure that the expenditures have the appropriate budget controls. He said one of the key points DOA put in the section was the segregation of duties where multiple individuals would look at the payments so that the authorizations were met within the funding source. 8:45:43 AM SENATOR WIELECHOWSKI pointed out that the section being repealed had a very specific requirement to examine and audit every receipt, account, bill, claim, refund, etc. He remarked that the replacement section looked like it had taken away the requirement for an audit. He asked if there was a requirement elsewhere for an examination and audit. MR. AREHART explained that post-payment audits occur all of the time. He specified that the intent was to leverage some of the controls that were already in the system. He conceded that coming back to the committee with revised language to specifically pinpoint the controls might be the best option. SENATOR WIELECHOWSKI remarked that the proposed change seemed pretty substantive that was not being replaced. CHAIR STOLTZE summarized that the proposed changes bypasses the DOA as well as repeals the audit provision. 8:47:20 AM SENATOR HUGGINS asked that the process in requesting the statutory change be explained. MR. BOUCHER specified that the genesis for the legislation was part of a periodic statutes review by the Office of Management and Budget. SENATOR HUGGINS asked how the specific statute request occurred. MR. BOUCHER explained that there was an internal vetting and prioritization process where specific requests were based upon needs. 8:49:43 AM MR. AREHART detailed that language in Section 3 was changed where a term "tourist class" would be replaced with "lowest fare." He said the intent was to make sure that travel used the lowest fare during the state's time of budgetary constraints. He added that language would be included that documented any deviation from the lowest fare. CHAIR STOLTZE asked that an example be given where flying first class would be in the best interest of the state. MR. AREHART explained that first class was not an option and first-class fares were not booked. He remarked that individuals flying in first class would most likely be using upgrades. CHAIR STOLTZE remarked that he had never seen a governor in first class, but noted that he had seen deputy commissioners in first class and agreed that personal upgrades were probably used. MR. AREHART answered correct. He specified that the DOA does not purchase first class. 8:51:59 AM SENATOR HUGGINS noted that the Senate was under a travel restriction and asked what the process was to assure that people were abiding by the intent of a travel restriction. MR. BOUCHER answered that the DOA has travel reports on all of the departments that details every trip. SENATOR HUGGINS asked what the DOA does when a person deviates outside of the cost parameters. 8:53:17 AM MR. BOUCHER explained that the DOA provides information and the commissioners or those that do the management of travel expenses provide oversight or enforcement. SENATOR WIELECHOWSKI asked for an explanation of the repeal in Section 5. MR. AREHART explained that Section 5 had to do with a statute that was put on the books in the late 1970s where the University of Alaska was having cash flow problems and the mechanism in the statute allowed advances to be made to the university that then had to be repaid. He revealed that the statute had not been used for over a decade and the repeal request was considered a cleanup. 8:55:25 AM SENATOR WIELECHOWSKI pointed out that Section 39 was a repeal for employee savings bonds deductions and asked if anyone ever made requests anymore. MR. AREHART explained that the IRS instituted "Treasury Direct" in 2010 that allowed employees to buy savings bonds directly. He specified that the state no longer buys bonds and the repeal was a statutory cleanup. CHAIR STOLTZE summarized that all of the departments and branches of government were trying to find cost savings. He said the bill might be an opportunity to look at the University of Alaska and the court system as well. He added that the bill could be a real cleanup by the time the committee was done. 8:57:17 AM CHAIR STOLTZE announced that SB 171 was set aside and public testimony remained open. MR. BOUCHER remarked that the DOA would return with more specific answers and asserted that the department was not trying to shirk its responsibilities. 8:58:58 AM CHAIR STOLTZE asked for a summary on discussions with the University of Alaska regarding working together for efficiencies and savings. MR. BOUCHER replied that the conversations have been very productive on multiple levels. He noted that one topic addressed was the sharing of facilities within the information technology (IT) space. CHAIR STOLTZE commented that there was no choice but to make government smarter and better. 9:00:45 AM CHAIR STOLTZE announced that SB 171 would be held in committee.