SB 207-TRANSFER DUTIES FROM DCCED  4:37:28 PM CHAIR MEYER called the committee back to order. He announced the consideration of SB 207. 4:37:51 PM SENATOR MIA COSTELLO, Alaska State Legislature, Juneau, Alaska, sponsor of SB 207, explained that the bill deletes a department. She noted that the concept for the bill has been years in the making. She emphasized that economic development is one of her priorities as a legislator and noted that most of her legislation has been to promote that. She referenced her legislative history with governors Hickel and Murkowski. She detailed her experiences with two administrations that included departmental consolidation as well as her involvement in trade missions to Asia to promote Alaska. She remarked that she questioned whether the departmental consolidation currently works and noted that as one reason why she introduced the bill. SENATOR COSTELLO disclosed that during her time as a representative in the House she oversaw a working group that addressed how to diversify the state's economy. She disclosed that one of the questions the working group asked pertained to identifying a state that was doing a good job and Texas was identified. She said the Texas website is a "one stop shop" for easily connecting inquires with the people and resources needed to start a business in the state. She noted that she constantly asks the question as to how the state can elevate its economic development and disclosed that her answer is to get rid of the Alaska Department of Commerce, Community, and Economic Development (DCCED) and put the commissioner and some divisions in the governor's office to elevate the position. She said DCCED spans a tremendous range of topics and emphasized that her proposed change is not meant to diminish the work that is done at the department, but to elevate it. She explained that the commissioner for DCCED sits on 23 boards, a time-consuming job where most of the responsibilities will go to other departments, including the Department of Revenue and the Department of Natural Resources. She detailed some of her proposed changes as follows: • The Minerals Commission and the forest products in that department will go into the Department of Natural Resources. • The Alaska Film Office, no longer in existence, will be "removed from the books." • Remove the commissioner's office in the Division of Administrative Services: o The commissioner would be housed in the governor's office and work directly with the governor and staff members. She noted that many of the departments used to be separate and were ultimately combined; however, she said the state has never asked if combining the departments is working. She asserted that it is a worthy discussion when considering Alaska's fiscal challenges. She added that she thinks the state should be marketed and encouraged the administration and legislature to market Alaska whenever possible. 4:44:19 PM JOSHUA WALTON, Staff, Senator Costello, Alaska State Legislature, Juneau, Alaska, noted that the bill has 127 sections due to departmental-separation components. He referenced the proposed division/office/program relocation as follows: • Dissolved: o Commissioner's Office, o Division of Administrative Services, o Alaska Film Office. • Office of the Governor: o Alaska Seafood Marketing Institute, o Alaska Tourism Marketing Board, o Division of Economic Development: square4 Development Section, o Note: square4 Includes all marketing programs, square4 Includes all non-lending programs. • Department of Revenue: o Division of Banking and Securities, o Division of Community and Regional Affairs, o Division of Corporations, Business and Professional Licensing (DCCED-CBPL), o Division of Economic Development: square4 Investments Section, o Division of Insurance, o Alaska Energy Authority, o AIDEA, o Alaska Gasline Development Corporation, o Alaska Railroad Corporation, o Alcoholic Beverage Control Board, o Marijuana Control Board, o Regulatory Commission of Alaska, o Note: square4 Includes all revolving loan fund programs, square4 Includes all independent and quasi-judicial agencies. • Department of Natural Resources: o Alaska Minerals Commission, o Alaska Forest Products. He pointed out that a committee substitute would be required to carry out all the bill's objectives. 4:48:06 PM SENATOR WILSON asked Senator Costello to address the referenced memo for SB 207 from the Division of Legal and Research Services, item 10 regarding the constitutionality of moving some of the items into the Office of the Governor and referenced the section as follows: Moving duties and programs to the Office of the Governor. As requested, the bill moves the film production promotion program, the Alaska product preference program, the Made in Alaska labeling program, and tourism duties and grants from DCCED to the Office of the Governor. However, moving these duties and programs out of a principal department and into the Office of the Governor raises an issue under the Constitution of the State of Alaska. Article III; sections 22, 25, 26; Constitution of the State of Alaska; provide that the Legislature is required to allocate powers to the principal departments in the executive branch and that the head of a principal department is subject to legislative confirmation. The Legislature exercises its oversight of these departments by confirming the single executive or members of the commission or board that head the department. The Alaska Supreme Court has not addressed whether the governor's office is a principal department; however, the Legislature may not confirm the head of the Office of the Governor (the governor), and it does not appear that the Office of the Governor would be considered a principal department as contemplated by the constitution. Moving duties and programs from a principal department into the Office of the Governor appears to violate the constitutional requirement that the Legislature allocate powers, etc., to the principal departments. In addition, transferring duties and programs to the Office of the Governor removes the Legislature's oversight (by its confirmation authority) of the execution and implementation of these transferred duties and programs once they are in the Office of the Governor. 1. Under Article III, section 22, the Legislature has the authority to allocate functions, powers, and duties to departments within the executive branch, with the limitation that there be no more than 20 principal departments. Article III, section 24, further provides that "[e]ach principal department shall be under the supervision of the governor." 2. Art. III, section 25, requires that the head of each principal department be appointed by the governor, subject to legislative confirmation. 3. Art. III, section 26, requires that the members of a board or commission that heads a principal department or regulatory or quasi- judicial agency be appointed by the governor. SENATOR COSTELLO explained that the bill moves the commissioner of DCCED to the governor's office. She specified that the bill does not move the "commissioner of the department," but the "commissioner" is being moved. She said she believes that for clarity it is possible to have language in the bill that says, "For the purposes of this section the commissioner is not a commissioner of a department." 4:49:14 PM SENATOR GIESSEL addressed the memo from the Division of Legal and Research Services as follows: A follow up on Senator Wilson's question. What the memo calls out is moving these individuals, whether it is the commissioner or any of these divisions and most prevalently the Division of Corporations, Business and Professional Licensing (DCCED-CBPL); these personnel are subject to legislative confirmation and as the memo points out that moving duties and programs to the Office of the Governor appears to violate the constitutional requirement that the legislature allocate powers to principal departments and have oversite related to confirmation. She asked Senator Costello how she would deal with the constitutional issue referenced in the memo. SENATOR COSTELLO reiterated that she believes that there is a work-around with the issue that Senators Wilson and Giessel referenced. She said she is willing to work with anyone who is interested in pursuing the noted constitutional issue. SENATOR GIESSEL specified that her main familiarity with the entire DCCED has to do with DCCED-CBPL. She pointed out that the division staff provides substantial staff support to the multiple boards and questioned the substantial staff movement into the Department of Revenue. She said her second issue focuses on the mission conflict between the Department of Revenue's task in collecting money versus the mission statement for DCCED-CBPL. She opined that DCCED-CBPL has a quasi- adjudicatory regulatory mission or charge that seems to be in conflict in terms of the Department of Revenue's purpose of collecting money. 4:51:40 PM SENATOR WILSON thanked Senator Costello for looking for efficiencies by combining governmental services. He said he was willing to work with her to try and find more suitable places to put some of the departments. He conceded that he questioned if DCCED could be fully eradicated but opined that some pieces may be moved around to shrink the size of the department. SENATOR COGHILL remarked that SB 207 is a big undertaking. He opined that Senator Costello's focus may be on what the government can do to be nimbler in its business opportunities versus the idea of efficiency. He said the legislation is a big shake-up where core responsibilities are blended. He questioned whether the focus on core responsibilities would be retained. SENATOR COSTELLO asserted that SB 207 is transformational. She pointed out that the proposed departmental change in the bill also occurred in the 1990s when three departments were merged. She said there is a need to break down silos between departments; for example, there might be advantages with Community and Regional Affairs being housed in a different department, whether the Department of Revenue or another one. She noted that when the merger occurred, DCCED became a department that spanned a huge range of issues ranging from aerospace to rural bulk fuel loans. She disclosed that at a recent Aviation Advisory Council meeting she learned that a community was eligible for federal funds but was not aware of it because "that's a DOT issue." She opined that there are opportunities for increased collaboration and asserted that asking the question is worthwhile to enhance some of the things. She reiterated that the commissioners spend a third of their time sitting on boards and the question addressing the time issue is posed in the bill. She noted that there is a House version of SB 207 as well. 4:55:42 PM CHAIR MEYER said he appreciated Senator Costello for bringing the legislation forward. He agreed with previous statements that SB 207 is big bill and noted that the legislation needs additional work, pointing out that the fiscal notes have not been able to keep up. He asked Senator Costello if her intent is to save the state money. SENATOR COSTELLO explained that saving money is not why she introduced the bill but saving money would be a benefit from the legislation. CHAIR MEYER commented that he likes the idea of, "breaking down the silos." He noted that Senator Costello gave the example of how everything was centralized to reduce staff and share services, a concept he likes and will address with the deputy commissioner. He suggested that work continue with the bill and noted that Senator Wilson offered his assistance. He said the bill will be brought back for public testimony at a later date. 4:57:17 PM CHAIR MEYER held SB 207 in committee.