HOUSE COMMUNITY AND REGIONAL AFFAIRS STANDING COMMITTEE February 1, 1996 1:06 p.m. MEMBERS PRESENT Representative Ivan Ivan, Co-Chair Representative Alan Austerman, Co-Chair Representative Jerry Mackie Representative Kim Elton Representative Al Vezey Representative Pete Kott Representative Irene Nicholia MEMBERS ABSENT All members were present. COMMITTEE CALENDAR HOUSE BILL NO. 409 "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 Community and Economic 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; 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." - HEARD AND HELD (* First public hearing) PREVIOUS ACTION BILL: HB 409 SHORT TITLE: DEPT OF COMMUNITY & ECONOMIC DEVELOPMENT SPONSOR(S): REPRESENTATIVE(S) KELLY, Therriault, James, Kohring JRN-DATE JRN-DATE ACTION 01/11/96 2409 (H) READ THE FIRST TIME - REFERRAL(S) 01/11/96 2409 (H) CRA, FINANCE 01/16/96 2456 (H) COSPONSOR(S): KOHRING 02/01/96 (H) CRA AT 01:00 PM CAPITOL 124 WITNESS REGISTER PETE KELLY, Representative Alaska State Legislature State Capitol Building, Room 513 Juneau, Alaska 99801 Telephone: (907) 465-2327 POSITION STATEMENT: Presented sponsor statement and answered questions on HB 409. MIKE IRWIN, Commissioner Department of Community and Regional Affairs P.O. Box 112100 Juneau, Alaska 99811-2100 Telephone: (907) 465-4700 POSITION STATEMENT: Presented department's position and answered questions on HB 409. JEFFREY W. BUSH, Deputy Commissioner Office of the Commissioner Department of Commerce and Economic Development P.O. Box 110800 Juneau, Alaska 99811-0800 Telephone: (907) 465-2500 POSITION STATEMENT: Presented department's position and answered questions on HB 409. LAMAR COTTEN, Deputy Commissioner Office of the Commissioner Department of Community and Regional Affairs P.O. Box 112100 Juneau, Alaska 99811-2100 Telephone: (907) 465-4700 POSITION STATEMENT: Presented department's position and answered questions on HB 409. PAULA CONRU, Legislative Assistant to Representative Pete Kelly Alaska State Legislature State Capitol Building, Room 513 Juneau, Alaska 99801 Telephone: (907) 465-2327 POSITION STATEMENT: Provided information on HB 409. ACTION NARRATIVE TAPE 96-5, SIDE A Number 0001 CO-CHAIR IVAN IVAN called the House Community and Regional Affairs Committee meeting to order at 1:06 p.m. Members present at the call to order were Representatives Ivan, Austerman, Vezey and Nicholia. Members absent were Representatives Mackie, Elton and Kott. HB 409 - DEPT OF COMMUNITY & ECONOMIC DEVELOPMENT Number 0062 CO-CHAIR IVAN noted that the committee packets for HB 409 contained the bill, fiscal notes, sectionals and the sponsor statement. He acknowledged the large number of teleconference sites on line to listen to testimony from the sponsor and representatives from the Department of Community and Regional Affairs and the Department of Commerce and Economic Development. He announced that public testimony would be taken Saturday, February3, 1996, from 1:00 to 5:00 p.m. CO-CHAIR IVAN noted that Representative Mackie had joined the meeting. Number 0165 REPRESENTATIVE PETE KELLY read from the sponsor statement for HB 409: "House Bill 409 consolidates Alaska's economic development programs currently located in the Department of Community and Regional Affairs and the Department of Commerce and Economic Development. It combines the two agencies into one focused entirely on development. Under HB 409, this new department is called the Department of Community and Economic Development. Non-development functions currently housed within C&RA and DCED are assigned to other existing agencies. HB 409 does not seek to eliminate or reduce services; it merely reorganizes them. "The missions of C&RA and DCED are similar - to promote economic development for Alaska as a whole as well as for our local communities. The two complement each other and are designed to coordinate their activities. However, coordination can be difficult across agency lines and could be better facilitated by having these development programs housed under one roof. This type of streamlining has been discussed for years, throughout the course of several administrations. "Economic development and jobs for our families is a top priority. As we continue in the current environment of budget cutting, these services become more threatened each year. As chairman of DCRA and DCED, I see HB 409 as a vehicle to take some of the pressure off cutting these services or their delivery, whether they are urban or rural, by reducing the bureaucracy associated with them and improving their operations through efficiency. "Alaska's fiscal crisis has made consolidation and streamlining necessary to achieve savings. Our economic dependence on a single industry emphasizes our need for efficient and effective development programs. The Governor has taken a first step by transferring the ARDORS from Commerce to C&RA and combining the Divisions of International Trade and Economic Development in Commerce into one unit. A joint task force on international trade is focusing on ways to consolidate Alaska's trade efforts. These are important first steps. HB 409 is another part of the process. HB 409 will create budget savings, but just as importantly, better coordinated and more effective programs. It will protect the services and their delivery in the long run." Number 0300 CO-CHAIR IVAN asked if there were questions. Hearing none, he invited Representative Kelly to join the committee at the table. MIKE IRWIN, Commissioner, Department of Community and Regional Affairs (DCRA), presented an overview of the disadvantages of HB 409. He prefaced his remarks by noting that representatives from DCRA, the Department of Commerce and Economic Development (DCED), and the other six affected departments were present. Number 0485 COMMISSIONER IRWIN explained that HB 409, as drafted, would basically eliminate DCRA and DCED as they currently existed. Certain functions would be combined into a new department, slightly bigger than the current DCRA; the functions of six other state agencies would expand. He expressed that the intent behind HB 409 was unclear. He saw it not as streamlining; instead, he viewed it as a massive rearrangement of functions of state government. He noted that on the surface, there was a desire to achieve efficiencies. In response to that concern, Commissioner Irwin stated that duplication and overlap between DCED and DCRA were virtually nonexistent. The Administration had made initial reductions for FY 97 reflecting their starting point on a path towards measurable efficiencies, he said. The FY 97 budget reflected a net combined reduction from FY 96 of roughly $2.2 million in general fund expenditures for the two departments, exclusive of an additional $5.8 million reduction in the two departments' formula-funded programs. In contrast, under HB 409, they anticipated a budget increase of approximately $1.6 million in the first two years. Number 0755 COMMISSIONER IRWIN conveyed the Administration's observations about rearranging the executive branch of government. He said they believed the lead role should be taken by those who, on a day-to- day basis, were in the business of managing programs and delivering services. He noted that government did not always run as efficiently as a well organized business. He compared the legislature to a board of directors, with the executive branch being the management team; he asserted that the branches could work in cooperation with each other. COMMISSIONER IRWIN commended the sponsor and those who had worked on HB 409. However, he said, it was a rearrangement of organizational boxes that did not address the essential questions of 1) what services the government could and would provide and 2) how much Alaskans were willing to pay to provide those services. He asserted that the Administration had structured, in the FY 97 budget, a plan that relative to DCRA and DCED combined programs within and between those departments; proposed the elimination of programs and services; and remained true to the core missions that had evolved over many years and legislative sessions, through several administrations. Number 0978 CO-CHAIR IVAN thanked Commissioner Irwin for the testimony and recognized that Representatives Elton and Kott had joined the meeting. CO-CHAIR ALAN AUSTERMAN asked Representative Kelly whether there had been an analysis of rearrangements and shuffling functions around before the bill was drafted. He further asked who had drafted the recommendations as to which functions would be shuffled around. Number 1034 REPRESENTATIVE KELLY replied that the bill had resulted from his work in the House Finance Committee, where he was the chairman for both the Community and Regional Affairs subcommittee and the Commerce and Economic Development subcommittee. He said they needed to take action to protect services. He recognized that duplications between DCRA and DCED were not exact duplications but rather duplications of mission. Economic development was needed in rural Alaska and statewide. Yet within DCRA and DCED there were numerous regulatory and other functions that did not fit. When the model began, the drafters wanted to create a new department that concentrated on economic development; they took the economic development functions of DCRA and DCED and put them into one department. The regulatory and other functions were then peeled off and distributed to other departments that more matched the mission statements of the programs being sent to those other departments. Representative Kelly summed up by saying they had created a model; then the bill was drafted to match the model. Number 1148 CO-CHAIR AUSTERMAN asked if Representative Kelly's office had set up the model and decided which functions would go to which departments. REPRESENTATIVE KELLY responded that was correct. He added there had been a great deal of input. Number 1230 REPRESENTATIVE JERRY MACKIE referred to an organizational chart prepared by Representative Kelly. He asked Commissioner Irwin whether financial impacts of moving people and offices had been analyzed. Number 1258 COMMISSIONER IRWIN replied they had, superficially. It was an extremely complex bill, however. With respect to the fiscal analyses, a whole team of fiscal officers and accountants among the various agencies had been working hand in hand for the past couple of weeks. When moving people around, one had to move phone systems and data processing systems, make leasing arrangements and so forth. He felt the estimate was conservative; the cost of moving people was included in the $1.6 million fiscal note for the entire bill. As far as working with other agencies, the Department of Revenue's plate was full, especially when talking about the commissioner and his main managers. The Department of Revenue was already a large department. HB 409 would increase its personnel by another 100 people. They questioned whether the department could take on those services being contemplated. Number 1423 REPRESENTATIVE MACKIE asked Representative Kelly, in terms of the overall restructuring proposed, to estimate net loss in terms of state employees. He added there was no reason for restructuring without substantial savings and asked where the savings would come from. Number 1445 REPRESENTATIVE KELLY responded that from the model currently being considered, the savings would be $967,000. He asked Paula Conru, Legislative Assistant, if she could provide specific numbers regarding personnel positions; Representative Kelly then replied that he did not have those figures with him. REPRESENTATIVE MACKIE commented that he would like to have those figures. Ultimately, if the number of employees providing services were reduced, services would be affected. Number 1512 REPRESENTATIVE KELLY replied that departments receiving new programs would get them intact. There might even be additional employees. REPRESENTATIVE MACKIE asked about programs being eliminated. Number 1540 REPRESENTATIVE KELLY asserted that HB 409 eliminated no programs. REPRESENTATIVE MACKIE expressed confusion at how the programs could be distributed intact, eliminating employees without reducing services, and still save money. Number 1550 REPRESENTATIVE KELLY responded that essentially there were administrative services and commissioners' offices in two departments. REPRESENTATIVE MACKIE asked if savings would stem from eliminating one commissioner and support staff, plus one agency's support staff, rather than eliminating actual programs. Number 1575 REPRESENTATIVE KELLY said one of the fears about HB 409 was that it would somehow damage services, particularly in rural Alaska. The intent of the bill was to protect services in rural Alaska. He had to make decisions about savings at the budget subcommittee level. He did not want to discontinue the grants and services that were so critical to rural Alaska, nor eliminate economic development functions in DCED. Number 1610 CO-CHAIR IVAN asked Commissioner Irwin about the figures he had proposed. COMMISSIONER IRWIN replied that the $5.8 million amount was for proposed reductions in the municipal assistance and revenue sharing formula programs this year. Number 1647 REPRESENTATIVE ELTON expressed concern that HB 409 was being viewed "with the soul of accountants." He wanted to know whether the sponsor had already scheduled a meeting, or whether the committee could do the same, with the clients receiving the services. He thought that would be the most compelling testimony. CO-CHAIR IVAN responded that the current hearing was to invite comment from state agencies affected by HB 409; Saturday, February3, was reserved for testimony by the public from 1:00 to 5:00 p.m. He said he wanted to allow time for everyone to properly address issues and concerns. Number 1751 JEFFREY W. BUSH, Deputy Commissioner, Office of the Commissioner, Department of Commerce and Economic Development (DCED), said Commissioner Irwin had already touched on several points he had wished to make. Mr. Bush said he would concentrate on programmatic impacts of some of the proposals in HB 409. The proposal to eliminate one commissioner, he said, would have an impact on the resulting commissioner's office. The commissioner of DCED, he noted, was appointed to 16 boards and state commissions; a great deal of the commissioner's time, as well as Mr. Bush's, was spent attending meetings already. The new commissioner would have to deal with additional commissions, seats and boards. For example, Mr. Bush said, adding Alaska Housing Finance Corporation board membership to the DCED commissioner's job would be a significant burden. MR. BUSH emphasized that the Administration was committed to eliminating any duplication of service. He believed there was no duplication, but welcomed the opportunity to address perceived duplications that might be brought to his attention. There had been analysis in the past seven months, resulting in at least two executive orders affecting the workings between DCED and DCRA, as well as the internal workings of DCED, specifically designed to streamline service, he said. Number 1879 MR. BUSH said the Administration's position was that, in and of itself, simply moving agency programs around was not productive; this was a basic premise. The Administration wanted to identify ways to save money and were putting together proposals from a budgetary standpoint to do just that. The $2.2 million in savings among the economic development functions of government was significant, he said; much of that was the result of administrative efficiencies they had worked on creating. Number 1950 MR. BUSH discussed the proposal to transfer regulatory agencies to other departments. Suggested for transfer to the Department of Revenue were the Alaska Public Utilities Commission (APUC); Division of Insurance; and Division of Banking, Securities and Corporations. He said these should be located within the agency that dealt with economic development. Although traditionally viewed as regulatory agencies, their focus, particularly at present within DCED, was on improving business climate in Alaska and assisting businesses with starting up. He cited examples within those agencies that assisted with economic development. Moving them to the Department of Revenue would change their focus; they would no longer help businesses but would have more traditional regulatory emphasis. Number 2062 MR. BUSH referred to the proposal to move the Division of Measurement Standards to the Department of Transportation and Public Facilities (DOTPF). He said this was not a new idea. The Administration neither opposed nor supported it, but felt it worthy of discussion. He said there were serious political considerations. Within DCED at present, he added, the Division of Measurement Standards had an economic development focus. However, there might be reasons to transfer the agency to DOTPF. Number 2137 MR. BUSH referred to the proposal to move the Alaska Minerals Commission from DCED to the Department of Natural Resources. The Administration recommended instead that it remain as an economic development agency. The charge of that agency, he said, was to identify constraints and suggest methods to remove those constraints on mining in Alaska; it was an economic development function. Number 2156 MR. BUSH commented that the Alaska Products Preference Program, however, currently located in DCED, might better be located in the Department of Administration, where other products preferences programs in the state were already housed. Number 2184 MR. BUSH referred to the proposal to move the Child Care Facility Revolving Loan Program, currently located in DCED's Division of Investments, to the Department of Health and Social Services. The Division of Investments, he said, currently handled most of the loan programs operated by the state. He noted that the child care loan program currently had a zero default rate, unusual in state loan programs; it was a successful business loan program. The Administration encouraged it to stay where it was. However, he said, it was not a significant issue. He explained that many times if a program was located within one agency, a management contract would be signed with another agency to operate the program. If the Child Care Facility Revolving Loan Program were moved the Department of Health and Social Services, he suggested, a management contract would probably be signed for that program. He saw nothing to be gained by moving it. Number 2232 MR. BUSH said although he hesitated to speak for other agencies, he wanted to pass along some concerns. In general, he said, although other departments might be able to absorb the programs in question, it would hurt their overall missions or they would not be able to operate the programs as effectively as at present. He cited examples, including the Department of Revenue's wish to focus on tax issues. Number 2291 MR. BUSH said the Division of Occupational Licensing was an "odd one." Currently located in DCED, where the Administration felt it should stay, it was slated to be moved to the Department of Labor. However, the Department of Labor's stated mission was to work with the labor force in Alaska and to create jobs. Occupational licensing was not a job creation function. Equally important, Mr. Bush said, was a fiscal note in the committee packet; $300,000 of that was due specifically to the Division of Occupational Licensing being split off from the Division of Banking, Securities and Corporations and the Division of Insurance. Currently, they all operated under a single computer system; DCED was in the process of upgrading that system using FY 96 money appropriated by the legislature. To split those agencies, he said, would significantly increase the cost from a practical standpoint. Therefore, he said, the Administration thought the Division of Occupational Licensing should remain with the other regulatory agencies. Number 2352 MR. BUSH indicated that Remond Henderson and Guy Bell, who had headed up the fiscal analysis, were present from DCED to answer specific questions after Mr. Bush completed his overview. Mr. Bush explained that the starting point for compiling the fiscal note was the fact that the new, proposed department functions should be located in one place. To minimize costs, the ninth floor of the State Office Building in Juneau and the seventh floor of the Frontier Building in Anchorage, both of which currently housed DCED, had been proposed as that site. The Administration had calculated the minimum amount of moves possible. Although 400 to 600 people would be affected, the total number of moves was 161. That was the best number they could arrive at. The Department of Administration had figured the costs per move; their analysis resulted in the current fiscal note. Mr. Bush said there were additional items in the fiscal note, including $50,000 for professionals to design space, $25,000 each for Juneau and Anchorage. The Department of Administration believed a full-time person for one year in both Juneau and Anchorage would be required to implement the move. There would also likely need to be additional space leased somewhere; $50,000 for two years was allocated for that. TAPE 95-5, SIDE B Number 0007 MR. BUSH admitted this was not an exact science. Even less exact, he said, were computer shake-out and data processing costs. Mr. Bush explained that DCED had been appropriated $350,000 to create the current computer system, which was in the process of being built. They predicted that splitting the Division of Occupational Licensing from the Division of Banking, Securities and Corporations and the Division of Insurance would cost $300,000 to essentially create another computer system. Beyond that, DCED included $250,000 for computer compatibility issues. Number 0052 MR. BUSH said figures did not include other issues such as the DCRA building in Juneau, which could not be remodeled without Americans with Disabilities Act (ADA) issues being raised. In this move, he said, employees already there would move out and a whole new agency would move in; it was assumed that could be done without moving any walls or recabling the building in any way. Mr. Bush emphasized that the Administration had tried to minimize the fiscal note and be as accurate as possible within given constraints. Number 0076 MR. BUSH said DCED had similar concerns to those indicated by Representative Mackie. They proposed eliminating five positions, including the commissioner, executive secretary to the commissioner, administrative services director, secretary to that director, plus a receptionist. Beyond that, it was difficult to predict. In moving a program from one agency to another, not only were people moved, but administrative support as well. For example, they might end up short on data processors. Beyond the five positions, DCED could not predict any savings. In the short run, they saw no administrative savings; in the long run, they could not predict. Number 0151 MR. BUSH concluded by saying they were open to discussions on ways to streamline and save money. But he, at least, was not convinced that simply moving programs around was the answer. They needed to look at the programs themselves and identify which programs to maintain and which ones to eliminate. Hard decisions of that type would result in significant budget savings. Number 0223 REPRESENTATIVE MACKIE asked Mr. Bush whether moving the products preference program could be accomplished by executive order. MR. BUSH replied that it probably could. It was not a high priority, he said, and would not necessarily save any money or efficiencies. REPRESENTATIVE MACKIE referred to Representative Kelly's organizational chart and asked if that redistribution could also be accomplished by executive order if the Administration were convinced they should make the transfer. Number 0254 MR. BUSH responded yes, he believed the Administration could do that, to the extent it was simply moving programs. REPRESENTATIVE MACKIE commented that he understood the need for HB 409 to create one department instead of two. However, he said, from the perspective of anyone on the outside looking in, one would ask why child care and day care assistance would not be better served in the Department of Health and Social Services, for example. Number 0348 REPRESENTATIVE KELLY asked if a representative from the Department of Natural Resources (DNR) was present; he commented that he supported the recommendations made at his last meeting with DNR and would entertain amendments that would accomplish what DNR had recommended. CO-CHAIR IVAN advised Representative Kelly, on behalf of the House Community and Regional Affairs Committee, that the committee was not privy to the discussions Representative Kelly had participated in. Number 0433 LAMAR COTTEN, Deputy Commissioner, Office of the Commissioner, Department of Community and Regional Affairs (DCRA), said his testimony would focus on the mission of DCRA. The reason DCRA functioned well, he said, was because of how the existing services were interconnected. Since its inception in 1972, DCRA had focused on developing stronger local economies, stronger local governments and increased local fiscal responsibility. For DCRA, this meant focusing on development of human resources, including working with city councils, borough assemblies, nonprofit organizations in the public sector, and others. They also focused on what DCRA characterized as community development, which was the infrastructure, normally the responsibility of or associated with the public sector. This infrastructure did not make a lot of money; it included roads, water and sewer, community halls, electricity, boat harbors and other waterfront development such as docks and grids. DCRA did not expect private sector capital to be attracted to either rural or urban Alaska if basic community development infrastructure did not exist, with human resources capable of providing those services. Number 0570 MR. COTTEN said DCRA had approximately 200 employees in four divisions. Unlike similar divisions, the administrative services divisions of DCRA worked directly with a number of communities with grants. The other three divisions of DCRA worked well together in trying to meet the basic mission of community and human resource development. Mr. Cotten cited examples of programs operated by DCRA, including land and coastal management, the local boundary commission, and the state assessor's office. He emphasized the focus on the basics. He cited further examples, including loans and grants from the Division of Energy and the training of plant managers in small communities. He said if capital projects were provided, a small, accessible agency should be available to work with the communities, whether it be on utilities, land, or bookkeeping, to get the job done. Number 0776 MR. COTTEN discussed the Division of Community and Rural Development, which focused both on grants for community development and, in some cases, economic development through feasibility studies to look at economic opportunities in small communities. Unlike DCED, whose primary focus was the private sector, DCRA concentrated on communities, especially smaller, rural communities, with respect to basic community development. Mr. Cotten said that was a natural break between DCRA and DCED. There was coordination and linkage, but these points clearly separated the two departments. He added that the Division of Community and Rural Development also looked at job training and the State Training Employment Program (STEP), which was job-related. He explained that these job training programs fit in well in rural Alaska with other programs in DCRA, as outreach programs were located statewide in a variety of areas. In addition, day care and Head Start programs were an integral part of community development. Number 0930 MR. COTTEN emphasized that the distinction and success of DCRA as a department related to its small size, with 200 people; its presence in rural Alaska as well as the urban centers; its top priority of coordination and cooperation between the four divisions; and its focus on the basics. In closing, Mr. Cotten referred to a bill passed the previous year concerning the Human Investment Resource Council; the mission of that council was to look at the appropriate placement of programs. That council began January 1, 1996. Mr. Cotten suggested that HB 409 might be disruptive to that process. Number 1110 CO-CHAIR AUSTERMAN asked about job training programs throughout Alaska; he wondered if, either currently or under HB 409, those programs were all under one department. If not, he wondered if they could they be brought under one department for savings. COMMISSIONER IRWIN replied that the two main programs were 1) the Jobs Training Partnership Act and Jobs Training Partnership Office (JTPA/JTPO); and 2) the STEP program. Both currently were housed under DCRA; under HB 409, those would move to the Department of Labor. Commissioner Irwin noted there was also the welfare/JOBS component, but he did not know what other programs existed. He did not believe that HB 409 would necessarily consolidate those over to the Department of Labor along with the STEP and JTPA/JTPO programs. Number 1175 CO-CHAIR AUSTERMAN said the committee wanted to look at that scenario if they were going to be streamlining and reorganizing. COMMISSIONER IRWIN referred to Deputy Commissioner Cotten's remarks about the Human Resource Investment Council (HRIC) and said he himself was one of the five commissioners. With the impending overlays of welfare reform and new work requirements, he expected a lot of the same types of initiatives. There was a pending consolidation of federal education training programs and block grants. A lot of change would have to be managed. If programs were moved around now under HB 409, a couple of years down the road, knowing the federal requirements and state welfare reform requirements, another reshuffling might be required. Commissioner Irwin questioned whether they were putting the cart before the horse, at least with respect to those areas of service delivery. Number 1302 REPRESENTATIVE ELTON referred to Deputy Commissioner Bush's mention that the commissioner of DCED sat on 16 different boards and commissions. Representative Elton noted that some of those were statutorily assigned and asked Representative Kelly if HB 409 reassigned those to the consolidated department's commissioner's office. REPRESENTATIVE KELLY replied yes. Number 1328 REPRESENTATIVE MACKIE asked Representative Kelly whether he had performed a fiscal analysis or done projections as to the cost, or if he had asked for the fiscal note to make that determination. Specifically, he wondered what Representative Kelly felt about the $1.6 million fiscal note for the current year. Representative Mackie added that in every subsequent year, there would be a savings. He asked if the $347,000 reflected the five eliminated positions mentioned earlier by Representative Kelly and noted that he could see where it showed positive savings. Number 1365 REPRESENTATIVE KELLY said he had no reason at this point to disagree with the different agencies that came up with that number. He had asked them to do that because he thought they were in the best position to determine the figures. He added he was only disappointed that at that time, he did not have an itemized fiscal note; there was just one fiscal note for all agencies, making it difficult to analyze possible areas within the fiscal note that could be reduced. He was awaiting a detailed fiscal note. Number 1408 REPRESENTATIVE MACKIE asked why take the action if it would not eliminate services or save any money. He added he could see the small amount saved. He asked if the five positions were what they were trying to accomplish savings for. REPRESENTATIVE KELLY emphasized that the reasoning was to protect services. He did not want to eliminate services. He disagreed that it was a $347,000 per year savings; he thought it to be $1 million. He was not currently prepared to give the committee that model, however. He added that Mr. Bush had cited examples where there were problems in HB 409. Number 1483 MR. BUSH advised that the three regulatory agencies that were direct-line agencies for DCED were on the same computer system and dependent on that system. Those agencies were the Division of Insurance; the Division of Banking, Securities and Corporations; and the Division of Occupational Licensing. REPRESENTATIVE KELLY said HB 409 was a huge bill and a massive undertaking. He was relying on the departments and the committee process to find any errors. He himself had identified $1 million in savings; Mr. Bush had identified a $300,000 mistake. Representative Kelly said he was perfectly willing to entertain any amendments to correct that mistake and any others that might be found. However, he would disagree in the overall mission of the bill. It would hurt; there was no question about it. He said he believed the departments could carry on their mission under the new structure, only the state could now proceed with a $1 million savings, at minimum, past the original fiscal note. That was a net benefit, he said, particularly when he did not have to cut rural grants and the like. He did not want to cut services; HB 409 did not attempt to cut services. Number 1576 REPRESENTATIVE MACKIE suggested there were more programs there than rural grants. CO-CHAIR AUSTERMAN referred to a meeting with Representative Kelly in Co-Chair Austerman's office. At that meeting, Co-Chair Austerman had asked several questions. He said he had gone through the bill and 99 percent of it was shuffling one department to the next. Towards the back, however, starting on page 94, he said, it added new sections to the bill. He referred to page 94, Article 7 on line 30. There and in other places, new sections were proposed. He wanted to know why they were new sections and asked why they were not just renumbered if they simply moved programs to other departments. Number 1665 REPRESENTATIVE KELLY deferred to Paula Conru to answer the question. PAULA CONRU, Legislative Assistant to Representative Kelly, said she wanted to check with the bill drafter on that; however, she believed the new sections were created by lifting existing sections out of the DCRA title in statute and inserting them the title that established the new department. Number 1715 CO-CHAIR AUSTERMAN thought it would make sense if every department received a different number of some kind. MS. CONRU explained that the way the bill was crafted, everything in the DCRA title was lifted out and transferred into the existing number for DCED. Number 1749 REPRESENTATIVE KELLY referred to rural grants and explained that, in the budget cutting the last time, those grants had been some of the biggest, most tempting dollars to go after. The legislature had tried to refrain from going after those, he said. As budget chairman, he reiterated, those were the most tempting. Number 1796 REPRESENTATIVE MACKIE explained that was why he had raised that issue. He represented a rural district; rural programs were always the most tempting for a lot of people, he said. He added he did not want to take it as essentially a threat. Referring to HB 409, he said either they needed to redo these or the rural grants would be gone in the budget cutting process. He said he just wanted to clarify that a lot of things besides rural grants were involved in the two departments. He added that Representative Kelly had made his point well. Number 1845 REPRESENTATIVE KOTT said that on that same note, they could pass HB 409 and a year later, the rural grants would be gone anyway. Whether it happened or not, rural grants were always a target. He asked Representative Kelly when the committee could expect the agency model that had been discussed. Number 1880 REPRESENTATIVE KELLY replied within the next week or two. REPRESENTATIVE KOTT asked the commissioners when the committee could expect a detailed fiscal note on how the conclusions had been reached. Number 1929 MR. BUSH responded that the fiscal note was their best shot. A lot of energy had gone into it. Mr. Bush pointed out that department representatives were present to answer specific questions. He explained that the fiscal analysis was fairly detailed on how it had been determined, right down to the specific people who would be moved under HB 409. The Administration had decided that preparing multiple fiscal notes would not really show savings, because when moving programs from one department to another, it showed up negative for one agency and positive for another, with no net gain. He added that the Administration had thought a consolidated fiscal analysis, showing overall impact on state expenses, would be most useful to the committee. He likened the analysis to a moving target; the numbers might change, and if so, the committee would be informed. Mr. Bush said he was not sure what questions the committee might have that answers did not already exist for in the fiscal note. Number 2045 REPRESENTATIVE KOTT explained that he had heard comments during the discussion that indicated the fiscal note was incomplete; he had wondered if anything else was forthcoming. CO-CHAIR AUSTERMAN asked Mr. Bush if the committee would be seeing another fiscal note in the near future or would they be working with what they had throughout the consideration of HB 409. Number 2085 MR. BUSH expressed belief that the fiscal note was the final analysis, for the present. However, based on comments at the meeting, he expected to see a new model or a change in HB 409; that would create the need to change the numbers. Number 2117 COMMISSIONER IRWIN said it was safe to say that as they continued sifting through the numbers and refining their knowledge, the Administration would certainly let the committee know of any major discrepancies that might affect the bill. It had been difficult, he said, especially with complexities such as those created by a single employee performing multiple roles within a department. Number 2232 REPRESENTATIVE KELLY said he was expecting from the Administration a more detailed analysis of the fiscal note. Number 2260 COMMISSIONER IRWIN wondered what could be more detailed. REPRESENTATIVE KELLY replied the analysis was justification of some of the numbers for some of the moving costs. MR. BUSH advised that a representative from the Department of Administration was present to answer any questions about assumptions on moving costs. Number 2324 REPRESENTATIVE ELTON said they might be setting an almost impossible standard. He expected to see a series of changes to the fiscal note, based on the sponsor's additional analysis. He did not think he was prepared to ask a detailed question on moving costs until there was less of a moving target. Number 2385 CO-CHAIR IVAN said there was time to address this issue and asked that it be brought up in the future. CO-CHAIR AUSTERMAN mentioned the upcoming public hearing on Saturday, February 3, and suggested that following the hearing, the sponsor could come back with an amendment of some kind. TAPE 96-6, SIDE A Number 0001 REPRESENTATIVE MACKIE said if the sponsor wanted more detailed information from the Administration, the Administration should provide it. He noted reference to moving 161 positions, each at a cost of $5,000; he wondered how the Administration had arrived at that figure, for example. Regardless of the contents of a bill, he felt it important to have as much information about fiscal impact as possible. He added that it sounded like the Administration would provide that to the sponsor, who would provide it to the committee at the next meeting. Number 0100 REPRESENTATIVE ELTON referred to recommendations made after the change of administrations by business groups and other interested Alaskans. He wondered if anything as major as combining DCRA and DCED had been suggested at that time. MR. BUSH said he had not heard of anything. COMMISSIONER IRWIN said he had been on the executive committee of the Marketing Alaska effort and had heard no such suggestion. Number 0200 CO-CHAIR IVAN encouraged the committee to coordinate amendments with the sponsor and the agencies. He added that he sought as much input as possible from everyone affected and involved. REPRESENTATIVE KELLY thanked the departments for their extensive work in the period of time given them. ADJOURNMENT There being no further business to conduct, CO-CHAIR IVAN adjourned the House Community and Regional Affairs Committee meeting at 2:45 p.m.