HOUSE FINANCE COMMITTEE April 15, 1999 2:05 P.M. TAPE HFC 99 - 81, Side 1 TAPE HFC 99 - 81, Side 2 CALL TO ORDER Co-Chair Therriault called the House Finance Committee meeting to order at 2:05 p.m. PRESENT Co-Chair Therriault Representative Grussendorf Vice-Chair Bunde Representative Kohring Representative Austerman Representative Moses Representative J. Davies Representative Williams Representative G. Davis Co-Chair Mulder and Representative Foster were absent from the meeting. ALSO PRESENT Annalee McConnell, Director, Office of Management and Budget, Office of the Governor; TESTIFIED VIA THE TELECONFERENCE NETWORK Mike Andrews, Human Resource Investment Council, Anchorage. SUMMARY HB 40 "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 Commerce and Rural 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; relating to the Department of Commerce and Rural Development and the commissioner of commerce and rural development; adjusting the membership of certain multi- member bodies to reflect the transfer of duties among departments and the elimination of departments; creating the office of international trade and relating to its duties; and providing for an effective date." HB 40 was placed in a subcommittee chaired by Representative Therriault, and consisting of Representative Austerman, Representative Kohring and Representative J. Davies. HOUSE BILL NO. 40 "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 Commerce and Rural 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; relating to the Department of Commerce and Rural Development and the commissioner of commerce and rural development; adjusting the membership of certain multi- member bodies to reflect the transfer of duties among departments and the elimination of departments; creating the office of international trade and relating to its duties; and providing for an effective date." House Bill 40 was placed in a subcommittee consisting of Co- Chair Therriault as chair, Representative Austerman, Representative Kohring, and Representative J. Davies on 3/26/99. The subcommittee offered a proposed committee substitute, # 1-LS0056\H, dated 4/14/99. Co-Chair Therriault also provided members with a spreadsheet detailing the proposed restructuring (copy on file). Functions were divided into three new departments: Labor and Workforce Development, Community and Economic Development and Education and Child Development. ANNALEE MCCONNELL, DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET, OFFICE OF THE GOVERNOR observed that consolidation has been part of the discussions regarding a long range balanced budget solution. She stressed that consolidation would also bring new focus to priorities such as child development, workforce development, marketing Alaska and provide a stronger focus on rural Alaska. She observed that the Governor views the consolidation as a way to bring emphasis to these priorities and to provide better service at a lower cost to the public. She emphasized that consolidation goals need to be identified. The Governor's goals are: ? A strong focus on child development and early learning; ? Strong economic development (especially in high unemployment areas; ? Consolidated workforce development; ? A strong voice for marketing Alaska; ? Improved quality of and access to services; ? A strong voice and access for rural communities to services and policies of the state; and ? A secure long-term strategy for rural energy (including funding for Power Cost Equalization). Ms. McConnell noted that the Governor feels that a long-term solution to Power Cost Equalization (PCE) is a vital element of the discussions. She added that state government should be modernized to gain efficiencies and cost savings. Ms. McConnell observed that there is a lot of work to be done to assure that there is as little disruption to employees and programs as possible. She stated that there is no way that every question can be resolved during the rest of the legislative session. Issues relating to the federal government will need to be resolved. She emphasized the need for flexibility. Co-Chair Therriault observed that it would be difficult to anticipate the fiscal cost in the out years. He stated that subcommittee chairmen of the new departments would have to look at ways to obtain additional savings or efficiencies. He stressed the difficulty of projecting the five-year savings. He pointed out that some relocation costs could be observed within the scheduled move of state employees to the Bank of America building in Anchorage. Co-Chair Therriault discussed programs under the proposed Department of Labor and Workforce Development. The Human Resource Investment Council (HRIC) was placed under this function. He observed that there is some concern with the placement of the Human Resource Investment Council. Ms. McConnell acknowledged that HRIC would work closely with the Department of Labor and Workforce Development. She stated that the Administration has not resolved the issue of whether HRIC should remain within the Office of the Governor or be transferred to the new department. She clarified that, while there are similarities, the Governor's plan and the proposed committee substitute are not identical. MIKE ANDREWS, HUMAN RESOURCE INVESTMENT COUNCIL, OFFICE OF THE GOVERNOR explained that the Council is allowed 26 members, but that there are 22 active members. He noted that there are opportunities to reduce the number of council members. He stated that shifting to another department would not cause too many technical problems. He noted that there is a mandated 51 percent private sector majority on the Council. He reviewed some of the Council's seats. There are five commissioners, the lieutenant governor, four representatives from organized labor, a member of the Alaska Native Coalition for Employment and Training, a representative of the University of Alaska and several businesses and industry representatives on the Council. It was created in 1995 and began operation in 1996. The Governor's Council on Vocational Education, the State Job Training Council and the Alaska Employment Securities Council were merged to form the Human Resource Investment Council. There were 39 members on the three councils previous to the merger. The Council is supportive of the proposed legislation, but would like more time for review. Vice-Chair Bunde stated that he would like to hear the Governor's long-term solution for funding PCE. In response to a question by Representative Austerman, Ms. McConnell pointed out that the Governor's proposal would retain vocational education responsibilities and the Alaska Career Information System in the new Department of Education and Child Development. The proposed committee substitute would place them under the new Department of Labor and Workforce Development. She emphasized that more attention needs to go into the issue of vocational education. She recommended that it remain with education and child development. Co-Chair Therriault explained that he viewed vocational education as preparation for entering the workforce. Ms. McConnell acknowledged that there should be a relationship between the two. She stated that she would outline some reasons why vocational education should remain under education. Co-Chair Therriault noted that more discussion is needed on the placement of HRIC, vocational technical education and the Alaska Career Information System. Representative G. Davis stated that he would also flag the Adult Basic Education program. Co-Chair Therriault stated that there needs to be an understanding of who the program is serving. He questioned if the program is serving individuals in high school or those that are being retrained as the job market shifts. Representative J. Davies asked where the Governor would place the School to Work program. Ms. McConnell noted that it was retained under education. Co-Chair Therriault referred to the proposed Department of Education and Child Development. He observed that there have been problems with the transition of clients between Day Care Pass I in the Department of Health and Social Services and programs in the Department of Community and Regional Affairs. Head Start and Childcare Assistance would be aligned with Day Care Pass I, II, and III. Ms. McConnell stressed that there would still need to be an enormous amount of coordination between the Department of Health and Social Services and the new Department of Education and Child Development. She suggested that Childcare Licensing also be included under education. She noted that there is already preschool licensing in the Department of Education. She also proposed that research on child development and nutrition programs affecting early childhood development be included under education because of their close relationship with preschool and childcare. Co-Chair Therriault stated that he is leery of moving health and nutrition issues into education and daycare assistance. He questioned where the break would be made. Representative J. Davies asked for information on the Early Learning Program. Ms. McConnell clarified that it is a function not a program. Part of the mission of the Department of Education and Child Development would be early learning. In response to a question by Representative J. Davies, Ms. McConnell emphasized that there have been efforts to improve the quality of childcare as opposed to warehousing children in childcare centers. The intent is for one area to have clear responsibility for being up to date on issues surrounding childcare so that they can be translated into ideas for improvement. Ms. McConnell explained that consolidation was looked at from a client's perspective. The intent is to simplify and minimize the number of places a client would have to visit or interact with. Co-Chair Therriault looked at the proposed Department of Community and Economic Development. He stated that the intent is to keep functions of economic development tied together. He acknowledged that there are a lot of items under the proposed department, but emphasized that many are self-contained. He pointed out that the Alaska Seafood Marketing Institute (ASMI) is largely self-contained. The Alaska Tourism Marketing Council and tourism would be rolled together. The marketing function would be outside of the state. He stressed that the Banking, Securities and Corporations component would not take a lot of daily supervision from the commissioner or deputy commissioners that oversee it. Ms. McConnell stated that the Governor's proposal would place Power Cost Equalization (PCE) under the Alaska Industrial Development and Export Authority (AIDEA). She referred to recommendations from the Blue Ribbon Commission on Power Cost Equalization. The Governor also recommends that processing of the Capital Matching Grants program for the incorporated communities, which is currently in the Department of Administration, be transferred to the new Department of Community and Economic Development. He also recommends that the Low Income Home Energy Assistance program be transferred from the Department of Health and Social Services. Representative J. Davies expressed concern that many of the items are not tied to economic development and are not of a rural flavor. He stated that it would make more sense to shift some of these items to a new department of commerce and revenue. He provided members with a list of items that could be shifted to a new department of commerce and revenue (copy on file). Co-Chair Therriault observed that discussions have occurred about placing Banking, Securities and Corporations and the Division of Insurance with Occupational Licensing. Representative J. Davies recommended that they be moved as a block into the Department of Revenue. He pointed out that most are relatively independent operators and only need an administrative home. He stressed that there should be a focus on community and rural development. Co-Chair Therriault noted that there have been discussions with the Department of Commerce and Economic Development regarding the move of these functions to the Department of Revenue. He observed that there were some concerns with the proposal. Ms. McConnell emphasized the importance of articulating goals and how they would be approached. The attitude of how the organization is approached is very important in providing positive relationships with customers. Co-Chair Therriault emphasized that he does not agree that a line must be drawn between fostering economic development for the state or for rural areas of the state. (Tape Change, HFC 99 - 81, Side 2) Ms. McConnell observed that the perception of how the issues are approached is emotional. She stated that people are appropriately concerned that the result be better for them. She noted that in aggregate there are far more jobs in small businesses, which employ 25 or less, than in large businesses. She pointed out that there are a large number of people living in small villages. She emphasized that there are other vehicles for economic development in urban areas that serve functions for larger areas that are not available in rural Alaska. She stressed that more jobs in rural Alaska would benefit the entire state. Co-Chair Therriault clarified that Representative J. Davies' proposal would place tourism under the Department of Commerce and Revenue. He observed that there is a component for planning and development of tourism in rural Alaska. He pointed out that there would be a division between rural and urban tourism. Representative J. Davies stated that the major marketing effort is to attract tourism to all parts of the state. He stressed that it is impossible to make one link to every function. He stressed that the focus on rural Alaska is needed because of Alaska's unique formation and structure. Co-Chair Therriault pointed out that there would be a rural advocate at the cabinet level to make sure that rural needs would be met. Vice-Chair Bunde maintained that the less parochial and more statewide the service the more support would be generated. Representative Grussendorf spoke in support of placing Adult Basic Education and the Alaska Career Information System under the Department of Education and Child Development. He emphasized that the goal is to allow students to look at careers while in high school. Co-Chair Therriault observed that his intent was to group mandatory education and preschool functions. Representative Grussendorf observed that junior and seniors look at opportunities that are available in college and alternatives to college while in high school. He observed that vocational technical education could be left under the labor portion. Representative Kohring emphasized that the legislation would keep current programs intact, provide a rural advocate and bring programs together for easier access. He maintained that the emphasis has been to make sure that the legislation helps and does not hurt rural Alaska. Co-Chair Therriault noted that it might be years down the road before things settle and efficiencies are identified. Vice-Chair Bunde stressed that the needs and interests of rural Alaska are not monolithic. He observed that there is as much variety in rural Alaska as in urban Alaska. Representative J. Davies acknowledged that an attempt is being made to improve the delivery of services to rural Alaska, but suggested that the Committee listen to rural Alaskans to see if the new structure meets their needs. HB 40 was HELD in Committee for further consideration. ADJOURNMENT The meeting adjourned at 3:10 p.m. House Finance Committee 8 4/15/99