GENERAL SUBJECT(S): OVERVIEW: PRESENTATION BY PUBLIC MEMBERS OF THE COMMISSION ON PRIVATIZATION AND DELIVERY OF GOVERNMENTAL SERVICES The following overview was taken in log note format. Tapes and handouts will be on file with the House Finance Committee through the 21st Legislative Session, contact 465-2156. After the 21st Legislative Session they will be available through the Legislative Library at 465- 3808. Time Meeting Convened: 9:05 a.m. Tape(s): HFC 00 - 29, Side 1 HFC 00 - 29, Side 2 PRESENT: Absent Co-Chair Therriault X Co-Chair Torgerson Absent Co-Chair Mulder X Co-Chair Parnell X Vice Chair Bunde X Senator Adams Absent Representative Austerman X Senator Donley X Representative J. Davies X Senator Green X Representative G. Davis X Senator P. Kelly Absent Representative Foster X Senator Leman X Representative Grussendorf Absent Senator Phillips X Representative Moses X Senator Wilken X Representative Phillips X Representative Williams ALSO PRESENT: SENATOR WARD; REPRESENTATIVE JOHN COWDERY; KATHRYN THOMAS, COMMISSION MEMBER, COMMISSION ON PRIVATIZATION AND DELIVERY OF GOVERNMENT SERVICES; MARCO PIGNALBERI, STAFF, REPRESENTATIVE JOHN COWDERY; DON VALEKSO, COMMISSION MEMBER, COMMISSION ON PRIVATIZATION AND DELIVERY OF GOVERNMENT SERVICES. TESTIFIED VIA TELECONFERENCE: BILL ALLEN, COMMISSION MEMBER, COMMISSION ON PRIVATIZATION AND DELIVERY OF GOVERNMENT SERVICES; GEORGE WEURCH, COMMISSION MEMBER, COMMISSION ON PRIVATIZATION AND DELIVERY OF GOVERNMENT SERVICES; TOM FINK, COMMISSION MEMBER, COMMISSION ON PRIVATIZATION AND DELIVERY OF GOVERNMENT SERVICES. LOG SPEAKER DISCUSSION TAPE HFC 00 - 29 SIDE 1 000 CO-CHAIR TORGERSON Co-Chair Torgerson convened the Joint House & Senate Finance Committee meeting at 9:05 a.m. He voiced appreciation for the work done on privatization by the Commission. The final report was distributed to Committee members. [Copy on File]. He noted that there would be four presenters on teleconference. 025 REPRESENTATIVE COWDERY Introduced his staff and voiced his appreciation for the work done by all Commission members. 035 MARCO PIGNALBERI, STAFF, REPRESENTATIVE JOHN COWDERY Pointed out the outstanding volunteer effort. Mr. Pignalberi noted that the volume of work represented by the subcommittee reports was extraordinary. We have never seen such a prolific contribution by Alaskan citizens to their state government. Mr. Pignalberi commented that the State of Alaska needs a better budget format. If there is a consistent theme that resounded from nearly every subcommittee, it is this: state budget documents are frustrating and incomprehensible to the citizens of the state. Subcommittee members and Commissioners wanted to discover what costs accompany specific activities performed by state government. They could not. The budget does not reveal the cost of performing state services. The services themselves are not well defined and the cost of carrying them out is no where to be found. It was frustrating for subcommittee members. He suggested that the budget structure and format do not serve the public and should be changed or supplemented to accommodate public interest. 100 MR. PIGNALBERI Continued, a review of privatization commission work in other states indicates that this is a widespread and fundamental problem. It is fundamental because we always want to know if a privatization proposal will save money. Without the ability to match costs to services performed, there will be many cases in which where we will not know if a saving will accrue. One of the recommendations, number 9, passed by the Commission, in Table #5, deals with the issue. Its supporting rationale is in Attachment #1. It is provided as a handout. [Copy on File]. He invited members attention to one comparison of that task Based Budget with the current budget. (Table, Page 2) He asked that members compare that information with the table, Page #3. 131 MR. PIGNALBERI Mr. Pignalberi commented that privatization is a smart idea anywhere but especially in Alaska. After the federal government, State government is the largest owner of Alaska's land and resource wealth. Additionally, the State owns the $28 billion Permanent Fund, the Alaska Railroad, the most extensive ferry system in the U.S., all airport gateways into the state, more than 250 rural airports, a fleet of aircraft, fish hatcheries, major roads within local government jurisdictions, a variety of laboratories, most docks and harbors, a rocket launch facility, a dairy and more. Additionally, the state owns every major hydro-electric dam, the main electrical transmission grid, one eighth of the oil flowing through the oil pipeline and is the major financier for residential housing and development financing within Alaska. This unique preponderance of government ownership and control inevitably leads to government growth, often at the expense of private sector growth. 169 MR. PIGNALBERI Privatization cannot be accomplished by occasional foray. It is clear that some longer-term mechanism should be put in place to carry on the work begun here. ? The first step is to begin immediate consideration of the 20 recommendations adopted by the commission. ? The second step is to enact some version of the proposed legislation requiring the Executive Branch to identify activities that are inherently non-governmental and to provide for privatizing those that are not. 184 MR. PIGNALBERI FAIRA requires the agency to make the list public after consultation with the Office of Management and Budget. Then, whenever a non-inherently governmental activity is proposed for outsourcing, the federal agency must use a competitive procurement process that allows the federal work force to compete with the private sector. FAIRA does not mandate privatization. Its importance is that it provides a process to: ? Identify government activities that are not inherently governmental in nature; and ? flush out full costs for performance of certain tasks by government 220 MR. PIGNALBERI Mr. Pignalberi noted that the jury is still out about Alaska's involvement in privatization. Legislation like FAIRA will provide the basis for long term, consistent effort toward privatization. At Representative Cowdery's request, FAIRA has been given a sister for Alaska's statutes, named SAIRA, the State Activities Inventory Reform Act. 230 KATHRYN THOMAS, COMMISSION MEMBER, COMMISSION ON PRIVATIZATION AND DELIVERY OF GOVERNMENT SERVICES, & THE ALASKA STATE CHAMBER OF COMMERCE, HOMER Noted how important the Commission has been to the Alaska State Chamber of Commerce. She spoke to the work of the Subcommittee. To seriously consider privatization in the State, there must be a mechanism available with a set of goals to identify different functions of the government, and to analyze how best save money. 253 MS. THOMAS Would to see the Commission charged with developing a budget process so that everyone in the State would become accountable for the budget. Each person would have the responsibility how the money in the State is spent. She suggested that there could also be an Audit Committee to help the original Committee provide the evaluation. 268 DON VALESKO, COMMISSION MEMBER, COMMISSION ON PRIVATION AND DELIVERY OF GOVERNMENT SERVICES Noted that he had distributed a handout. [Copy on File]. He commented that serving on the Commission was an exercise in frustration. He stated that the Commission had an impossible mission which was evidenced by the final report. The Commission staff performed admirably under a tremendous workload and a very short time frame. He commented that the loyal staff did everything they could to insure their superiors' wishes were carried out. 301 MR. VALESKO Suggested that the Commission staff process of the subcommittees was deplorable. The focus they were given was very near-sighted and the time in which they were expected to make informed decisions was woefully inadequate. The subcommittee selection process was done entirely by the Co-Chairman and staff. Partisan politics appeared to have played a major role in the selection of the subcommittee members. Definite patterns of significant conflicts of interest appeared in almost every subcommittee. 328 MR. VALESKO Noted that the research and review of each department was superficial at best. With the inadequate amount of time subcommittees were allotted, it was impossible to educate and inform the members. The commission did not require the subcommittee to require a cost/benefit analysis of their recommendations. Consequently, all the recommendations did not have any information regarding the cost effectiveness of each recommendation. He added that a conflict of interest prevailed in each of the subcommittees. There were many private industries that sat on the subcommittee and continued to represent only their personal interest. He suggested that the State is often doing the work cheaper than the private sector can. 354 MR. VALESKO Listed the problems occurring within the commission: ? Time constraints flawed Commission's ability to deliver a realistic product; ? Cursory contact with affected public and affected employees; ? Appalling press relations; and ? No cost/benefit analysis. 377 MR. VALESKO Concluded that after hearing the abbreviated presentation of each of the subcommittees, the full commission decided to forego a formal process of reviewing each subcommittee's recommendations. Instead, each commissioner put together his/her own list of recommendations. 385 BILL ALLEN, COMMISSION MEMBER, COMMISSION ON PRIVATIZATION AND DELIVERY OF GOVERNMENT SERVICES, FAIRBANKS, (TESTIFIED VIA TELECONFERENCE) Noted that the work requested by the Commission was very broad. He stressed that the size of the job with regard to the time that it was allocated was a large undertaking. He urged that members study the proposed plan. Mr. Allen suggested that the plan could contain the first step, which should show opportunities for bettering the State services. He recommended that the Commission's work time be extended in order to provide better details and further backup, stressing the necessity of that action in order to address the true oversight of the Commission's work for the Legislature's consideration. He concluded, noting that the work had been a good service for the State. 419 GEORGE WEURCH, COMMISSION MEMBER, COMMISSION ON PRIVATIZATION AND DELIVERY OF GOVERNMENT SERVICES, FAIRBANKS, (TESTIFIED VIA TELECONFERENCE) Voiced his appreciation for being asked to serve on this Commission. He acknowledged that when combining such a group, there is bound to be advocates for various viewpoints and interests. Mr. Weurch advised that the fact that there were different points of view should not invalidate the submitted study. There are common themes reoccurring throughout the material with the search for efficiency and common services for residents of the State. 430 MR. WEURCH Pointed out that local governments are striving to deal with reduced revenue streams. He hoped that would be addressed through private sector activities. He commented that "being a owner State" should not be confused with "being an operating State". He pointed out that many people are more than happy being employed in the private sector and that it does not necessarily spell "doom and disaster". Mr. Weurch addressed the fact that the government needs to be addressing the missions, goals and objectives when determining privatization. 465 TOM FINK, COMMISSION MEMBER, COMMISSION ON PRIVATIZATION AND DELIVERY OF GOVERNMENT SERVICES, ANCHORAGE, (TESTIFIED VIA TELECONFERENCE) Advised that the Commission had provided the legislature with a source book. He applauded that work undertaken by Committee. He believed that substantial amounts of money that could be saved through extending the propositions itemized through the work of the Commission. 477 SENATOR JERRY WARD Commented that each aspect had not been thoroughly detailed. He suggested that was work would be best done in the House and Senate Finance Committees. He explained that the consideration of the Commission was if the work currently done could be done at the same level of adequacy, service and cost as performed by the State. He urged that the Finance Committee's consider these facts. 495 SENATOR AL ADAMS Noted that he also worked with the Commission. He applauded the work of all the volunteers, while acknowledging that some of the volunteers did have a conflict of interest. Senator Adams agreed that the time frame given to perform the work was too short. He stressed that the work of privatization is a major consideration and that the State must develop methods for the transition. He acknowledged that there are many prospects for being privatized, and equally important there are many concepts that should not be considered for the health, welfare and safety of Alaskans. He pointed out the work of the Department of Corrections and prisons. He urged that such considerations be scrutinized closely. 515 SENATOR ADAMS Reiterated the need for qualify of service as currently being received by the Alaska State residents. Another consideration is the benefit package that the employees receive and how that can be met. A cost savings will exist which should be considered. 525 CO-CHAIR PARNELL Advised that he had requested that all subcommittee chairs review the proposals of the Commission so that every recommendation would be considered within the appropriate subcommittee and discussed at the level. He acknowledged that there are numerous avenues in which the work could be incorporated. He agreed that it should be brought before the full Finance Committees for approval. SENATOR ADAMS Reiterated that it is essential that guaranteed cost savings be considered. 541 REPRESENTATIVE J. DAVIES Added his concern that the time period undertaken to do the study was too short. He added that he was concerned that the mission, which had been directed, was toward privatization. He asked that both avenues should be considered. 549 REPRESENTATIVE J. DAVIES Referenced the detail books and the amount of information included in each consideration. He requested that Mr. Valesko respond to the recommendations. 556 MR. VALESKO Responded that there were over 400 different subcommittee recommendations made. He pointed out that in the final process, only information was taken from the member commissioners. The final list of recommendations contained only 200 or + of the material initially presented. 567 SENATOR ADAMS Countered that all members were given opportunity to provide recommendations. He commented that everyone played with the same rules and that each item was voted upon. 579 CO-CHAIR TORGERSON Pointed out that there are statutory requirements in law, which must be addressed in order to implement these concerns. What has been presented are only recommendations for the Legislature to consider. 589 SENATOR LEMAN Agreed that this report is a good start in the consideration on privatization. He reiterated that there are many good ideas contained in the report. He agreed that not all the recommendations would save money and he recommended that the process continue to stay active. He asked if impediments had been identified that would not improve the delivery of services and additionally, how these concerns would be paid for. TAPE CHANGE 00 - 29 SIDE 2 584 SENATOR LEMAN Questioned if items had been considered which keep the State from making progress toward the goal. 580 MR. PIGNALBERI Of the 408 recommendations advanced by the subcommittees and commissioners, the assembled commission considered 26. Twenty were adopted and 5 failed. One was adopted and rescinded. The full reports, with all their attachments have been submitted to: ? the Governor, ? the Senate President, and ? the Speaker of the House 564 SENATOR LEMAN Applauded the process made to allow the considerations to become simpler. He recommended that considerations from this study be closely scrutinized. 555 MR. PIGNALBERI In response to Representative J. Davies, Mr. Pignalberi pointed out that the detail budget book does contain current information but the current budget does not relate those expenses to the work performed. The Commission is speaking to relating the costs identified with the work product. 550 CO-CHAIR TORGERSON ADJOURNMENT The meeting adjourned at 9:59 A.M. JOINT HOUSE & SENATE FINANCE COMMITTEE LOG NOTES February 9, 2000 H.F.C. & S.F.C. 9 2/09/00