HOUSE FINANCE COMMITTEE April 3, 2000 2:00 P.M. TAPE HFC 00 - 98, Side 1 TAPE HFC 00 - 98, Side 2 CALL TO ORDER Co-Chair Therriault called the House Finance Committee meeting to order at 2:00 p.m. PRESENT Co-Chair Mulder Co-Chair Therriault Representative Foster Vice Chair Bunde Representative Grussendorf Representative Austerman Representative J. Davies Representative Phillips Representative G. Davis Representative Williams Representative Moses was absent from the meeting. ALSO PRESENT Senator Sean Parnell; TESTIFIED VIA TELECONFERENCE Jeff Bush, Deputy Commissioner, Department of Community and Economic Development; Julie Decker, SEARDFA, Wrangell; Geron Bruce, Legislative Liaison, Department of Fish and Game; Vince Usera, Senior Securities Administrator, Division of Banking, Securities, and Corporations, Department of Community and Economic Development; Byrce Edgmon, CDQ Manager, Department of Community and Economic Development; Jack Fargnoli, Senior Analyst, Office of Management and Budget, Office of the Governor; Wendy Redman, Vice President, Statewide Programs, University of Alaska. SUMMARY HB 333 "An Act relating to the accounting for and appropriations of the dive fishery management assessment; and providing for an effective date." HB 333 was heard and incorporated into HB 334. HB 334 "An Act relating to the establishment of and accounting for an administrative cost charge for the state's role in the community development quota program and to the appropriation of receipts from the charge; and providing for an effective date." CSSB 281(FIN) am "An Act relating to missions and measures to be applied to certain expenditures by the executive branch of state government and the University of Alaska from the state operating budget for the fiscal year ending June 30, 2001; and providing for an effective date." CSSB 281 (FIN)am was heard and HELD in a subcommittee consisting of: chair Phillips and members Bunde, and Davies. CS FOR SENATE BILL NO. 281(FIN) am "An Act relating to missions and measures to be applied to certain expenditures by the executive branch of state government and the University of Alaska from the state operating budget for the fiscal year ending June 30, 2001; and providing for an effective date." SENATOR SEAN PARNELL testified in support of the legislation. He noted that House Finance Committee staff and agency personnel worked with the Senate on the legislation. He stressed the importance of the legislation and noted that the legislature appropriates funding to state agencies and expects them to follow through on expenditures in a way that is never clearly defined. Missions and Measures were developed for each agency. He gave examples of the missions and measures: Alaska Vocational Technical Center. (a) The mission of the Alaska Vocational Technical Center is to provide market-driven vocational and technical training to state residents. (b) The legislature intends to measure the success of the center in achieving its mission by considering; (1) The percentage of graduates who are employed in their areas of training; (2) The wage increase for graduates; (3) The percentage of students who complete long- term training programs; (4) The percentage of students living in student housing compared to student- housing capacity; and (5) For each long-term program, the number of students enrolled in the program compared to the number applying to the program. Division of Juvenile Justice. (a) The mission of the Juvenile Justice is to protect and restore communities and victims while holding juvenile offenders accountable for correcting their behavior. (b) The legislature intends to measure the success of the division in achieving its mission by considering: (1) The percentage of juvenile offenders that re- offend; (2) The percentage of juvenile offenders in long- term treatment who improve their grade point average during their time at the facility; (3) The percentage of juvenile offender court- ordered restitution and community service that is paid or performed; and (4) The number of escapes from juvenile justice institutions. Senator Parnell stressed that the bill will only be as effective as the follow-up and accountability that the legislature gives it in upcoming years. He stressed that the legislature needs to work with agencies to determine if they have met their mission and if not, why not. The legislature can then respond to issues of management or inadequate funding. The mission and measure bill is separate from the actual budget bill. He spoke in support of combining missions and measures, and the actual budget into one piece of legislation. He noted that the state of Texas combines its missions and measures and appropriations into one document. The public can locate the mission and outcomes with each appropriation item. He encouraged Alaska to take the next step to integrate missions and measures into one booklet with the operating and capital budgets. Senator Parnell suggested deletion of the Senate language for the Division of Banking, Securities, and Corporations on page 7, line 28: "protect shareholders in corporations". He pointed out that it is a broad and big statement and that there is no statutory direction to protect shareholders in corporations in such a broad-brush way. This language was added on the floor of the Senate. Representative J. Davies questioned if the purpose of the measures is to actually measure outcomes, not to measure what is produced. Senator Parnell agreed and gave examples of the intention. In the Department of Public Safety the intent is to measure how safe the roads are. In the Department of Transportation and Public Facilities the intent is to measure if the roads are adequately maintained to citizen standards. The intent is not to measure the number of lane-miles that are maintained; the measure is how well they are maintained. He stressed that as a result, the public would have a more readable and understandable budget. Representative Phillips questioned if there was much difference between the House and Senate language. Senator Parnell explained that the work was divided between the House and Senate. The House language was incorporated along with the Senate language into a bill. There were amendments in the Senate Finance Committee and on the Senate floor. He stated that the only significant change was to the mission and measures of the University of Alaska. VINCE USERA, SENIOR SECURITIES ADMINISTRATOR, DIVISION OF BANKING, SECURITIES, AND CORPORATIONS, DEPARTMENT OF COMMUNITY AND ECONOMIC DEVELOPMENT provided information on the legislation. He stressed that the measure for Division of Banking, Securities, and Corporations on page 7, line 28 (see above) is so broad as to be impossible to comply with and that it would cover any person that owns a share in any corporation. Representative Phillips agreed with comments by Mr. Usera. She stated that an audit by the Legislative Budget and Audit Committee found that the legislature had no statues in place to implement the measure. JACK FARGNOLI, SENIOR ANALYST, OFFICE OF MANAGEMENT AND BUDGET, OFFICE OF THE GOVERNOR testified in support of the legislation. He stressed that the governor would look forward to a more comprehensive process for more public involvement. He spoke in support of greater public participation. He emphasized that as the measures become the focus of a more comprehensive discussion that the role of the commissioners and the governor's cabinet would be interpreted more broadly in terms of the statutory responsibility of the departments. He added that use of a standardized approach for administrative services of functions is problematic and emphasized that the departments are inherently different and that future discussion regarding the differences would be fruitful. Representative Phillips MOVED to delete language on page 7, line 8, subsection (3): protect shareholders in corporations. There being NO OBJECTION, it was so ordered. Representative J. Davies MOVED to ADOPT the House language for the university and to delete the Senate version. He maintained that the Senate language was "weak tea". WENDY REDMAN, VICE PRESIDENT, STATEWIDE PROGRAMS, UNIVERSITY OF ALASKA provided information on the amendment to the legislation. She acknowledged that the House worked extensively with the Board of Regents on the university's missions and measures, but noted that the Senate language picked up the key measures. There isn't any inconsistency between the House and Senate language. The primary difference is that the Senate did not include all of the language adopted by the House. She stated that the primary issues were addressed and that the university would support either version. (Tape failure occurred at this point.) Senator Parnell noted that Senate changes were the result of discussions that concluded that many of the measures were not true measures. He gave the following examples: The new or expanded degree programs in teacher education, health careers, process technology, transportation and logistics, information technology, seafood processing, and other high demand job areas; The increase in research grants in arctic biology, climate change, resource development, fisheries and ocean science, logistics, geosciences, and atmospheric sciences; Senator Parnell emphasized that the intent was to not focus on the income or new programs but on the outcomes. Ms. Redman observed that the House Subcommittee wished to direct were the university would spend their efforts in relationship to research. The intent was to increase research in some areas such as arctic research. Representative J. Davies agreed and explained that a problem with research is that the most important research does not payoff for a long period of time. Therefore, it is difficult to measure the outcome. He acknowledged the need to measure results, but emphasized the difficulty of measuring a research enterprise with results based orientation. He observed that the House included a measure of "the number of annual citations and references per research faculty member." He maintained that research, cooperative extension and public service is left out of the Senate version. He observed that much of the language in the House version was derived from language recommended by the Board of Regents and refined by the House Subcommittee with their help. He felt that the Senate language was vague. Senator Parnell observed that the measure of the number of University of Alaska graduates, by community of origin and by community of current employment, who are new teachers, new principals, and new superintendents does not measure the quality of the teachers. Co-Chair Mulder expressed appreciation for the brevity of the Senate version. He suggested that the proper balance could be derived from combining the Senate and House language. He felt that House items 8 - 10 were worth considering. Representative J. Davies stated that it is appropriate to have a mix of measures with productivity to measure the quality of the program in meeting a state need. He stressed the need to produce teachers that can be employed in rural Alaska. Representative Phillips agreed that an ideal statement could be derived from a combination of the House and Senate language. She felt that the Senate version was incomplete and emphasized the need for measures regarding vocational education. Representative J. Davies noted that a typical mission of a university doesn't include a community college. Alaska is unique and it is important to roll in the vocational mission to highlight the uniqueness of Alaska's system. Co-Chair Therriault referred CSSB 281 (FIN)am to a subcommittee consisting of: chair Phillips and members Bunde, and Davies. Senator Parnell pointed out that the Senate version included measures relating to research: (8) the number and amount of research grants in Alaska-specific areas of inquiry; (8) the occurrences of applied research benefiting Alaska's economy; (8) the average number of hours faculty members spend on classroom instruction, student advising, research, and other activities. Representative J. Davies stressed that they are not in the mission statement. CSSB 281 (FIN)am was heard and HELD in a subcommittee consisting of: chair Phillips and members Bunde, and Davies. HOUSE BILL NO. 333 "An Act relating to the accounting for and appropriations of the dive fishery management assessment; and providing for an effective date." HOUSE BILL NO. 334 "An Act relating to the establishment of and accounting for an administrative cost charge for the state's role in the community development quota program and to the appropriation of receipts from the charge; and providing for an effective date." Co-Chair Therriault noted that HB 334 and HB 333 were combined into one proposed committee substitute, work draft 1-GH2069\H Utermohle, 4/3/00. BYRCE EDGMON, CDQ MANAGER, DEPARTMENT OF COMMUNITY AND ECONOMIC DEVELOPMENT provided information on the legislation. The legislation would switch the funding source for the CDQ program from general funds to statutory designated program receipts. The fee would allow the program to be self-supporting. (The tape resumed at this point.) Mr. Edgmon observed that there is a $400 thousand dollar ceiling (on the amount that can be reappropriated for administrative costs) in the legislation. The cost of oversight is currently approximately $250 thousand dollars. He noted that the state does not anticipate that a level of $400 thousand dollars would be reached but observed that legislation would be required to remove the ceiling. The fee would be administered by the Department of Community and Economic Development. He observed that the House Labor and Commerce Committee amended the legislation to allow new CDQ groups to be exempted from the fee for the first two years of their existence. Representative Austerman questioned the intent behind the exemption of new CDQ's from the fee. Mr. Edgmon reiterated that the provision was added by the Senate Labor and Commerce Committee and stated that the state is neutral on the issue. He observed that existing CDQ groups have expressed concern with the provision. Representative Austerman asked for information on the program. Mr. Edgmon explained that the CDQ staff is charged with working with CDQ groups to assure that they meet the mission of the program to create sustainable fisheries related economies in Western Alaska. He noted that CDQ groups have community development plans on file with the state of Alaska. Staff works with groups to assure that they comply with state and federal program standards. Staff also allocates quota for the groups. Groups are growing and making more investments on the Bering Sea. The CDQ staff reviews: plans for due diligence on new investments, performance measures and compliance with program standards. In response to a question by Co-Chair Therriault, Mr. Bryce stated that the department was not concerned over the merging of HB 333 and HB 334. Representative Phillips noted that there is a difference in fiscal notes. Co-Chair Therriault observed that new notes would be requested. GERON BRUCE, LEGISLATIVE LIAISON, DEPARTMENT OF FISH AND GAME stated that it would be appropriate to roll HB 333 and HB 334 into one bill. He noted that both bills deal with the classification of program receipts. He stressed that HB 333 only deals with classification of program receipts; HB 333 does not establish a fee structure. He explained the issue arose from legislation passed in 1997. A group of commercial fishermen that wanted to start a new fisheries worked with Representative Williams on legislation, which allowed them to form an association and conduct an election to place an assessment on people harvesting the dive fishery resource in the area represented by the association. The assessment of the Southeast Regional Dive Fishers Association went into effect and the revenue has been flowing into the treasury. The department has requested appropriation of the funds in FY01. At the current time they are classified as general funds. The legislation would classify the funds as statutory designated program receipts. He emphasized that it is a case of an industry group that wants additional services from government and is willing to pay for them. The department and the industry group would jointly develop a plan. In response to comments by Co-Chair Mulder regarding the Department of Fish and Game's fiscal note, Mr. Bruce explained that the revenue is going to be available in FY01. It is not yet an on-going program. He explained that there are expenditures funded through the class of revenue. The funds are being reclassified. They are requested in the 2001-operating budget and are currently in the language section. Representative J. Davies clarified that the funds would be statutory designated program receipts. Co-Chair Therriault stressed that the conference committee can resolve issues relating to the location of the funding. He emphasized that he did not want to double fund the request. Co-Chair Mulder asked if the department would have the authority to assess against CDQ participants for the administrative cost without the bill. Mr. Edgmon stated that they would not have the authority without the bill. Co-Chair Mulder noted that section 4 provides the statutory authority. Representative Austerman asked how the fees are determined. Mr. Edgmon explained that there is a two-tiered approach. The current cost is $250 thousand dollars. The state of Alaska developed a fee with the CDQ groups. Half of the $250 thousand dollars is paid with a flat fee that applies to all six groups. The remaining 50 percent is portioned out to the groups based on their allocation of the quota. Representative Austerman questioned if the CDQ groups must approve the flat fee before it can be raised. Mr. Edgmon responded that the CDQ staff has an understanding that they would work with the groups and honor any changes. The state does not anticipate any changes to the current management structure or the fee. The fee could be changed at anytime up to the $400 thousand dollar limit. Co-Chair Mulder asked what is expended to manage the program. Mr. Edgmon stated that the cost is $251 thousand dollars. The program costs have remained stable for 6 or 7 years. Representative Austerman expressed concern with the provision, which would allow statutory designated program receipts to grow from $250 thousand dollars to $400 thousand dollars. Co-Chair Mulder stressed that the state maintains the oversight and can place a limit on the amount of money that can be received. Representative Austerman questioned, if there is going to be oversight, why there should be a $400 thousand dollar cap. Co-Chair Mulder agreed and suggested that the limit was included to provide comfort to the groups. Representative J. Davies expressed concern that the state would be forced to amend the statute if the limit was retained. He referred to section (f), page 3, line 23 and questioned why a two year exemption was chosen. Mr. Edgmon noted that the language was added in the Senate Labor and Commerce Committee. He did not know the intent. He noted that Senator Stevens does not support expansion of new CDQ groups. The amendment would allow any new CDQ group, in theory, to be exempted from the fee for two years. The current fee is approximately $250 thousand dollars divided by six. Representative G. Davis questioned if there was discussion regarding expansion. Mr. Edgmon stated that expansion is an on-going issue. He added that the $400 thousand dollar ceiling was agreed on by the CDQ groups, in the event that extra staff were needed to keep pace with the groups' growth. He stated that he did not anticipate a fee increase. Mr. Bruce referred to the fiscal note that was submitted by the Department of Fish and Game for HB 333. He clarified that both the legislative classification of funds and the appropriation are needed. He added that the fiscal note was prepared before the funds were included in the language section of the operating budget. Co-Chair Mulder MOVED to ADOPT the proposed committee substitute work draft 1-GH2069\H Utermohle, 4/3/00. There being NO OBJECTION, it was so ordered. Co-Chair Mulder MOVED to delete lines 5 and 6 on page 3: "and cannot exceed $400,000". He stressed that the language is unnecessary (Tape Change, HFC 00 - 00, Side 2) There being NO OBJECTION, it was so ordered. Representative J. Davies MOVED to ADOPT Amendment 2: delete "two" on page 3, line 26 and insert "one". Co-Chair Therriault OBJECTED for the purpose of discussion. In response to a question by Co-Chair Therriault, Mr. Edgmon stated that he did not have an objection to the amendment. Representative Phillips spoke in support of retaining the two-year period. She pointed out that it takes a lot of money and effort for startup. Representative Austerman spoke in support of the amendment. He pointed out that the program gives away the resource and stated that he would strike the whole section. Representative G. Davis noted that existing CDQs would be paying for new programs. Co-Chair Mulder felt that it would be unfair to charge one group for the administrative cost of another group for more than one year. Representative J. Davies observed that the state paid for the previous program startup. Representative Austerman MOVED to amend the amendment by deleting subsection (f). Co-Chair Mulder OBJECTED. He argued that new groups should probably be allowed time to find out if they can "sink or swim." Representative Grussendorf questioned if a new CDQ community could form without subsection (f). Co-Chair Therriault stressed that the language is permissive, but does not authorize new CDQ's. Representative J. Davies agreed and thought that it was up to the federal government to authorize new CDQ communities. Representative Austerman stressed that the dive fisheries are being told to pay before they go fishing, while new CDQ's would be given a resource and not charged for its management. Co-Chair Mulder withdrew his objection to the amendment to Amendment 2. There being NO OBJECTION, Amendment 2 was amended. There being NO OBJECTION, Amendment 2 was adopted. Co-Chair Mulder MOVED to report CSHB 334 (FIN) out of Committee with the accompanying fiscal notes. There being NO OBJECTION, it was so ordered. ADJOURNMENT The meeting was adjourned at 3:25 p.m. House Finance Committee 11 4/3/00