ALASKA STATE LEGISLATURE
HOUSE STATE AFFAIRS STANDING COMMITTEE
January 26, 2017
3:04 p.m.
MEMBERS PRESENT
Representative Jonathan Kreiss-Tomkins, Chair
Representative Gabrielle LeDoux, Vice Chair
Representative Chris Tuck
Representative Adam Wool
Representative Chris Birch
Representative DeLena Johnson
Representative Gary Knopp
MEMBERS ABSENT
Representative Andy Josephson (alternate)
COMMITTEE CALENDAR
HOUSE BILL NO. 16
"An Act relating to training regarding disabilities for police
officers, probation officers, parole officers, correctional
officers, and village public safety officers; relating to
guidelines for drivers when encountering or being stopped by a
peace officer; relating to driver's license examinations; and
relating to a voluntary disability designation on a state
identification card and a driver's license."
- MOVED HB 16 OUT OF COMMITTEE
OVERVIEW: DEPARTMENT OF ADMINISTRATION
- HEARD
PREVIOUS COMMITTEE ACTION
BILL: HB 16
SHORT TITLE: DRIV. LICENSE REQ;DISABILITY:ID &TRAINING
SPONSOR(s): REPRESENTATIVE(s) THOMPSON
01/18/17 (H) PREFILE RELEASED 1/9/17
01/18/17 (H) READ THE FIRST TIME - REFERRALS
01/18/17 (H) STA, FIN
01/24/17 (H) STA AT 3:00 PM GRUENBERG 120
01/24/17 (H) Heard & Held
01/24/17 (H) MINUTE(STA)
01/26/17 (H) STA AT 3:00 PM GRUENBERG 120
WITNESS REGISTER
REPRESENTATIVE STEVE THOMPSON
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Answered questions on HB 16, as prime
sponsor.
SHELDON FISHER, Commissioner
Department of Administration (DOA)
Juneau, Alaska
POSITION STATEMENT: Co-provided an overview of the Department
of Administration (DOA).
KEVIN BROOKS, Director
Division of Shared Services (DSS)
Department of Administration (DOA)
Juneau, Alaska
POSITION STATEMENT: Co-provided an overview of the Department
of Administration (DOA).
EMILY RICCI, Chief Health Policy Administrator
Division of Retirement and Benefits (DRB)
Department of Administration (DOA)
Juneau, Alaska
POSITION STATEMENT: Co-provided an overview of the Department
of Administration (DOA).
ACTION NARRATIVE
3:04:17 PM
CHAIR JONATHAN KREISS-TOMKINS called the House State Affairs
Standing Committee meeting to order at 3:04 p.m.
Representatives LeDoux, Tuck, Wool, Birch, Knopp, and Kreiss-
Tomkins were present at the call to order. Representative
Johnson arrived as the meeting was in progress.
HB 16-DRIV. LICENSE REQ;DISABILITY:ID &TRAINING
3:05:12 PM
CHAIR KREISS-TOMKINS announced that the first order of business
would be HOUSE BILL NO. 16, "An Act relating to training
regarding disabilities for police officers, probation officers,
parole officers, correctional officers, and village public
safety officers; relating to guidelines for drivers when
encountering or being stopped by a peace officer; relating to
driver's license examinations; and relating to a voluntary
disability designation on a state identification card and a
driver's license."
3:06:46 PM
REPRESENTATIVE JOHNSON, referring back to Representative Knopp's
comment at the House State Affairs Standing Committee meeting of
1/24/17, asked if HB 16 should be amended to change the language
of AS 18.65.670, subsection (c), to reflect that the
Commissioner of Department of Public Safety (DPS) is mandated to
adopt regulations regarding training for village public safety
officers (VPSO).
3:07:15 PM
REPRESENTATIVE STEVE THOMPSON, Alaska State Legislature, as
prime sponsor of HB 16, responded that he was satisfied that the
Alaska Police Standards Council (APSC) has already mandated the
training in its regulations.
3:08:00 PM
REPRESENTATIVE JOHNSON moved to report HB 16 out of committee
with individual recommendations and the accompanying fiscal
notes. There being no objection, HB 16 was reported out of the
House State Affairs Standing Committee.
3:08:26 PM
The committee took an at-ease from 3:08 p.m. to 3:21 p.m.
^OVERVIEW: DEPARTMENT OF ADMINISTRATION
OVERVIEW: DEPARTMENT OF ADMINISTRATION
3:21:15 PM
CHAIR KREISS-TOMKINS announced that the final order of business
was the overview from the Department of Administration.
3:21:34 PM
SHELDON FISHER, Commissioner, Department of Administration
(DOA), provided an overview of the Department of Administration
(DOA) using a PowerPoint presentation, titled "Department of
Administration Overview." He referred to Slide 2, titled
"Organization," and stated that DOA is responsible for: the
state's information technology (IT) services under Enterprise
Technology Services (ETS); accounting and payroll systems under
the Division of Finance (DOF); purchasing, leasing, and mail
services under the Division of General Services (DGS); human
resources and labor contracts under the Division of Personnel
and Labor Relations (DPLR); benefits for active and retired
employees under the Division of Retirement and Benefits (DRB);
and property insurance and workers compensation under the
Division of Risk Management (DRM). He pointed out that the
green colored boxes on the chart indicate services provided to
other departments.
MR. FISHER said that external public services are provided
through the Division of Motor Vehicles (DMV), the Office of
Public Advocacy (OPA), and the Public Defender Agency (PDA). He
added that DOA facilitates and administers a number of boards
and commissions.
MR. FISHER stated that his primary task is to build and enable a
high-functioning organization. He noted the new directors in
DOA: Ajay Desai of DRB; Kevin Brooks of the Division of Shared
Services (DSS); and Marla Thompson of DMV. He also mentioned
the new Chief Information Officer, Bill Vajda.
3:25:39 PM
MR. FISHER referred to Slide 3, titled "DOS Budget - UGF," and
stated that DOA has about $90 million in general funds (GF), $30
million [designated general funds] (DGF), and about $69 million
[undesignated general funds] (UGF). He said that the UGF is
dominated by OPA and PDA. He mentioned that OPA participates in
legal defense when the public defender has a conflict. It also
manages the state's public wards - adults who cannot take care
of themselves - through public guardians.
3:27:33 PM
REPRESENTATIVE LEDOUX asked how many people staff OPA.
MR. FISHER responded OPA has 128 employees.
REPRESENTATIVE LEDOUX asked if all or most of the employees are
involved with criminal defense.
MR. FISHER answered no, out of the 128 employees, about 32
lawyers provide criminal or appellant defense functions. The
balance of employees comprises public guardians, guardians ad
litem (for children), and those involved with Child in Need of
Aid (CINA) cases.
REPRESENTATIVE LEDOUX opined that when she first started
practicing law in Alaska, the state did not have a very "robust"
OPA, and most guardian cases were "farmed out" to private
counsel. She asked if anyone has compared the cost of using
private counsel versus maintaining an OPA.
MR. FISHER conceded that some of the work is still through
contract, but DOA has determined that for the criminal defense
work, it is cheaper to hire staff lawyers.
REPRESENTATIVE LEDOUX asked if the cost analysis included the
cost of benefits, as well.
MR. FISHER said it did. He went on to say OPA is "stretched"
considerably, citing that Alaska has one of the highest ward to
guardian ratios in the country. He said, on average, a guardian
can spend less than two hours a month with a ward but still must
take care of all of his/her needs. He added that DOA has tried
to minimize cuts to the OPA budget.
3:31:33 PM
REPRESENTATIVE LEDOUX asked if the primary responsibility of DOA
to a ward [of the state] was managing his/her finances.
MR. FISHER responded that it could be managing finances,
ensuring adequate housing, or guaranteeing basic needs are met.
REPRESENTATIVE LEDOUX asked if people pay for the guardianships
when they have the means.
MR. FISHER answered that there is a fee for this service, which
doesn't cover all of the cost, but that OPA is designed to meet
the needs of those people who don't have the means to care for
themselves.
3:32:30 PM
REPRESENTATIVE WOOL asked if the 128 employees in OPA are all or
mostly all attorneys.
MR. FISHER responded OPA has 32 practicing lawyers, and the
other employees are social workers or trained guardians.
REPRESENTATIVE WOOL asked if the Office of Children's Services
(OCS) duplicates any of OPA's functions.
MR. FISHER answered that he does not know if OCS also has
guardians ad litem. He opined that the primary guardian ad
litem function is through DOA, but conceded OCS may have a role,
as well.
3:33:41 PM
REPRESENTATIVE BIRCH asked if the public defender represents
those being prosecuted by the district attorney.
MR. FISHER responded yes, the public defender provides criminal
defense for indigent defendants.
REPRESENTATIVE WOOL asked how the budgets are determined for
prosecution [within the Department of Law (DOL)] and defense
[within DOA]. He asked, "How do you decide who gets a bigger
budget?"
MR. FISHER answered that although the budgets have evolved
historically, DOA tries to manage a budget that allows it to
maintain a caseload that satisfies both constitutional and
ethical requirements. He added that the budgets are not
necessarily comparable, for example, DOL has access to
investigators within the police department or Alaska State
Troopers (AST), whereas DOA must pay for investigators within
its budget. He added that the budgets of both departments have
been cut.
3:35:47 PM
REPRESENTATIVE KNOPP asked about the process of guardianship -
if the need for guardianship is determined through the court
system and then the guardian is provided by DOA.
MR. FISHER stated his understanding that determining
guardianship is only done through the court system.
REPRESENTATIVE KNOPP asked the extent of services provided by
DOA to the individual needing guardianship.
MR. FISHER said that typically the individual needing a guardian
has some resources. He explained that the guardianship budget
does not include rent money. It includes reimbursement of a
guardian who helps the individual administer his/her own
resources, because that individual is incapable of managing
his/her own life.
3:37:38 PM
MR. FISHER continued with Slide 3 and said that $16 million of
DGF pays DMV's operating costs and comes out of DMV fees. He
went on to say that Alaska Oil and Gas Conservation Commission
(AOGCC) receives about $7.5 million in fees from the [oil and
gas] industry. These two amounts make up the bulk of DGF. He
cited the other UGF-funded functions shown on Slide 3: the
State of Alaska Telecommunications System (SATS) and Alaska Land
Mobile Radio System (ALMR) - both used by first responders for
emergency communications - and the accounting function for the
State of Alaska. Most of DOA's budget, which is in excess of
$300 million, comes from fees other agencies pay for DOA
services.
3:40:00 PM
MR. FISHER referred to Slide 4, titled "Department Priorities,"
and asserted that DOA is focused on trying to improve the way
services are delivered both within the department and throughout
the state. He explained that DSS consolidates administrative
functions that every department needs and historically have been
performed within each department, such as accounting, travel,
and facilities. He asserted that consolidation of functions
will save money. He said that IT services, which are too
specialized to combine under DSS, can be streamlined and
improved using the "shared services" principles.
MR. FISHER said DOA recognized a need to modernize the DRB
systems and processes, which date back to the '90s, and hired
Ajay Desai as the director of DBR to lead that effort.
MR. FISHER said health care reform is a big issue both for the
State of Alaska and for the state as a whole. DOA is
responsible for administering both the active employee plan and
the retiree plan, at a cost of over $600 million.
3:42:35 PM
REPRESENTATIVE BIRCH asked if the medical plans delegated by the
various unions are periodically audited to find out the extent
of the accumulated asset base and expenditure.
MR. FISHER responded yes. He replied that as bargaining
agreements are negotiated, DOA now insists on receiving detailed
information about the medical plans for DOA actuary review. He
mentioned that during the last round of negotiations with the
Alaska State Employees Association (ASEA), DOA held ASEA's
contribution flat because the ASEA Health Trust had accumulated
a "meaningful" reserve. He said that, over time, "they'll need
to spend down some of those reserves in order to be able to
continue to provide the medical care." He added that medical
costs are growing substantially faster than [the rate of]
inflation, so even though inflation has been low in Alaska and
the rest of the U.S., medical costs are growing between 7 and 9
percent annually. He said, "Keeping a plan flat in a growing
cost environment will start to normalize that, and we'll
continue to, over time, get them to a place where I think we
believe that the reserves are appropriate."
REPRESENTATIVE BIRCH asked to receive a summary of the medical
plan information for all the negotiated agreements and the
account balances.
3:45:09 PM
REPRESENTATIVE LEDOUX asserted that medical costs in Alaska seem
to be so much higher than in the Lower 48. She asked what DOA
is doing to encourage Alaskans to go south for non-emergency
operations.
MR. FISHER responded that DOA has a medical travel benefit but
added, "It's not one that we are particularly proud of" and it
is "fairly clunky." Mr. Fisher speculated that health plan
members are not taking the opportunity to leave Alaska to
receive non-emergency care as much as possible. He said he
expects DOA to initiate a much more robust medical travel
benefit that is easier to use. He offered his belief that the
new benefit would offer a net saving for the state, due to less
expensive procedures out of state.
3:46:54 PM
CHAIR KREISS-TOMKINS asked what percentage of non-emergency
procedures are currently conducted out of state through the
medical travel benefit, and what percentage DOA anticipates with
the improved medical travel benefit.
MR. FISHER said that DOA is presently gathering data in order to
estimate the value of this new benefit and will provide that
information when available.
3:48:01 PM
MR. FISHER reported that DOA leases about $50 million of space
and is working to optimize use of the space and negotiate better
pricing.
3:48:58 PM
REPRESENTATIVE TUCK asked if the Health Care Authority (HCA)
feasibility study is being done in house or through a contract.
MR. FISHER responded that DOA issued a request for proposal
(RFP) and is working with a consultant. He anticipates the
final product to be a blend of in-house and contract work.
3:49:42 PM
KEVIN BROOKS, Director, Division of Shared Services (DSS),
Department of Administration (DOA), continued the Department of
Administration (DOA) overview with Slide 6 of the PowerPoint
presentation, titled "Shared Services Overview." He said that
currently there are 14 state departments, each with an
Administrative Services Division performing various
administrative functions throughout the department. He offered
that under a "shared services" model, his office's mission is:
to identify and centralize the common functions throughout
[state] government; to implement redesign and improvement of the
processes; and ultimately, to achieve efficiency and cost-
savings by performing necessary functions of government with
fewer people. He asserted that the new model allows departments
to focus on their core missions, while DOA performs the
"backroom" business functions.
3:51:54 PM
REPRESENTATIVE JOHNSON expressed a concern about changes in
personnel workloads that reduce positions to less than fulltime
and asked how that would be handled by DSS. She added she
assumes each position has been "costed out."
MR. BROOKS replied that there are already "fragmented positions"
within the departments. He relayed that DSS will staff
accordingly to handle the volume of work and bill departments by
the number of transactions processed. He mentioned that the
work is performed by accounting technicians, and added that the
accounting technician position is relatively low in the state
structure and experiences a fair amount of turnover.
3:55:00 PM
REPRESENTATIVE WOOL asked if transferring positions to DOA from
other departments represents any downsizing or "real savings."
MR. BROOKS agreed that "it really does [the state] no good to
just reshuffle the chairs." He said a 10 percent reduction was
levied on every department's budget. From the 90 percent of the
budget retained, the departments will pay DSS contractually for
services instead of paying employees. He said that DSS's goal
is an additional 20 percent reduction and possibly higher as
processes are refined. He said DSS is "mapping the process, ...
removing steps to the process, and ... creating one [process]"
for each department to adopt. He offered his belief that one
process, instead of 14 processes, will result in efficiencies
and savings.
3:57:34 PM
REPRESENTATIVE TUCK cited the savings, listed on Slide 6, of 10
percent in fiscal year 2018, 30 percent in FY 19, and 50 percent
long-term, and asked how Mr. Brooks arrived at those forecasts.
MR. BROOKS said that DSS contracted with Everett Ross, who
facilitated a similar transition in Ohio. He said that DSS is
attempting to model Ohio's efforts and utilize industry
benchmarks for processing transactions. He attested that the
percentages are reflective of similar efforts in other
jurisdictions.
REPRESENTATIVE TUCK recommended that DSS be aware of unintended
consequences of centralization of functions. He cited an
example in which centralization caused more delays and problems,
and cautioned against a similar result if DSS does not
understand the 14 departments well enough. He urged DSS to
ensure actual cost savings and avoid creating inefficiencies.
MR. BROOKS said that before transitioning a department, DSS is
spending considerable time with the department to understand
their "book of business." He said DSS will focus on identifying
benchmarks, costs, timelines, and outcomes, in order to avoid
the unintended consequences Representative Tuck cited.
REPRESENTATIVE TUCK added that he supports the concept described
by Mr. Brooks but cautions against unintended consequences.
4:01:05 PM
REPRESENTATIVE BIRCH referred to a previous comment about the
merits of traveling Outside for more competitively priced
medical services. He asked if the consolidation effort would
afford DSS the opportunity to find competitive private sector
resources or opportunities.
MR. BROOKS said DSS's primary focus is using state employees to
perform administrative functions instead of out-sourcing or
privatizing. He said there are union rules to follow but added
there are certain functions that lend themselves to contractual
arrangements. He asserted that DSS would take a balanced
approach - using state employees when appropriate and a private
sector solution when that is a better fit.
REPRESENTATIVE BIRCH cited the motor vehicle operation of DMV as
a good example of a balanced operation with good "back up."
4:03:01 PM
MR. BROOKS referred to Slide 7, titled "SSOA Roadmap - Pilots
and initial waves are definitive," and stated that DSS is taking
a measured approach in its efforts. He said DSS's first
initiative was with "travel and expense," which began as a pilot
project in DOA. He went on to say that the initiatives will be
implemented in waves - three or four departments at a time. The
timeline on Slide 7 shows the six-month plan for implementation
of the travel and expense roll-out. He pointed out that the
Department of Labor & Workforce Development (DLWD) and
Department of Revenue (DOR) are part of the Travel & Expense
Wave 1 effort. He described the process: selecting a
department; identifying the best practices; improving the
process; stabilizing the process; then moving on to three or
four additional departments. He stated his belief that in the
next five or six months, all departments will have transitioned
in regard to travel and expense. He asserted that DSS will use
a similar phased approach for the other initiatives.
4:04:50 PM
REPRESENTATIVE LEDOUX asked, "What sort of best practices are
you looking for?
MR. BROOKS said each department has its own operating
procedures. He suggested that developing one standard desk
manual would eliminate 14 separate ones. He referred to the
Integrated Resource Information System (IRIS), which handles
financials and human resources for the state, and said IRIS has
changed how all state departments are functioning. He said he
supports fully utilizing the IRIS system and automating
processes to the extent possible. He maintained that there are
a myriad of processes and functions that lend themselves to
efficiencies and streamlining.
4:06:20 PM
CHAIR KREISS-TOMKINS asked for the name of the contractor who
overhauled IRIS for the State of Alaska.
MR. FISHER explained that IRIS is an accounting system that
replaced the state's out-of-date system. The contractor,
Consultants to Government and Industry Technologies and
Solutions Inc. (CGI), offered a product that is specifically
designed to support state government. He said that IRIS was
delivered on time and on budget, and CGI assisted with
implementation. He said DOA launched the financial module of
the new system 18 months ago and the human resources module a
week and a half ago. He reported that the system is performing
reasonably well and has met DOA's expectations.
4:08:18 PM
MR. BROOKS referred to the flowchart on Slide 8, titled "As-Is
Process Mapping," which illustrates the current process for
travel, from the initial travel order to the final check and
reconciliation. He said the DSS project manager interviews
staff to map the existing process and to discuss opportunities
for efficiencies and improvements. Mr. Brooks then identified
the flowchart on Slide 9, titled "To-Be Process Mapping," as the
new standard with which departments are trained. He mentioned
that DSS will repeat this procedure with "accounts payable" in
February or early March.
4:10:06 PM
MR. FISHER referenced Slide 10, titled "Process Improvement: DMV
- Average Wait Time," to explain process improvement using the
DMV as an example. He asserted that the improvement in DMV wait
times was driven by process improvement, and no capital project
or increase in operating expense was involved. He added DSS has
used its process improvement expertise to do process improvement
projects in the Department of Natural Resources (DNR) and the
Department of Transportation & Public Facilities (DOT&PF), with
leasing, with facilities, and with a number of other efforts.
4:12:19 PM
REPRESENTATIVE TUCK offered he is very impressed with DMV's
ability to "get people in and out." He asked how much of the
reduced wait times were due to reduced volume of business.
MR. FISHER cited the improvement in average wait times,
comparing August 2015 with August 2016 - 44 minutes and 16
minutes, respectively. He said DMV processed about 1,000 more
transactions in August 2016 than in August 2015; however, the
overall annual volume of transactions was down slightly in 2016.
He maintained, however, that most of the savings were driven by
efficiencies in delivery of service and not reduction in usage.
REPRESENTATIVE TUCK asked if the additional 1,000 transactions
in August 2016 included in-person transactions.
CHAIR KREISS-TOMKINS asked if there was a budget reduction for
DMV.
MR. FISHER responded that there was no budget reduction, in part
because it is funded by DGF. He added, "That's a decision that
we kind of need to make together. Do we want to save money or
continue to provide the degree of service, or some combination?"
REPRESENTATIVE WOOL commented that in a recent visit to a DMV
office he was astonished at how few people there were in the
office. He offered possible reasons: people aren't registering
cars or getting driver licenses; population fluctuation; more
information and transactions online. He suggested that a few
more minutes of wait time may be just as acceptable and possibly
staff could be reduced.
MR. FISHER reiterated that the most significant change is not
due to reduced volume, but to process time. He mentioned that
the budget for DMV declined by about $250,000 from FY 17 to FY
18. He offered that DMV is trying to put more [information and
transactions] online. He said he anticipates that someday the
DMV will provide services with self-serve kiosks similar to
airports, and that contact with a DMV agent would just be for
unusual circumstances.
REPRESENTATIVE TUCK asked if there will be a more detailed
presentation for each division later.
CHAIR KREISS-TOMKINS responded yes.
4:18:01 PM
MR. FISHER referred to Slide 12, titled "Recommendations," and
explained that the new chief information officer (CIO) is tasked
with improving the efficiency of IT service delivery. He said
that currently there are 14 separate IT departments researching
and selecting the best computers, servers, configuration, and
storage technology. He said DOA recognized the opportunity to
be more efficient in those efforts. He added that these
services are "commodity" services - services all departments
need but are not specialized for a particular department. He
differentiated commodity services from "line of business"
services, of which IRIS is an example - a single product used
for the entire state. He stated that for every commodity
service DOA delivers, it makes a "buy versus bill" decision.
The question is asked: can something be done better and more
efficiently internally or by procurement? He noted that DOA has
obligations to do a feasibility study under DOA contracts and
will fulfill those commitments under the DOA bargaining
agreements.
4:20:46 PM
MR. FISHER next referred to Slide 13, titled "Organizational
Vision." He stated that the department technology officers
(DTO) currently report to either the administrative services
director (ASD) or the commissioner of their various departments.
He said that in the future, they would report to the CIO "on a
solid line basis." He explained that this means the DTOs would
be part of the centralized IT organization and receive their
performance reviews from the CIO, but would still support the
needs of their various departments in a "dotted line"
relationship.
4:23:05 PM
REPRESENTATIVE TUCK asked for confirmation that the CIO oversees
ETS and, under the new structure, the DTO in DOA and the DTOs
from the other departments.
MR. FISHER declared that the organization chart on Slide 13 is
official as of today, and DOA has never had a CIO before today.
REPRESENTATIVE TUCK asked for clarification that the new CIO
will start out by overseeing ETS, and then eventually the DTOs.
MR. FISHER answered yes, it will happen quickly.
4:24:53 PM
MR. FISHER referred to the dotted circle around the director of
the Office of Management & Budget (OMB), DOA, and the CIO, on
the organization chart, and explained that it represented the
strategic governance function. He pointed out [Internal
Verification & Validation] (IV&V) Function shown under the
director of OMB in the chart and identified it as a regular
audit function to ensure that DOA is improving the level of
service that it is delivering to the other departments. He
announced DOA's slogan is "better, faster, cheaper." DOA will
be benchmarking the level of service currently delivered,
establishing service level agreements with the departments, and
auditing for actual improvements. He stated that the audit will
be a function of OMB, outside of DOA.
4:26:23 PM
REPRESENTATIVE GRENN referred to Slide 7 and asked if, after
Wave 4, DOA would go back to the Wave 1 departments to re-
evaluate and make improvements.
MR. FISHER claimed that at each step of the way, DOA will be
learning and making corrections and improvements. He said that
OMB, through the IV&V function, will periodically measure the
effectiveness of the work, in cost, time, and quality.
4:27:56 PM
EMILY RICCI, Chief Health Policy Administrator, Division of
Retirement and Benefits (DRB), Department of Administration
(DOA), continued the Department of Administration (DOA) overview
with Slide 15, titled "Cost of State Employee Health Care." She
stated that Slide 15 shows the roles of DOA and DRB for the
provision of employee health care. The first role, she said, is
paying the employer contribution towards covering employee
health care benefits. She added that not all State of Alaska
employees are covered by the same health insurance plan.
Depending on the plan, employees have access to benefits either
through the ASEA Health Trust or the AlaskaCare Employee Plan
"AlaskaCare" managed by DOA.
MS. RICCI referred to the column on the right on Slide 15
detailing the AlaskaCare Employee Plan. It is a self-insured
plan, which means the State of Alaska pays the claims for the
expenses that are incurred. She added that DOA does not
actually manage the claims or administer the benefits but
contracts out to several different third-party administrators.
She said that Aetna Inc. "Aetna" is the third-party
administrator for the medical plan, and Moda Health "Moda" is
the third-party administrator for the dental plan. She went on
to say the AlaskaCare Employee Plan covers about 16,350
individuals, which includes 6,350 employees and 9,800
dependents. The remaining 200 people are those who are no
longer with the State of Alaska but accessing benefits through
Consolidated Omnibus Budget Reform Act (COBRA). She stated that
the cost of AlaskaCare to the State of Alaska is approximately
$137.5 million, which includes $7.5 million in supplemental
funding and $13.8 million paid by employees.
4:30:32 PM
REPRESENTATIVE LEDOUX asked what was meant by "supplemental
funding."
MS. RICCI responded that in FY 16, DOA received approximately
$7.5 million in supplemental funding to be applied to the Group
Health and Life Trust Fund, which pays benefits for the
AlaskaCare Employee Plan.
REPRESENTATIVE LEDOUX asked if a certain amount was budgeted,
then an additional $7.5 million was needed.
MS. RICCI referred to Slide 16 and answered that the employee
health plan is experiencing a fiscal challenge. She mentioned
that the plan experienced some initial savings in 2014, when
Aetna became the third-party administrator and had negotiated
better discounts with the providers. She added that the
reduction in cost didn't last. The cost has been increasing
since 2016, due to the factors listed on Slide 16. She said
there was a spike in utilization [of health care services] in
2015 following layoff notices, but the level of utilization
never returned to the pre-spike level. She added there has been
a reduction of employees, necessitating higher employer
contributions to cover the decreased number of employees. She
said, also, there has been an emergence of a double digit
pharmacy growth, a rate of 14-19 percent, which has occurred
across the nation, as well. She said the health care cost grew
faster than DRB anticipated. She concluded that the combination
of these factors has resulted in the plan expending more on
claims than is being brought in as revenues. She said DRB uses
a reserve balance to make up the difference, but using the
reserve is not be sustainable going forward. She referred to
the right column on Slide 16 and noted the four "levers" for
addressing the fiscal challenges: increase employee
contribution; implement plan design changes; reduce the cost of
service; and increase employer contributions.
4:34:28 PM
REPRESENTATIVE LEDOUX said she understood why the spike occurred
but asked why the level of utilization stayed high.
MS. RICCI speculated that stress and uncertainty is contributing
to the sustained increase in utilization. The uncertainty, she
conjectured, is related to all of the changes - in positions, in
salaries, and in health insurance. She offered that people are
having medical procedures done now instead of waiting a year or
more. She said DRB looked to see if high cost claimants were
driving the spike but found, in general, it was overall
utilization of lower level services. This supported the theory
of people seeking services and appointments that, in the past,
they would have delayed.
REPRESENTATIVE LEDOUX asked if Ms. Ricci thought this trend was
related to employees' concern for increased deductibles and
other increases.
MS. RICCI answered yes, that added to it.
4:36:06 PM
REPRESENTATIVE BIRCH referred back to Slide 15 and restated the
information: the employer cost of health insurance is about
$265 million; of that, the AlaskaCare portion is about $115
million, and the Union Health Trust portion is about $150
million. He mentioned the 16,350 lives covered under AlaskaCare
and asked how many employees are covered under the Union Health
Trusts. He expressed confusion over the number of employees.
He said he has heard the number to be 24,000, with 2,500
employees laid off, but this year's number is only an 80-person
variation from last year.
MR. FISHER responded that the 24,000 figure refers to all state
workers, including those in the legislature, the administration,
the courts, and the university. He stated there are about
11,000 employees, and 6,300 of them are covered under
AlaskaCare. He said that state employees "skew old." In the
next five years a little over 20 percent of all state employees
will be eligible for retirement. He cited that historically
about two-thirds of those eligible actually retire. He asserted
that the reduction achieved in the state work force has largely
been due to attrition; therefore, only 80 people have received
pink slips. He said, "The most important thing you can do with
your employees is be transparent and honest with them." He
offered that many of these employees were told early on that
their positions would be eliminated so they could plan for it.
He said the 80 pink slips are misleading, as the work force has
decreased substantially.
REPRESENTATIVE BIRCH asked about employee participation for
AlaskaCare.
MR. FISHER referred to Slide 15 and stated that employees
contribute about 10 percent of the health care premium. He said
that there is a standard plan and an economy plan. He said
historically the economy plan had poorer benefits but did not
require employee contribution. For employees who wanted a
greater level of benefits, a contribution was required. He said
the $13 million, or 10 percent of the cost of AlaskaCare,
represents the contributions under the standard plan. He said
that all collective bargaining agreements entered into by the
current administration require some contribution from all
employees, for both the standard and the economy plan. He said
DOA is currently evaluating, internally and with its actuaries,
how to develop a more systematic method of determining and
calculating the employee contribution. He attested that 20
percent of the cost of the premium is the target for employee
contribution.
REPRESENTATIVE BIRCH quoted $265 million to be the total cost of
health care and asked if the premium paid by employees, which is
now about $26 million, will be doubled to about $50 million.
MR. FISHER reminded the committee that AlaskaCare is managed by
DOA, and the Union Health Trusts are managed by the unions. He
added that each one of the Union Health Trusts has its own
standards. Some of the Union Health Trusts already require
considerably more than 20 percent employee contribution. He
added that his comments specifically refer to AlaskaCare.
REPRESENTATIVE BIRCH asked if $265 million is "all-inclusive,"
that is, if it includes the employee contribution.
MR. RICCI said, "The employee contribution for AlaskaCare is
inclusive of that number." She added that she would check on
the employee contributions for the Union Health Trusts.
4:43:46 PM
CHAIR KREISS-TOMKINS asked if DRB has performed an analysis of
the costs of different medical procedures conducted in Alaska
compared with the Lower 48, and what the relative savings could
be.
MS. RICCI claimed DRB is currently undertaking analysis to
identify opportunities, and it is consulting reports from other
organizations, such as the Alaska Health Care Commission and the
Milliman studies. She asserted the analysis was part of their
evaluation of costs and benefits and will help to identify
alternatives to improve the medical travel benefit.
CHAIR KREISS-TOMKINS asked if DRB is consulting with Aetna and
doing in-house analysis with in-house information.
MS. RICCI said absolutely, analysis can be done through DRB's
data warehouse. She claimed DRB staff is currently sorting
through data to determine the best value for changing the
medical travel benefit.
CHAIR KREISS-TOMKINS asked if DRB will share its findings.
MS. RICCI responded absolutely.
CHAIR KREISS-TOMKINS asked if Ms. Ricci had a timeline for
sharing the conclusions from the analysis.
MS. RICCI said no, but offered it would be within the next
couple of months. She said DRB's goal is to have the new
medical travel benefit implemented in the next three to six
months.
4:46:15 PM
MS. RICCI turned to Slide 17, titled "Health Care Authority
Study," and said Senate Bill 74, the Medicaid Reform Bill, which
passed in the 29th Alaska State Legislature, directed the
commissioner of administration to conduct a study evaluating the
feasibility of a health care authority. The study is due June
2017. She explained that since there is no standard definition
for "health care authority," there are a range of models across
the U.S., from very sophisticated to very narrow. Washington
State and Oregon have very sophisticated authorities that manage
most of their public employees and Medicaid healthcare spending
in an integrated fashion. She mentioned other states having
authorities in name only, with just an office similar to the
Office of Rate Review in the Alaska Department of Health and
Social Services (DHSS).
MS. RICCI went on to say DRB put out an RPF in July and awarded
a contract in August to PRM Consulting. The consulting firm
will evaluate the feasibility of a health care authority study,
in two phases. She said the goal is to see if there are
opportunities to create savings through greater efficiencies.
PRM Consulting is looking at a wide range of entities receiving
state funding, either directly or indirectly, for health care
benefits, including all State of Alaska employees, Unions Health
Trust employees, retirees, Medicaid recipients, school district
employees, employees of political subdivisions, individuals, and
small group markets. She explained that phase one will evaluate
the opportunity for savings through a consolidated purchasing
strategy. That approach, she said, allows entities to retain
their autonomy, plan design, and plan administration, while DRB
looks for opportunities for savings through leveraging volume.
The second phase, she continued, evaluates opportunities for
savings through a coordinated plan administration. She queried,
"Is there a way that we can better and more efficiently provide
health care services across all these different entities?" She
added that the report is due in June, but DRB hopes to provide
information in advance of that date and anticipates the
completion of phase one in February.
4:49:58 PM
MR. FISHER referred to Slide 20, titled "Recap of Last Year:
ASEA, LTC, SU, CEA," to discuss the three [collective
bargaining] negotiation principles. He addressed the first
principle by saying that cash and benefits need to be fair to
both the State of Alaska and the employees. He emphasized the
need to treat employees fairly, notwithstanding the fiscal
challenges. He claimed DOA is trying to balance the demands and
asserted that employees are "giving more" than they have in the
past. The current administration has not negotiated any Cost of
Living Allowance (COLA) increases; there is increased
contribution by employees to the health benefit; contributions
to Union Health Trusts have remained "flat"; and employees have
been asked to give a furlough or furlough equivalent.
The second principle, he said, is efficiency. He said DOA has
been looking at bargaining agreements to ensure the work rules
contribute to an efficient process. He mentioned that
bargaining agreements have evolved differently resulting in
multiple different state processes. He mentioned that DOA has
identified the work rules with the greatest impact and is trying
to standardize the rules across bargaining units for more
efficient management.
He went on to the third principle, which is to hold employees
accountable and recognize and reward the best employees. He
mentioned the creation of the Labor Management Committee to look
at performance reviews and develop a more effective evaluation
process.
4:53:13 PM
REPRESENTATIVE TUCK confirmed his belief that labor management
committees are useful tools to identify efficiencies, foster
teamwork, and reduce grievances.
REPRESENTATIVE BIRCH asked how many different labor agreements
DOA manages and what the bargaining units are.
MR. FISHER responded that there are 11 different bargaining
agreements. The unions are: ASEA; Labor, Trades, and Crafts
(LTC); Supervisors Union (SU); Confidential Employees
Association (CEA); Marine Engineers Beneficial Association
(MEBA); Inlandboatmen's Union of the Pacific (IBU);
International Organization of Masters, Mates and Pilots (MM&P);
Alaska Vocational Technical Center Teachers' Association
(AVTECTA); Alaska Correctional Officers Association (ACOA);
Public Safety Employees Association (PSEA); and Teacher
Education Association of Mt. Edgecumbe (TEAME).
REPRESENTATIVE BIRCH asked if the union agreements have staged
expiration dates and if holidays are coordinated between unions.
He also asked if all of the agreements include [salary] step
increases.
MR. FISHER offered that each bargaining agreement is a three-
year agreement; therefore, each year about one-third of them are
negotiated. He said DOA is attempting to better standardize
work rules. He added that historically merit step increases
were given in addition to the COLA; merit increases reflect
increase in skill and proficiency of the employee, and COLA
addresses cost of living differences. He expressed his belief
that the rate of growth of state salaries is too steep. He
offered that doesn't mean employees as a whole are
overcompensated, since starting salaries tend to be "below
market." He added that the salaries of some of the employee
groups, particularly the professionals and the highly skilled,
are less than market, according to DOA analysis.
4:58:02 PM
REPRESENTATIVE BIRCH mentioned the recent discussion in the
House Labor and Commerce Standing Committee regarding
contracting out positions within DOT&PF and asked if salary
studies are performed.
MR. FISHER, in response to Representative Birch, clarified that
whenever DOA outsources, it does a feasibility study, not a
salary study, to determine the cost of performing a task
internally versus externally.
REPRESENTATIVE TUCK used the example of becoming a journeyman
electrician to explain that employees, who are not fully
qualified when they enter into a position, start out below
market value. He added that the reason step increases were
negotiated was to increase wages and benefits as skills and
abilities increase.
5:00:35 PM
ADJOURNMENT
There being no further business before the committee, the House
State Affairs Standing Committee meeting was adjourned at 5:00
p.m.