COMMISSION ON PRIVATIZATION AND DELIVERY OF GOVERNMENT SERVICES Anchorage, Alaska December 7, 1999 9:25 a.m. COMMISSION MEMBERS PRESENT Representative Cowdery, Co-Chair Senator Ward, Co-Chair Senator Al Adams (via teleconference) Tom Fink, Former Mayor of Anchorage Emil Notti Mike Harper, President, Kuskokwim Corporation (via teleconference) Kathryn Thomas, Former Chair of Alaska State Chamber of Commerce Don Valesko, Business Manager of Public Employees Local 71 COMMISSION MEMBERS ABSENT Representative Brice Bill Allen, Former Mayor of Fairbanks George Wuerch, Alaska Municipal League COMMITTEE CALENDAR Discussion and adoption of recommendations Reports from the following Privatization Subcommittees: University of Alaska - postponed Alaska Railroad Subcommittee - postponed PREVIOUS ACTION See Commission on Privatization minutes dated 7/20/99, 8/16/99, 9/20/99, 10/28/99, 11/04/99, 11/10/99, 11/18/99, 11/24/99, 11/30/99 and 12/01/99. WITNESS REGISTER MARCO PIGNALBERI, Commission Director and Legislative Assistant to Representative John Cowdery POSITION STATEMENT: Answered questions and presented information on behalf of the commission. ACTION NARRATIVE TAPE 99-22, SIDE A CO-CHAIR COWDERY called the Commission on Privatization and Delivery of Government Services meeting to order at 9:25 a.m. Members present during the meeting were Representative Cowdery; Senators Ward and Adams; and Commissioners Fink, Thomas, Harper, Notti and Valesko. Marco Pignalberi, Commission Director, was also present. It was noted that Representative Brice was out-of- state. Commissioners Allen and Wuerch were not in attendance. APPROVAL OF PREVIOUS MINUTES Approval of previous minutes was postponed until the members had a chance to read them. OLD BUSINESS MARCO PIGNALBERI, Commission Director and Legislative Assistant to Representative John Cowdery, noted that the University of Alaska has not provided sections of its report because Wendy Redman has been out-of-state. NEW BUSINESS Subcommittee Reports CO-CHAIR COWDERY announced that the University of Alaska's report would be postponed until the next meeting [December 8]. [It was later announced that the report of the Alaska Railroad Corporation would be postponed as well.] [Most of the information contained in subcommittee reports will be available at the commission's web site at www.privatizealaska.org.] Discussion and adoption of recommendations CO-CHAIR COWDERY suggested discussing recommendations and presenting them in alphabetical order. COMMISSIONER FINK mentioned there are approximately 90 different recommendations, some short and some three pages long. He said he believes only a few commissioners agree on one or two; other than that, there is a lot of disparity. CO-CHAIR COWDERY proposed going through the recommendations, noting that there was a lot of duplication. COMMISSIONER FINK agreed that there was duplication regarding vouchers and charter schools. Observing that six members were present out of eleven, he suggested all members participate in deciding the outcome; otherwise, it may weaken the report or commissioners who are not present may subsequently disallow the recommendations that are passed. [A discussion was held regarding the absent members.] CO-CHAIR COWDERY asked members if they should proceed without the representatives from the Alaska Railroad Corporation (ARRC); it was indicated that the ARRC would present comments tomorrow. COMMISSIONER FINK, CO-CHAIR WARD and CO-CHAIR COWDERY indicated they didn't believe the commission should wait. COMMISSIONER THOMAS pointed out that the merger report is available. CO-CHAIR WARD indicated he personally didn't have a desire to hear any more reports. COMMISSIONER THOMAS expressed concern about how to meld this process. She suggested perhaps providing a basis that this commission could work from, to go forward and make a recommendation on what type of strategy should be used in the future, something that a piece of legislation could be written around. Specifically, she recommended establishing a commission by another name. She said she had received recommendations on what the new commission should be asked to produce for Alaskans, including what services could be streamlined or put up for competition. Suggesting there are three components, she proposed the need to have a popular budget format so that all Alaskans are accountable for the cost of their government. (Indisc.- background noise.) COMMISSIONER THOMAS said the third component on the "financial" would be an independent audit committee. Other subcommittees had real concerns about how some of the money was allocated. She also had included some labor considerations because she thinks the commission would like to give the workforce in state government an opportunity to participate in managed competition. However, if they can't easily see what the cost of management is for providing those services, they of course are burdened severely. Commissioner Thomas emphasized charging this organization with reviewing whether certain items should be sold, such as the railroad, the Four Dam Pool, or things that may be hanging out there. She said someone hasn't clearly made a decision for it in the government or the legislature. CO-CHAIR COWDERY agreed with creating a full commission. He said we [the legislature] will look for a source of funding and asked what is the makeup of this commission. COMMISSIONER THOMAS said she doesn't have ownership to the name of the proposed commission. Furthermore, she thought the privatization commission should be charged with (indisc.- background music). She said she had reviewed issues and thought the commission needed more information. COMMISSIONER NOTTI suggested, due to time constraints, that the [current] commission ought to limit what they are going to consider. Obvious issues are privatization, the university, the railroad, the school district and the Four Dam Pool. UNIDENTIFIED SPEAKER indicated he would echo some of Commissioner Thomas's concerns. He emphasized that the commission lacks information and that no in-depth analysis was made in any recommendation regarding cost-effectiveness. However, he believes that is what the bottom line of this commission should be. He cautioned that recommending privatization for its own sake could end up costing twice as much. He indicated he was intrigued by Commissioner Thomas's recommendation of another commission or body or entity but acknowledged the question of the budget and whether that would create another entity that would last 10 - 15 years. He said he would leave it up to the rest of the commissioners as far as what direction to go. CO-CHAIR WARD indicated that the proposed commission would never receive the details necessary. Nor does the [Knowles] Administration probably have the capability of telling the privatization commission or the legislature what they need to know. That is one of the problems with government. He doesn't think it is stonewalling on the part of any administration. CO-CHAIR COWDERY emphasized that no matter what the commission recommends, those issues have to go before the legislature, which may or may not take them up. However, the subcommittees' and commission's recommendations will give the legislature more insight. He surmised that some legislators might pick things up that weren't recommended and go forward with them. Although the privatization commission can say more information is needed, he concluded, he thinks the commission should go forward and follow maybe Commissioner Thomas' recommendation of an operational governmental commission. COMMISSIONER THOMAS said it is impossible for the people who testified to know what their costs are; she believes they are sincere when they state that. She suggested that the next organization require other budget components, that the accounting system be changed to be consistent throughout all [state] departments, and that there be mechanisms for an activity-based system. That will allow "us" to know how much it costs, for example, to mow an acre or to fill a pothole. Furthermore, it will identify the 16 managers for the three guys out there with the dump truck and the shovel. The state currently doesn't have a way to measure that. That is something they can amend their system to do. COMMISSIONER FINK referred to the Act which created the privatization commission and its responsibilities. He said he reads it that the legislature expected the commission, composed of mostly nonlegislators, to look into what goes on in government and how to save money. He said they realized the commission wouldn't have all the information available. Furthermore, the legislature wanted the commission's opinion and expected the members to come up with new ideas or to lend some credence to the legislature's taking a position. He again suggested that the commission not vote until all members were present because it would be hard to get six votes on anything. COMMISSIONER VALESKO mentioned credibility and recommended that six members be the majority on passing recommendations forward. CO-CHAIR WARD concurred that the final report should have six votes but said nothing should stop the process. [There was further discussion of whether to move the recommendations.] COMMISSIONER VALESKO explained that if a majority of four [of those currently present] made a recommendation, and seven commissioners didn't like the recommendation when the final report went out, they could say that recommendations 1, 5 and 7 should not be included, for example. COMMISSIONER THOMAS pointed out that when the subcommittees sat at the table with their reports, a high number said, "We're still not sure if we have all the information to make this recommendation - all the numbers that we needed, everything that we needed." She also indicated it has been difficult for the commission to weigh subcommittee recommendations and those from the administration. She mentioned that she had attended numerous subcommittee and commission meetings. TAPE 99-22, SIDE B CO-CHAIR COWDERY suggested that Mr. Pignalberi read the recommendations. MR. PIGNALBERI indicated the commission might reach a consensus on six recommendations. University Land Grant UNIDENTIFIED SPEAKER noted that the university land endowment passed the legislature three times but was vetoed by the governor. He pointed out that either Congressman Murkowski or Young is trying to get the federal government to throw in 250,000 acres - to match that - to add to the university's land grant. CO-CHAIR WARD said Alaska has a land-based university without enough land to operate. He then moved to adopt Commissioner Fink recommendation (13), "that the commission request the legislature to administrate - to take whatever action to transfer the 250,000 acres to the university for a land base." COMMISSIONER VALESKO objected for the purpose of discussion. He requested clarification about the specific land to be transferred. COMMISSIONER FINK asked what was in the language of the legislation. CO-CHAIR WARD explained that previous language instructed the commissioner of the Department of Natural Resources, Division of Lands, to identify those lands from state lands that were to be transferred - not federal lands or any other lands. He further stated, "We have 103 million acres, and we have 90 million acres that they can select from. ... What we're doing is we're fulfilling, under our obligation, to a land grant college." He reiterated that the governor had vetoed the legislation. COMMISSIONER VALESKO said he is hesitant to vote in support of this recommendation because he has too many questions about what land they are referring to. CO-CHAIR WARD pointed out that legislation introduced by Senator [Robin] Taylor had proposed to take every "Section 16" out of every township, if available. He suggested that the land issue should be left up to the legislature and the administration. Upon a roll call vote, the motion to adopt [Fink-(13)] carried by a vote of 6-1: Commissioners Fink, Harper, Notti and Thomas, and Co-Chairs Ward and Cowdery, voted "yea"; Commissioner Valesko voted "nay." Sale of the Matanuska Maid Dairy CO-CHAIR WARD moved recommendations Fink-(11) and Cowdery-(6), to sell the Matanuska Maid [Dairy]; he asked unanimous consent. COMMISSIONER VALESKO objected, saying he hadn't seen documentation that this would save the state money. In addition, it provides a service that the legislature decided to put in years ago. CO-CHAIR WARD stated his understanding that the subcommittee had thought it would save money; he suggested accepting their recommendation. He added that the commission should not be burdened with trying to do financial investigations. CO-CHAIR COWDERY offered an amendment that would require the proceeds from the sale of the Matanuska Maid [Diary] and/or the Alaska Railroad to be deposited into the permanent fund, which he indicated would take it off the board for legislatures to spend. In response to staff's comment that the commission was not addressing the Alaska Railroad, Co-Chair Cowdery emphasized that he would like to have it apply to both. UNIDENTIFIED COMMISSIONER said he would not vote for this amendment because he doesn't want to put any more into the permanent fund. He said it is contrary to the goal. CO-CHAIR WARD also objected to the proceeds going into the permanent fund and suggested Co-Chair Cowdery withdraw his amendment. He indicated it could be dealt with on the recommendation of selling the railroad. CO-CHAIR COWDERY responded that he would rather have his amendment fail than withdraw it because he feels that if the railroad is sold, [the money] goes into the general fund. Furthermore, the purpose of this commission is to reduce the size [of government]. MR. PIGNALBERI asked if a motion could be made without being seconded. UNIDENTIFIED SPEAKER seconded the motion. Upon a roll call vote, the motion to adopt the amendment requiring the proceeds of the sale go into the permanent fund failed by a vote of 3-4: Commissioners Notti and Thomas, and Co- Chair Cowdery, voted "yea"; Commissioners Fink, Harper and Valesko, and Co-Chair Ward, voted "nay." Upon a roll call vote, the motion to adopt [Cowdery-(6)], regarding the sale of Matanuska Maid Dairy, carried by a vote of 6-1: Commissioners Fink, Harper, Notti and Thomas, and Co-Chairs Ward and Cowdery, voted "yea"; Commissioner Valesko voted "nay." Sale of the Alaska Railroad [A motion by an unidentified commissioner to recommend selling the Alaska Railroad was made; however, it was withdrawn after Mr. Pignalberi reminded commissioners that members of the railroad, who hadn't had an opportunity to come before the commission with recommendations, would do so the following day.] Electronic Tracking Devices CO-CHAIR WARD moved recommendation (9), by Harper: Nonviolent inmates, DWI offenders should be removed from state incarceration in favor of half-way houses and/or electronic tracking devices to the extent major cost savings can be attained. COMMISSIONER FINK seconded the motion and noted that he himself had made the same recommendation: Fink-(10). There being no objection, Harper-9 was adopted. Charter Schools CO-CHAIR WARD made a motion to adopt charter school recommendations Fink-(1), Notti-(1) and Wuerch-(1). COMMISSIONER FINK seconded the motion. UNIDENTIFIED SPEAKER asked for an explanation because the three recommendations are not worded the same. COMMISSIONER FINK noted that his own recommendation requires 75 percent funding. However, he suggested adopting the language by Commissioners Notti and Wuerch, which was recommended by the subcommittee and which makes funding equal: We recommend that the legislature enact revised charter school laws that provide for educational choice by: (1) increasing the number of charter schools allowed in Alaska; (2) extending the contract period from five to ten years; (3) require school districts to provide equal funding for charter school students in their district; and (4) provide school facilities equal to other schools in their district. CO-CHAIR COWDERY asked whether a charter school could be a Native or religious school. CO-CHAIR WARD pointed out that charter schools are defined by statute. COMMISSIONER NOTTI, noting that he had added recommendation (4), pointed out that some charter schools are in buildings without windows and are not properly funded. COMMISSIONER VALESKO said he was going to vote against this recommendation because of his lack of understanding. CO-CHAIR COWDERY asked whether that means that if they build an elaborate school, everybody has to do so. COMMISSIONER NOTTI said that isn't what he intended. For example, there was an abandoned school in the Anchorage area, and the charter school people had to fight hard to use that facility. There is a concern of where to put these children. COMMISSIONER THOMAS expressed concern about the financial aspect of providing equal school facilities. Although she hadn't monitored the charter school issue a lot, she surmised that there is some funding formula for them. She asked, "If so, is it an allocation of how the money comes down that we're not providing for facilities or how it's attributed?" COMMISSIONER NOTTI answered that he is not clear on that. However, they don't receive the same dollar amount as the [other] students in the same school district, and their facilities are not equal, even though they are all publicly funded. He suggested they should be treated the same. COMMISSIONER THOMAS said her concern is that the commission is setting the scenario for a charter school to say, "We want you to bond and build a facility for us." COMMISSIONER NOTTI said he doesn't know what it implies except that they need better facilities. COMMISSIONER FINK commented that it liberalizes charter school requirements, and in the end there will be more because of these various gray areas. Charter schools are growing rapidly in Arizona but not in Alaska. One reason is statutory limitations, and the basic law should be changed. Another is that they are totally under the thumb of the local school district, which precludes having a good charter school system. He suggested the concept of control has to be dealt with. UNIDENTIFIED SPEAKER remarked that he hadn't looked at that and agreed with Commissioner Fink. COMMISSIONER FINK said he is willing to vote in order to move the issue forward. CO-CHAIR WARD said he supports charter schools but doesn't want to take citizens' money, put it into government, and then hand it back with too many strings. He added that he may be slipping into the "voucher" area but the same thing runs true to charter schools. He agreed that charter schools should have funding equal to other schools in a district. Furthermore, there are statewide building codes regardless of the location. However, placing mandates on a charter school about structural things that take away from a curriculum is one fear he would have. COMMISSIONER NOTTI responded that the commission doesn't have the perfect information. Furthermore, cities are not required to put money into charter schools. The state is. It seems they don't receive the same funding because charter schools don't have gymnasiums, libraries or furniture. CO-CHAIR WARD agreed with Commission Fink about voting on this issue but said he has a concern with putting strings on their money. Instead of their having a gymnasium, for example, he would like them to have the option of buying a laptop computer. COMMISSIONER FINK pointed out that that is not his intent. He indicated that if Commissioner Ward wants him to nullify it, he'll go along with that just to get it on the table. CO-CHAIR WARD concurred. MR. PIGNALBERI asked Commissioner Notti if the additional words solve the problem alluded to. He clarified that Commissioner Notti wanted to help them get better facilities but doesn't want to set a standard (indisc.-fading). COMMISSIONER NOTTI replied, "If it's fine with the commissioner." CO-CHAIR WARD commented that he was going to vote for the "other one" but he likes this one better. He made a motion to adopt the conceptual amendment. MR. PIGNALBERI explained that the conceptual amendment is that it is the intent of this language to help charter schools get better facilities. The key amendment is "without impeding their creation or development". CO-CHAIR WARD moved to amend his motion to reflect that amendment. COMMISSIONER FINK clarified that it refers to recommendation (4). MR. PIGNALBERI specified that the following phrase would be added: "without impeding their creation or development." CO-CHAIR COWDERY asked if everyone understood the proposal. COMMISSIONER VALESKO asked why recommendation (2) extends the contract period from five to ten years. COMMISSIONER FINK said he thinks the argument was that five years was too short. They need ten years for planning and raising money. COMMISSIONER VALESKO asked if that makes it easier for them to organize. COMMISSIONER FINK replied yes, it is a lot easier for them to organize and put together a program. COMMISSIONER VALESKO said he is opposed to the motion. Upon a roll call vote, the motion carried by a vote of 6-1: Commissioners Fink, Harper, Notti and Thomas, and Co-Chairs Ward and Cowdery, voted "yea"; Commissioner Valesko voted "nay." Vouchers for K-12 CO-CHAIR WARD made a motion to adopt recommendation Fink-(1): Voucher for K-12 education to parents at maximum 75 percent of the per pupil cost in each district. COMMISSIONER FINK seconded the motion. CO-CHAIR WARD said he supports the concept of vouchers. He mentioned that some people believe vouchers are going to hurt the public school system, and others think that choice in education is the highest and best use. He further stated: I absolutely believe in vouchers, but as when any money comes from the federal government or comes from the state government, if in fact it has strings attached to it - and they all have strings attached to it - we have to be very guarded of that. And as a legislator, I relay to you that I will be very guarded of that. To me, the cleanest mechanism would be to just make a recommendation to our congressional delegation to make any and all educational expenditures 100 percent deductible on their federal income taxes. But, since that is not before us at this time, I have moved the voucher amendment because I believe without a bunch of governments strings, if we can keep a true, pure voucher system going, then I believe that that would be good for the educational system of Alaska. COMMISSIONER FINK explained that the 75 percent is there for two reasons. The people who object to the voucher system, the NEA [National Education Association] and "AEA," argue that it will cost the public education money. He indicated he didn't care what the percentage was as long as it was less than 100 percent, so those who say it costs the public school system money will have a much more difficult time winning their argument. Furthermore, it should be saving the public school money. Private schools can "live" well off of 75 percent of what the public schools pay. CO-CHAIR WARD supported that concept. He again explained that the only reason for his addition was to eliminate any government strings attached to this money that would just create another branch of controlled education systems. COMMISSIONER FINK said it seems to him that the state had set as standards only reading, writing and arithmetic. CO-CHAIR WARD agreed. COMMISSIONER FINK said he is also in support of that. However, he doesn't know whether that should be incorporated. CO-CHAIR WARD said he wants the basic academics of reading, writing and arithmetic but is leery of the other things. COMMISSIONER FINK suggested adding that to the language because some of the commissioners are afraid of the state system setting standards that will interfere with the private or religious school. He said "we" don't want those standards. He moved to adopt the following conceptual amendment: Voucher for K-12 education to parents at maximum 75 percent of the per pupil cost in each district "with no more than reading, writing and arithmetic standards." CO-CHAIR WARD seconded the motion. MR. PIGNALBERI asked Commissioner Fink to restate the amendment. COMMISSIONER FINK stated, "with standards limited to reading, writing and arithmetic." COMMISSIONER VALESKO said the commission is trying to put the weight of this commission behind some recommendations to go back to the legislature, which has already considered this many times and brought forward bills that have not passed. Therefore, he is opposed to the recommendation. CO-CHAIR WARD mentioned that it took perhaps six years to pass the tort reform legislation. Upon a roll call vote, the motion to adopt [Notti-(1)] carried by a vote of 6-1: Commissioners Fink, Harper, Notti and Thomas, and Co-Chairs Ward and Cowdery, voted "yea"; Commissioner Valesko voted "nay." UNIDENTIFIED SPEAKER asked for a point of order. TAPE 99-23, SIDE A CO-CHAIR WARD called for the question on the "main" motion. SENATOR ADAMS indicated he would be voting against the motion because he didn't hear the full motion. Upon a roll call vote, the motion to adopt [Fink-(1)] carried by a vote of 6-2: Commissioners Fink, Harper, Notti and Thomas, and Co-Chairs Ward and Cowdery, voted "yea"; Senator Adams and Commissioner Valesko voted "nay." University of Alaska's Fairbanks Utilities CO-CHAIR WARD moved recommendation Cowdery-(2) regarding the privatization of the University of Alaska's utilities in Fairbanks. UNIDENTIFIED SPEAKER objected. UNIDENTIFIED SPEAKER mentioned that it is also Commissioner Allen's recommendation. MR. PIGNALBERI pointed out that the recommendations are stated differently. For example, Co-Chair Cowdery's recommendation, which is the same as recommendation 496 on the master list, states: Determine the true cost/benefit of selling the power plant and/or privatizing its operation, and compare to shutting it down and buying electric power from local utilities. MR. PIGNALBERI further explained that this recommendation only pertains to the Fairbanks power plant. It doesn't address the telephone and water utilities that the university owns and operates. In contrast, Commissioner Allen's recommendation encompasses all utilities: Selling U of A utilities to private regulated utility in Anchorage, Juneau, and Fairbanks. CO-CHAIR COWDERY said he would like to have his language approved. MR. PIGNALBERI indicated that if Commissioner Allen returns, he can move the other part of his recommendation. CO-CHAIR WARD again moved the recommendation [Cowdery-(2)]. COMMISSIONER FINK seconded the motion. COMMISSIONER VALESKO indicated he might support this. He interpreted the motion as not recommending doing it but rather determining the true cost and benefit of selling or privatizing it. He emphasized that he stands firmly in favor of determining those kinds of things. The motion [Cowdery-(2)] passed unanimously. Sale of State Land CO-CHAIR WARD made a motion to adopt recommendation Fink-(2): "Put up state land for sale similar to open to entry for oil leases." [THIS WILL BE WITHDRAWN, THEN LATER MOVED AGAIN AND ADOPTED.] UNIDENTIFIED SPEAKER seconded the motion. COMMISSIONER VALESKO asked if it was a subcommittee recommendation. MR. PIGNALBERI replied in the affirmative, 404 on the master list. The promotion and sale of Alaska public land should be privatized including 5,000 parcels that have been foreclosed on, relinquished or otherwise returned to the state for private ownership. MR. PIGNALBERI indicated recommendation 404 is narrower than Commissioner Fink's recommendation, and its value is maybe to provide some contextual background - but it is about 5,000 parcels that the state is taking back from private owners. COMMISSIONER FINK pointed out that recommendation 404 says "including 5,000," not "only the 5,000." CO-CHAIR WARD suggested that Commissioner Fink's recommendation includes the 5,000 parcels without saying it. COMMISSIONER FINK agreed. UNIDENTIFIED SPEAKER remarked that he is happy with it. COMMISSIONER THOMAS said she thought Commissioner Fink's recommendation may be a little more clear to his intent. She said she remembers "this" saying that the promotion and sale of the land should be privatized, without a lot of language about actually selling it. She indicated the commission may want to mesh those a little more. MR. PIGNALBERI pointed out that 404 recommends the handling of the sale transactions. COMMISSIONER FINK said his recommendation addresses putting the land up for sale with the idea that it raises money and puts land on the tax base for local governments for all kinds of development. MR. PIGNALBERI supported moving both recommendations separately. CO-CHAIR WARD suggested combining them because he supports Commissioner Fink's recommendation to move land into private ownership. COMMISSIONER FINK agreed. He then referred to periods of time since statehood when the state had made a lot of land available, with auctions held over the counter. However, that came to a screeching halt. CO-CHAIR WARD asked whether there would be an objection to combining the two - forgetting the political ramifications. UNIDENTIFIED SPEAKER replied, not as long as the combination is in the nature of being permissive. CO-CHAIR WARD indicated that is what he was trying to do. He said he liked the first part of "that one." MR. PIGNALBERI read the following proposed amendment: "Put up state land for sale similar to open entry for oil leases." The promotion and sale of Alaska public land "subject to this recommendation" should be privatized including 5,000 parcels that have been foreclosed on, relinquished or otherwise returned to the state for private ownership. COMMISSIONER THOMAS said the state has a disposal program. She suggested perhaps saying "accelerated." UNIDENTIFIED SPEAKER remarked, "We don't have anything like open to entry. Open to entry states - opens up the whole state - as nominates." CO-CHAIR WARD commented, "We have open entry in there. We've given the division plenty of time to do this." COMMISSIONER THOMAS said that is why she hates to see them drag their feet. CO-CHAIR WARD withdrew his original motion and moved the following: Put up state land for sale similar to open entry for oil leases. The promotion and sale of Alaska public land subject to this recommendation should be privatized including 5,000 parcels that have been foreclosed on, relinquished or otherwise returned to the state from private owners. CO-CHAIR COWDERY seconded the motion. COMMISSIONER VALESKO objected. Upon a roll call vote, the motion carried by a vote of 7-1: Senator Adams, Commissioners Fink, Harper, Notti and Thomas, and Co-Chairs Ward and Cowdery, voted "yea"; Commissioner Valesko voted "nay." [THIS MOTION WILL BE RESCINDED]. COMMISSIONER VALESKO indicated that by having some private entity take state land and sell it, it turns it into a profit-making enterprise. UNIDENTIFIED SPEAKER asked Commissioner Valesko if he is in favor of the first half. COMMISSIONER VALESKO replied he is; however, he is not in favor of the second half. CO-CHAIR WARD moved to rescinded his motion and asked unanimous consent. Hearing no objections, the motion was rescinded. CO-CHAIR WARD moved to adopt recommendation Fink-(2), "as is." There being no objection, the recommendation was adopted. CO-CHAIR WARD moved to adopt recommendation 404: The promotion and sale of Alaska public land should be privatized, including 5000 parcels that have been foreclosed on, relinquished or otherwise returned to the state from private owners. [THIS MOTION WILL BE WITHDRAWN]. COMMISSIONER FINK seconded the motion, adding that he is neutral on it. SENATOR ADAMS objected. COMMISSIONER VALESKO also objected. He said the commission was going to try to go through the commissioners' recommendations, but now they were starting to tack on things that came out of the subcommittees. CO-CHAIR WARD concurred and withdrew his motion. There being no objection to withdrawing the motion, it was so ordered. CO-CHAIR WARD moved recommendation Cowdery-(9), also number 188 on the master list: The legislature shall devise a task-based budget format and require, by statute, that the governor's budget be submitted in that format. SENATOR ADAMS objected because [the legislature] is currently working on more of a performance-based budget. Both the Senate and the House have started identifying missions and measures; the legislature has been working on this process for the last two years. He emphasized that the commission should let the legislature's finance committees continuing working on that. Senator Adams said he believes the commission is going in the wrong direction. MR. PIGNALBERI said performance measurement indicators (PMIs) are an important step forward in the budget process, but it must be cost-based. One has to know, for example, how many dollars are being spent on Tudor Road for maintenance or on the access road from the airport into town. Task-based budgeting gives that information, and then one can design one's PMIs accordingly. CO-CHAIR WARD said he doesn't believe this is in conflict with the current (indisc.--interrupted) the legislature whatsoever. He said he believes it reinforces it. COMMISSIONER THOMAS spoke in support of the recommendation. She said this is by rights the same language as activity-based budgeting. Furthermore, this is the tool needed to go farther in this process. Upon a roll call vote, the motion to adopt Cowdery-(9) carried by a vote of 5-3: Commissioners Fink, Notti and Thomas, and Co- Chairs Ward and Cowdery, voted "yea"; Senator Adams and Commissioners Harper and Valesko voted "nay." Child Support CO-CHAIR WARD made a motion to adopt recommendation Harper-(3): Issue Request for Proposal for the purpose of all collection of Court Systems-fines, issuing of restraining orders, warrants et cetera. Likewise as well as for collection of Non-payment of child support enforcement. [THIS WILL BE WITHDRAWN, THEN MOVED AGAIN, AMENDED AND ADOPTED.] CO-CHAIR WARD asked whether there is a difference between Commissioner Harper's and Senator Adams' recommendations regarding child support. COMMISSIONER HARPER mentioned that he would have to leave in five minutes. He asked if the commission will be meeting again this afternoon. CO-CHAIR COWDERY said he believes the commission can finish within an hour. CO-CHAIR WARD withdrew his motion. MR. PIGNALBERI noted there is a slight difference between the two versions. He read Senator Adams' recommendation, which is narrow and only pertains to Child Support Enforcement Division (CSED) collections: Privatize the collection of delinquent child support debt owed to the State of Alaska. MR. PIGNALBERI noted that Harper-(3) [see above] also pertains to the Alaska Commission on Postsecondary Education, and there may be [Alaska Department of] Fish and Game collections. Commissioner Harper's interpretation is that the collection of all fines that are presently assigned to the Department of Law should be contracted out or an RFP should be issued, Mr. Pignalberi said. He asked Commissioner Harper if he had characterized his recommendation correctly. COMMISSIONER HARPER affirmed that. CO-CHAIR WARD restated his motion to adopt Harper-(3). COMMISSIONER VALESKO objected, saying this might mean that the lack of any collection because of the unwillingness of the Internal Revenue Service (IRS) to reveal documentation regarding social security numbers to private contractors. He noted that one report he had read says that is a serious concern. He concluded that it may hinder the collection. COMMISSIONER THOMAS said she believes the latest information the commission received clarified that, and was contradictory. MR. PIGNALBERI further explained that this issue is being worked out in several states. He suggested all that is needed is a qualifier that says, "We don't want to do this at the expense of losing federal funds." UNIDENTIFIED SPEAKER said the point was that the IRS information would help to locate people. MR. PIGNALBERI agreed. UNIDENTIFIED SPEAKER remarked, "I never got that impression that it was totally answered, that the feds had said there was certain information they have which is valuable for collection of debts in Alaska - they would not provide other than to a government agency. I thought they said that." COMMISSIONER THOMAS said she believed that the Legal Services Division of the Legislative Affairs Agency had provided an opinion after that. CO-CHAIR WARD contended that Legal Services had not interpreted it that way. "The strings that came from the federal monies were not what was stated by the federal government." UNIDENTIFIED SPEAKER indicated the discussion was about federal information, not money. UNIDENTIFIED SPEAKER clarified that he was talking about whether the IRS was willing to share that information to a private entity. CO-CHAIR WARD said he believes the [Senate] Judiciary Committee will be looking at this issue. SENATOR ADAMS suggested dividing the question. One (1) would privatize delinquent child support that is owed to the state; two (2) would include the first sentence of Commissioner Harper's recommendation. He added that if the commission had future problems, the motion could be withdrawn. There being no objection, the motion carried. CO-CHAIR WARD renewed his motion to adopt Harper-(3). COMMISSIONER VALESKO objected. He asked if the motion is, "Issue Request for Proposal for the purpose of all collection of court system fines, issuing of restraining orders, warrants, et cetera - likewise, as well, for collection of nonpayment of child support enforcement." CO-CHAIR WARD replied yes. COMMISSIONER VALESKO expressed concern that if there is going to be a proposal for collection, it is going to get into the IRS consideration and this may become a problem. UNIDENTIFIED SPEAKER said he would like to see Legal Services' opinion. He indicated this information can be provided to him tomorrow or the following day. CO-CHAIR WARD said the commission can always rescind its action. MR. PIGNALBERI referred to Commissioner Harper's recommendation. He stated: We're talking about three different things. We're calling for an RFP for court system fines, which I don't think is very controversial. However, in the subcommittees, I know when they talked about putting out an RFP for restraining orders and warrants ... there was testimony that that could be dangerous, that really does require somebody with some training to serve a warrant because they're subject to abuse from somebody ... at the time they're served. And the two aren't necessarily related. And I just wonder if Commissioner Harper would like to propose moving his recommendation to include only the court system fines. MR. PIGNALBERI indicated the commission could come back and revisit the restraining orders and warrants. COMMISSIONER HARPER said that sounds like an excellent idea. CO-CHAIR WARD offered the following, which Mr. Pignalberi read: Issue a request for a proposal for the purpose of all collection of court system fines. Upon a roll call vote, the motion carried by a vote of 7-1: Senator Adams, Commissioners Harper, Fink, Notti and Thomas, and Co-Chairs Ward and Cowdery, voted "yea"; Commissioner Valesko voted "nay." CO-CHAIR WARD offered a motion to adopt Adams-(2). MR. PIGNALBERI noted that the commission needed to vote on the main motion for Commissioner Harper's recommendation. CO-CHAIR WARD moved to adopt Harper-(3), as amended. MR. PIGNALBERI read: Issue a request for a proposal for the purpose of all collection of court system fines. COMMISSIONER VALESKO said he thought he'd just voted against that a minute ago. CO-CHAIR WARD said to Commissioner Valesko that he'd voted against the amendment separating it. COMMISSIONER VALESKO stated for the record that he didn't vote against the amendment to split it. He added, "I did vote against it, but I didn't understand what I was voting against. To amend it, I'm for that." UNIDENTIFIED SPEAKER asked Commissioner Valesko what his stand is on the main motion. COMMISSIONER VALESKO said he is opposed to it. CO-CHAIR WARD again moved Harper-(3), as amended. Upon a roll call vote, the motion carried by a vote of 7-1: Senator Adams, Commissioners Harper, Fink, Notti and Thomas, and Co-Chairs Ward and Cowdery, voted "yea"; Commissioner Valesko voted "nay." CO-CHAIR WARD made a motion to adopt privatization collection, Adams-(2). COMMISSIONER VALESKO objected. SENATOR ADAMS explained that CSED is responsible for collection of all child support obligations. He said he feels this is appropriate for current obligations; however, past debts are difficult to collect. It would probably be more effective to turn the past debts over to a collection agency. He pointed out that the division supports this proposal. CO-CHAIR COWDERY seconded the recommendation. COMMISSIONER FINK read Senator Adams recommendation (2): Privatize the collection of delinquent child support debt owed to the State of Alaska. (Revenue 2) COMMISSIONER FINK turned the members' attention to "Revenue 2," which states: Thorough review and analysis by an independent efficiency expert with regard to "CSED." The review should include compliance with state and federal requirements. Additionally, a cost/benefit analysis should be performed. COMMISSIONER FINK asked if the two were the same. SENATOR ADAMS said he did not have his packet in front of him to refer to "Revenue 2." COMMISSIONER FINK asked, "Isn't that child support question ... also one that -- this cloud of the federal people opening their books to a private firm? And 'Revenue 2' just says they want to review an analysis, and it should include compliance with state and federal requirements." COMMISSIONER VALESKO said he'd heard Senator Adams saying that he is not necessarily making the recommendation of "Revenue 2" but is looking at the past debt owed to the state going to a collection agency. SENATOR ADAMS agreed. COMMISSIONER THOMAS recalled testimony of the subcommittee that if it is so many days overdue, it is considered delinquent. She said she can't remember whether that is 60 or 90 days. UNIDENTIFIED SPEAKER indicated the state doesn't get into collections unless there is delinquency. COMMISSIONER THOMAS replied yes, it is all paid through the state. UNIDENTIFIED SPEAKER commented, "If you and I were divorced, and I was ordered to pay you money, I couldn't pay you. I'd have to pay the state." COMMISSIONER THOMAS and CO-CHAIR COWDERY concurred. UNIDENTIFIED SPEAKER said it seems silly. COMMISSIONER THOMAS agreed. COMMISSIONER VALESKO asked whether Senator Adams had said the department is in favor of doing this. SENATOR ADAMS affirmed that CSED supports this proposal. COMMISSIONER VALESKO asked if there is a problem for a private agency to obtain information from the IRS, for example. SENATOR ADAMS said he would defer to the department. COMMISSIONER VALESKO noted that he would be voting in opposition to the recommendation. CO-CHAIR COWDERY asked if the department was online. UNIDENTIFIED SPEAKER said they'd gone to lunch. Upon a roll call vote, the motion to adopt [Adams-(2)] carried by a vote of 7-1: Senator Adams, Commissioners Harper, Fink, Notti and Thomas, and Co-Chairs Ward and Cowdery, voted "yea"; Commissioner Valesko voted "nay." COMMISSIONER HARPER announced he would be off-line until after lunch. SENATOR ADAMS informed members that he would be off-line that afternoon but would be available until noon. Four Dam Pool, Electrical Intertie and Bradley Lake CO-CHAIR WARD made a motion to adopt recommendation Fink-(12) regarding the sale of the Four Dam Pool. [Commissioner Fink's recommendation 12, as found on the commission's web page, number 12, stated: Sell or solicit proposals for a sale of: Electrical Intertie Four/dam pool for fair market value Bradley Lake Either get a consultant to try to find an economical method of sale or request proposal ideas from potential buyers. (increase income)] COMMISSIONER FINK seconded the motion. SENATOR ADAMS asked whether [the state] is getting true and full value, and whether anything in the recommendation states that "we" follow AIDEA's ideas on how to recover on the Four Dam Pool. He thinks it cost the state $483 million, he said, and communities wanted to buy it for $83 million. He emphasized that he wants to be sure, in the motion, that [the state] is getting the true and full value. COMMISSIONER FINK elaborated: "Sell or solicit proposals for a sale of the Four Dam Pool for fair market value. Either get a consultant to try to find an economical method of sale or request proposal ideas from potential buyers." He emphasized that it is to sell, if possible, for fair market value. He also indicated he is not positive that they can find an economical way of doing it. SENATOR ADAMS asked who is going to give out the fair market value. Is it the communities or the consultant? Or should [the state] go with AIDEA's letter of recommendation? UNIDENTIFIED SPEAKER remarked, "We left that open, I understand." COMMISSIONER FINK remarked that if there aren't a couple of bidders, that is a problem, in his view. CO-CHAIR WARD said Commissioner Fink's recommendation doesn't tie the state to only the communities. COMMISSIONER FINK agreed, noting that his recommendation doesn't mention communities. CO-CHAIR WARD remarked that it doesn't exclude them either. COMMISSIONER FINK emphasized that he is talking about fair market value. CO-CHAIR WARD pointed out that he had moved the recommendation because it doesn't lock the state into the communities or exclude them. He added, "What it does is it says to put it on the table and see what comes forth. And if something more tangible than the communities, or Mike Gravel, come forth, then it's something for the legislature to consider, with the proper revenue streams maybe coming off for other things." MR. PIGNALBERI urged members to look at the report from the Hydro-Electric Subcommittee, which recommended with regard to the intertie: "Keep the status quo, transfer of the intertie to the utilities of the current (indisc.) not appear to result in significant benefits to either the state or the participating utilities." UNIDENTIFIED SPEAKER interjected, "His motion was just about the Four Dam Pool, right?" UNIDENTIFIED SPEAKER affirmed that. MR. PIGNALBERI indicated Fink-(12) included all of them, however. TAPE 99-23, SIDE B MR. PIGNALBERI said the subcommittee report treats them separately and has individual recommendations for each: they basically said the Four Dam Pool probably should be sold, but Bradley Lake and the intertie should not be, and they gave their reasons in the subcommittee report. UNIDENTIFIED SPEAKER indicated the subcommittee [recommendation] limits selling it to one of the local utilities. MR. PIGNALBERI said it is to the electric utilities within the communities they serve. UNIDENTIFIED SPEAKER noted that this proposal clearly does not do that. This says, "Whoever will pay the most money." MR. PIGNALBERI suggested dividing the recommendation into three parts. UNIDENTIFIED SPEAKER said he was in favor of all three, and it wasn't necessary to divide it. COMMISSIONER VALESKO supported dividing the question because the subcommittee did have diverse recommendations. MR. PIGNALBERI suggested that part (1) would be: "Sell or solicit proposals for the sale of electrical intertie." COMMISSIONER FINK said he seconded the motion. He thinks the subcommittee recommended against this, he explained, and they said it had no value because of the contracts they have with the user utilities. He himself had added the second paragraph in order to get a consultant to come up with an economical method of sale or to request proposal ideas for potential buyers. If the subcommittee is correct that perhaps it isn't salable, don't sell it. Regarding recommendation 12, he emphasized the desire to sell them all, but only if a fair value can be obtained. CO-CHAIR WARD objected to dividing the recommendation. COMMISSIONER VALESKO said the subcommittee recommended selling the Four Dam Pool but not the electrical intertie or the Bradley Lake project. If the commission acted affirmatively to selling all of them, it would be disregarding the subcommittee in that case. COMMISSIONER FINK stated, "I understand the way [Commissioner] Don [Valesko] is reading it, but I thought by the qualifying paragraph I made is that's not true that you have to sell all three of them. For example, Bradley Lake has terrible difficulties in selling it because it's got different sets of bonds." He said a consultant may come up with a manner to do it for Bradley Lake and the intertie, but the way they currently stand, nobody will want to buy them. UNIDENTIFIED SPEAKER said he understands this. COMMISSIONER FINK noted that sometimes various consultants come up with a method to do a particular thing to achieve their goals, but sometimes one can't find a method. He indicated the subcommittee had seemed to be more [interested] in keeping ownership in the state, or certainly limiting it to the local utilities. Commissioner Fink emphasized that he doesn't agree with that. He restated that it ought to be sold if it's saleable and we can get a fair market price for it, but not if that isn't the case. Furthermore, he recognizes the problems on the intertie and Bradley Lake. MR. PIGNALBERI suggested modifying the recommendation to read: Sell the Four Dam Pool but solicit proposals for the electric intertie and Bradley Lake. COMMISSIONER FINK replied: The qualification really applies to all of them because the Four Dam Pool, according to the subcommittee, has contracts for sale, which will make it undesirable for anybody to buy other than those municipalities. So, I don't want it sold either if they can't get that thing modified so that it's a salable commodity. The way it currently is, they have locked in low rates, as I understand from the subcommittee, and nobody is going to want to pay a decent price for it other than those utilities. I don't want to sell it that way either. So "on the condition of making it a salable product" would apply to all three of them. CO-CHAIR WARD agreed that if it isn't economically sound, then it isn't done. CO-CHAIR COWDERY asked Mr. Pignalberi to read the motion. MR. PIGNALBERI responded: Sell or solicit proposals for sale of electrical intertie, Four Dam Pool, Bradley Lake for fair market value. Either get a consultant to try to find an economical method of sale or request proposal ideas from potential buyers. Upon a roll call vote, the motion to adopt [Fink-(12)] carried by a vote of 4-2: Commissioners Fink and Notti, and Co-Chairs Ward and Cowdery, voted "yea"; Senator Adams and Commissioner Valesko voted "nay." Alaska Housing Finance Corporation (AHFC) CO-CHAIR WARD asked how Commissioner Wuerch's recommendation, which is similar to number 580 on the master list, fits in with Fink recommendation (7). FINK-(7): Withdraw AHFC from the secondary mortgage market wherein taxable bonds or assets of AHFC would be used. WUERCH (AHFC Subcommittee recommendations): AHFC 2: We recommend combining other bonding entities with AHFC. In particular, we think that AIDEA, the Postsecondary Loan Program, and perhaps the Municipal Bond Bank all should be combined under the AHFC umbrella. AHFC 3: The commission should consider privatizing or otherwise segregating the entirety of AHFC under a state charter that requires it to provide the public services it currently provides and pay dividends on net income above a certain level. UNIDENTIFIED SPEAKER said it is totally different from his recommendation because he is trying to shrink AHFC. As he understands it, the other recommendation joins the various loan programs. UNIDENTIFIED SPEAKER said he believes it makes it much more difficult to get the government out of it. Furthermore, it will increase the size of government rather than cut it. Therefore, he doesn't support that. CO-CHAIR WARD made a motion to adopt recommendation Fink-(7) and asked unanimous consent. COMMISSIONER FINK seconded the motion. He explained that AHFC originally was a secondary mortgage market for Alaska when there weren't others. He believes the state has a private market. The subcommittee had reported that AHFC mostly sells bonds for government programs, which nobody else other than a municipality would sell. It is the government's arm that sells bonds for the community for the "first buyer," for some veteran programs, and so forth. He has limited cutting AHFC back only in the private sector market, and not in selling tax-free bonds but only tax bonds. So it would still be in all of the government-insured program. He noted that AHFC had indicated it is getting out of that; this will help it do that. He recalled that AHFC had testified they issue two or three different bonds, and one is in the secondary mortgage market. In his view, the private market is adequate to carry it - AHFC doesn't need to do that. UNIDENTIFIED SPEAKER recalled that Mr. Crawford's testimony had been that there was plenty of room for AHFC in the secondary market. They didn't see it as competing. COMMISSIONER FINK disagreed. He said Mr. Crawford is in the business, and, for whatever reason, he is going to go along with AHFC. Commissioner Fink said he was convinced by testimony that a governmental agency has to issue those tax-free bonds. Therefore, he is not objecting to that. UNIDENTIFIED SPEAKER referred to the housing market. COMMISSIONER FINK said the housing market is in some kind of government-insured market. UNIDENTIFIED SPEAKER recalled that a testifier had said, "If you don't have AHFC loaning money, they won't be building as many houses and, therefore, property values will go down - or up." The other testifier had said, "Moving them out of there is going to cause the opposite." One was an attorney and the other a builder. COMMISSIONER FINK indicated this isn't a big item. It is trying to get government out of an area that is private enterprise in every other state of the Union. CO-CHAIR WARD explained that he'd made the motion because he wanted AHFC to be submitted forward to the legislature for consideration. This may open it up to a very broad spectrum of what AHFC is. He said he doesn't believe this recommendation will hurt the housing market. UNIDENTIFIED SPEAKER also voiced the belief that it wouldn't hurt the housing market. He further stated: We have built up - in the AHFC, there's so many ways - we've built up separate governments. Different agencies get so much money coming in that they become a government [un]to themselves, and AHFC is that way. They have so much money. A lot of legislators like it because it's a cash cow. Whenever you need money, you can go over there and steal some from it because they've got surplus, and I'm trying to cut that down. I'm trying to make government more open, and it's an area where there is a very big market in the United States. It's equally available today now to Alaska, where it wasn't when we originally passed the law. So as long as the mover wants to stick with it, I want to stick with it too. Upon a roll call vote, the motion to adopt [Fink-(7)] carried by a vote of 5-2: Commissioners Fink, Notti and Thomas, and Co- Chairs Ward and Cowdery, voted "yea"; Senator Adams and Commissioner Valesko voted "nay." Homestead Law CO-CHAIR WARD made a motion to adopt recommendation Fink-(3). A homestead law. CO-CHAIR WARD seconded the motion. UNIDENTIFIED SPEAKER objected because he was not part of any discussions on the topic. CO-CHAIR COWDERY spoke in support of the motion. He said homesteading gives Alaska's young people the opportunity to build sweat equity into property. COMMISSIONER FINK said it is a sweat equity loan: someone without any money can get a piece of property. Furthermore, it does take land out of state ownership and put it in the hands of private individuals. If they happen to select land within a municipality, it would be added to the tax base of a municipality. He emphasized that it wouldn't bring money directly into the state because if people on homesteads pay anything, it is a nominal application fee. CO-CHAIR COWDERY commented that homesteading helped the tax base in Anchorage. UNIDENTIFIED SPEAKER indicted homesteads would most likely be built 20 to 150 miles away from populated areas. They would be in the boroughs, not in the downtown municipal areas. COMMISSIONER FINK remarked that the homesteaders would still pay taxes to the big boroughs. It is part of the concept of making state lands available to people. In this case, it is sweat equity, not money. COMMISSIONER VALESKO objected for clarification. SENATOR ADAMS also voiced his objection, then stated: It's no matter how good or bad the Homestead Act is, it's basically what we're doing. We're going beyond the policies of, and recommendations of, what the privatization committee has (indisc.). And we're just doing anything we feel like. And basically I'd like to have a motion that ... the AIDEA bonds in the Red Dog Mine be sold to the Northwest Arctic Borough. And that's privatizing something like that, but it wasn't a recommendation that came up from the citizens that were on these privatization task forces. We're just coming up with different ideas there. CO-CHAIR COWDERY indicated it was stated from day one that that would happen. Both the subcommittees and the commission will have an opportunity to make recommendations. [Changing the language of the recommendation was discussed.] MR. PIGNALBERI read: The legislature shall pass a law making land available for homesteading. Upon a roll call vote, the motion carried by a vote of 5-2: Commissioners Fink, Notti and Thomas, and Co-Chairs Ward and Cowdery, voted "yea"; Senator Adams and Commissioner Valesko voted "nay." There being no further discussion or business before the Commission on Privatization and Delivery of Government Services, Co-Chair Cowdery adjourned the meeting at 12:10 p.m.