COMMISSION ON PRIVATIZATION AND DELIVERY OF GOVERNMENT SERVICES Anchorage, Alaska December 13, 1999 9:15 a.m. COMMISSION MEMBERS PRESENT Representative Cowdery, Co-Chair Senator Ward, Co-Chair Senator Adams Representative Brice Bill Allen, Former Mayor of Fairbanks 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 George Wuerch, Alaska Municipal League COMMISSION MEMBERS ABSENT All members present COMMITTEE CALENDAR Discussion and adoption of recommendations regarding the University of Alaska; the draft transmittal letter, report and legislation; the Alaska Railroad Corporation; the collection of Alaska Court System fines; moving the legislative sessions to Anchorage; and the Department of Administration [Note: Several items were addressed more than once] 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 12/01/99, 12/07/99 and 12/08/99. 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 99-26, SIDE A [NOISE INTERFERENCE AT THE BEGINNING OF THE TAPE] CO-CHAIR WARD called the Commission on Privatization and Delivery of Government Services meeting to order at 9:15 a.m. All members were present: Representatives Cowdery and Brice; Senators Ward and Adams; and Commissioners Allen, Fink, Thomas, Harper, Notti, Valesko and Wuerch. Marco Pignalberi, Commission Director, was also present. APPROVAL OF PREVIOUS MINUTES CO-CHAIR WARD announced that the minutes had been packed away for the convening of the legislature and the move to the new office space. He said the minutes would be forwarded and there would be ample opportunity for the commissioners to make any comments. UNIVERSITY OF ALASKA MARCO PIGNALBERI, Commission Director and Legislative Assistant to Representative John Cowdery, said he was informed by the University of Alaska that they will not be able to furnish their report due to time constraints; however, it will be provided in the future. Furthermore, the university will not be providing the Extended Campuses Dollar Per Student Study because it would be a major project. DRAFT TRANSMITTAL LETTER MR. PIGNALBERI read into the record the following draft transmittal letter, dated December 21, 1999: Dear Governor Knowles, Madam President Pearce and Speaker Porter: Please consider this letter, the accompanying report and appendices as satisfaction of the requirements of Chapter 61 SLA (Session Laws of Alaska) 1999. The Commission on Privatization and Delivery of Government Services met 13 times over an 18-week period. We solicited public participants to work in 20 different subcommittees that focused on each department in state government, the University of Alaska, the legislature and the court system. Additional panels focused on state-owned hydroelectric projects, the Alaska Railroad Corporation and the Alaska Housing Finance Corporation. Through various stages of consideration, approximately 250 Alaskans volunteered to work on the subcommittees. Collectively, they participated in more than 200 meetings. In all, we made 400 recommendations concerning privatization and delivery of government services. The accompanying report includes a Master List of Recommendations. They are cross-referenced to each department and subcommittee report. The full subcommittee reports are included as appendices. This volume of work represented by the subcommittee reports is extraordinary. We have never seen such a prolific contribution by Alaskan citizens to their state government. Indeed, while the commission heard a presentation from each subcommittee and reviewed each of their reports, it was impossible to assimilate and debate all the information within the time available. Therefore, the commission recommends the entire corpus of work for further consideration by the administration, legislature and a successor privatization commission. In the meantime, the commission adopted 19 recommendations for immediate consideration. These recommendations were selected in large part because of a clear consensus among commissioners. These 19 recommendations are attached as Table A. If there is a consistent theme that resounded from nearly every subcommittee, it is this: state budget documents are frustrating and incomprehensible to the citizens of the state. Subcommittee members and commissioners wanted to discover what costs accompany specific activities performed by state government. They could not. Our budget structure and format do not serve the public and should be changed or supplemented to accommodate public interest. We learned from our review of federal programs that the most fundamental privatization task is to make a distinction between "core governmental responsibilities" and discretionary activities. Core governmental responsibilities are not candidates for privatization. All others are. In 1998, Congress enacted the Federal Activities Inventory Reform Act. Basically, this law required the executive branch to make a determination about which of its activities are not inherently governmental activities. We adapted this federal law to Alaska Statutes, and it is presented in a draft bill for which we urge your support. We wish to record that the commission and its subcommittees enjoyed broad cooperation, even enthusiasm, from many departments in the executive branch. We commend the departmental liaisons who enriched the experience of subcommittee members with their erstwhile responses to our inquiries. Finally, the commissioners and subcommittee members wish to express appreciation for the opportunity to constructively involve themselves in state government. We view our work as a first, small step toward a state government that is prepared to meet the challenges of the impending millennium. Yours truly, Senator Jerry Ward, Co-Chair Representative John Cowdery, Co-Chair DRAFT REPORT CO-CHAIR WARD asked Mr. Pignalberi to summarize the draft report for the record. MR. PIGNALBERI explained the following major sections of the draft report: I. CONTEXT Section I is simply an overall statement of how widespread privatization activities are around the world and the driving forces. II. INTERNATIONAL PRIVATIZATION Section II provides examples of international privatization activities. A host of examples of international privatization activities in other countries is yet to be inserted. III. U.S. GOVERNMENT PRIVATIZATION Section III includes privatization of activities on the national level. Other examples will be inserted including several reports conducted by the General Accounting Office of Congress and the National Conference of Legislators. IV. PRIVATIZATION IN THE 'LOWER 48' Section IV includes examples of privatization in the Lower 48. V. PRIVATIZATION DEFINITIONS Section V is important for the understanding of a report on privatization. VI. PRIVATIZATION IN ALASKA Section VI refers to the work of this commission. Included are examples of privatization currently occurring in Alaskan cities. The second paragraph talks about contractual expenditures and the state budget. The dollar figure has yet to be included, however. In addition, SB 33 specifically required the commission to look into the state procurement policies and procedures. Although the commission did not develop much information, it is necessary to put in the record what the commission did discover. It also addresses the process and how the work was accomplished, including the presentation of reports to the commission. VII. RECOMMENDATIONS ADOPTED BY 12/13/99 Section V refers to the number of recommendations advanced by the subcommittees. One table contains the 19 recommendations that were passed by the commission. Another table contains the four recommendations that was failed by the commission. The appendix is the master list of all the recommendations by the subcommittees and the commission. MR. PIGNALBERI noted that the legislative subcommittee recommendations were accidentally omitted from the master list but it would be updated today. The full unabridged reports with attachments will be provided to the governor, Senate President and Speaker of the House. A report will also be provided for legislative archives. The term "unabridged" means that the reports will include all the attachments of the committee reports. He continued: VII. UNIQUE ALASKAN SITUATION [Note: The report had two sections labeled "VII"] Section VII applies to ongoing work to the unique Alaskan situation. This also includes rural Alaska because of the interest shown. VIII. THE NEXT STEP Section VIII is simply a three-step process. IX. BARRIERS TO PRIVATIZATION Section IX includes articles that have already been read. X. RECIPE FOR SUCCESS Section X includes a general consensus around the country -six or seven steps that must be performed to accomplish a successful privatization program. XI. INTERNAL CRITIQUE Section XI includes the internal critiques that would have made the process better. It is up to the commissioners to decide on whether or not to include this section. XII. BIBLIOGRAPHY Section XII includes all the reports that have been collected and incorporated into the report. ALASKA RAILROAD CORPORATION SENATOR ADAMS made a motion to delete Recommendation 16: The commission recommends to the legislature that it consider placing the Alaska Railroad Corporation under the Executive Budget Act. UNIDENTIFIED SPEAKER seconded the motion. CO-CHAIR WARD requested a roll call vote. The motion carried by a vote of 7-4. Senator Adams, Representative Brice and Commissioners Allen, Harper, Notti, Valesko and Wuerch voted "yea." Co-Chairs Ward and Cowdery and Commissioners Fink and Thomas voted "nay." COLLECTION OF COURT SYSTEM FINES SENATOR ADAMS turned attention to Recommendation 9: The commission recommends issuing a request for proposals [RFP] for the purpose of all collection of court systems fines. SENATOR ADAMS noted that the collection functions of the Department of Law prepared by Joan Kasson [Special Assistant, Office of the Attorney General] states that the department does a cost-effective job of handling thousands of collections for the state in a wide variety of areas. The department believes it is unlikely that a private firm would be willing to handle this service for the state at less cost. Senator Adams expressed his belief that the statements made in the previous meeting were too broad. He also thought that the commission was only looking at child support enforcement collections. He asked the maker of the recommendation to explain it further. COMMISSIONER WUERCH said he was among the group that supported the recommendation. The intent was to take a look at all of the functions identified by the subcommittees as possible targets for contract servicing. It appeared that if there were professional billing agencies and collection firms that could do the same more cheaply and/or effectively without burdening the regulatory function, then it should be done. He said the Municipality of Anchorage is on the threshold of using a private firm to bill insurance companies for patients who are transported by the ambulance service. The preliminary indications are that it will be successful both financially and in equity because everybody will be treated the same, and everybody will have to pay. SENATOR ADAMS asked Commissioner Wuerch whether he wants Recommendation 9 to remain on the list. COMMISSIONER WUERCH replied yes, because it was worded in the contents as starting with an RFP. SENATOR ADAMS announced that he will not be making a motion to move this recommendation. He added that the state has taken over some functions of the Municipality [of Anchorage], as well as functions in corrections and the court system, which need be looked at. MOVING THE LEGISLATIVE SESSIONS TO ANCHORAGE CO-CHAIR WARD made a motion to move the legislative sessions to Anchorage - Legislative Subcommittee Recommendation 2. UNIDENTIFIED SPEAKERS seconded the motion. CO-CHAIR WARD requested a roll call vote. The motion carried by a vote of 6-5. Co-Chairs Ward and Cowdery and Commissioners Fink, Notti, Thomas and Wuerch voted "yea." Senator Adams, Representative Brice and Commissioners Allen, Harper and Valesko voted "nay." UNIVERSITY OF ALASKA Power plant COMMISSIONER ALLEN referred to Recommendation 6: The commission recommends determining the true costs/benefits of selling the power plant and/or privatizing its operation, and compare to shutting it down and buying electric power from local utilities. COMMISSIONER ALLEN explained that if the state sells the power plant at the University of Alaska Fairbanks, the heating source for the Fairbanks campus will be eliminated. He suggested making a recommendation to explore the total true costs and benefits of all utility services provided at the campuses in Juneau, Fairbanks and Anchorage. He also recommended that the property management functions at the University of Alaska be explored in terms of the true costs and benefits associated with privatization. The commission has only scratched the surface of several functions being handled by the university that are prime candidates for so-called outsourcing, he said, citing university housing as an example. It is an unnecessary expense that the state incurs. Furthermore, the trend in the Lower 48 is towards privatization. COMMISSIONER ALLEN made a motion to delete Recommendation 6 and replace it with the following: The commission recommends determining the true costs/benefits of all utilities being provided to the University of Alaska at the three major campuses. SENATOR ADAMS noted that Commissioner Allen's motion deals only with utilities. He asked whether a second motion will deal with housing. COMMISSIONER ALLEN replied that he will look at three areas: utilities, property management and housing. CO-CHAIR WARD suggested that Commissioner Allen make another motion combining all three. COMMISSIONER WUERCH referred to a report that included student services in relation to privatization; he cited food service and the bookstore as examples. He asked Commissioner Allen whether his motion includes those functions as well. COMMISSIONER ALLEN replied no, that is more detail than he is willing to bite off at this stage. CO-CHAIR WARD remarked that there hasn't been a second to the original motion. COMMISSIONER FINK seconded the motion. CO-CHAIR WARD asked Commissioner Allen to restate his motion. COMMISSIONER ALLEN slightly reworded his motion to substitute Recommendation 6 with the following: The commission recommends determining the true costs/benefits of privatizing utilities on the three main campuses of the University of Alaska Southeast, University of Alaska Anchorage, and University of Alaska Fairbanks. COMMISSIONER WUERCH said he believes the only campus that has its own utilities is Fairbanks. The University of Alaska Anchorage is serviced by the municipality, and he believes that the University of Alaska Southeast is serviced by Juneau. CO-CHAIR WARD remarked that this recommendation is just for utilities; it doesn't include water and telephone. UNIDENTIFIED SPEAKER said telephone service is already covered with another motion. COMMISSIONER ALLEN said he is including all utilities: water, sewer and electricity. CO-CHAIR WARD commented that it is relevant because it includes phone service for the other two campuses. It includes all utilities. COMMISSIONER ALLEN emphasized that the University of Alaska Fairbanks is unregulated, and it needs to be regulated. He indicated that by combining water, sewer and electricity with the local, regulated utility systems, the delivery of those services and the maintenance of improvements of the energy structures can be done at a far less cost as an independent system operated by the University of Alaska. Furthermore, if this motion passes and a true costs-benefits study is performed, the results will show a dramatic savings to the state. UNIDENTIFIED SPEAKER said he had voted in support of the original motion based on the wording of the recommendation as a true cost study. But he is not hearing that now, so he will be cautious in how he will vote on the motion now. UNIDENTIFIED SPEAKER reread the motion as follows: The commission recommends that the University of Alaska determine the true costs/benefits utilities at the three main campuses. COMMISSIONER VALESKO said he doesn't have a problem with it. CO-CHAIR WARD asked whether there were any objections to the motion. There being none, the motion was carried. Building maintenance COMMISSIONER ALLEN said he believes property management is a cost-saving endeavor. Improvements at the Fairbanks campus have deteriorated over the years, and the cost of bringing some of those buildings back into compliance exceeds $150 million. When he was involved with the University of Alaska, the funds that had been provided for maintenance were redirected to other things; however, he is not sure that is the case now. Furthermore, outsourcing and requesting a private management company to manage those properties would get more attention, and the economic life of those improvements would be extended because of the preventive maintenance program (indisc.-paper shuffling) that they would get. Right now, the chancellors have the ability to transfer funds, but at the same time, when they transfer funds from a maintenance program to another BRU [budget review unit], or another category, maintenance continues to decline and the cost of maintaining those buildings continues to worsen, resulting in an increased expense to the state. If a third party were involved, the university management and the legislature would be more attentive. CO-CHAIR WARD noted that a certain amount of money has been provided for maintenance in the last two decades for public facilities. The university is not alone in this. COMMISSIONER VALESKO stated concern about the Department of Transportation & Public Facilities (DOT/PF). Although it is the department charged with maintenance, its budget has been cut the most when considering all departments. It has not been the collective will of the legislature for the last two decades to put more money into maintenance, and the danger in that, even if it is privatized, is furthering the leak of money going into maintenance. COMMISSIONER THOMAS stated that she would have to support student housing as a private source because asset managers have the capability of taking care of their assets. In other words, they will provide maintenance dollars to take care of maintenance. Therefore, she would like to see a motion to include privatizing university housing. COMMISSIONER WUERCH said he believes this motion may be consistent with what has been done at the subcommittee level in the last several months. Circumstances have been reviewed to find out how other entities have accomplished this. He cited the success of privatizing housing for the military as an example. He further mentioned that Fairbanks has had notable successes. In addition, the model is very similar in that in the university the land belongs to the university, but the structure and operation of a housing unit can be privatized on publicly owned lands. The same is done on military bases where the land belongs to the United States Department of Defense, while the structure and the operation of a housing unit belongs to a private contractor. He cited the Coast Guard base in Kodiak as an example, which privatizes its entire facility from mowing lawns to serving food. Philosophically, he said, Commissioner Allen is proposing a concept that is right in line with the direction of many of the subcommittees. COMMISSIONER ALLEN voiced agreement with Commissioner Valesko's comments regarding DOT/PF. When he was the commissioner of the Department of Administration, he dealt with that issue daily. Furthermore, items that favorably impress "politicals" receive funding, while those such as maintenance fall by the wayside. Therefore, he is trying to isolate that which is important - maintenance - and have it be handled by a nonpolitical entity, to give it its own "life" so that Alaskans can see what is happening to the state's infrastructure. Typically, deferred maintenance is not understood until it is time to replace something. The state should do maintenance better. instead of waiting for something to collapse like other states do. COMMISSIONER ALLEN made a motion to adopt the following: The commission recommends determining the true costs/benefits of privatizing the property management function of all state facilities. UNIDENTIFIED SPEAKER seconded the motion. COMMISSIONER FINK asked Commissioner Allen whether he is including the university. COMMISSIONER ALLEN replied that through discussions he has heard, he thinks this should be inclusive of all state facilities. Nevertheless, he wondered whether it is too broad. COMMISSIONER FINK remarked that it is awfully broad, and there hasn't been much discussion on it. CO-CHAIR WARD wondered whether it should include trains, boats, planes and helicopters. COMMISSIONER ALLEN replied that those are typically not considered facilities. CO-CHAIR WARD asked Mr. Pignalberi to reread the motion on the table. MR. PIGNALBERI paraphrased as follows: The commission recommends determination of the true costs/benefits to privatize maintenance of all state buildings. UNIDENTIFIED SPEAKER interjected to include the following: the property management functions of all state buildings. UNIDENTIFIED SPEAKER stated that he is concerned with the motion because it is too broad, causing the commission to become bogged down in the identification of buildings. He suggested a motion to focus on buildings and structures of a capital value of "x" amount, so that time isn't wasted on trivia. CO-CHAIR WARD noted that the logic at the legislative finance committee level will take care of those details, which is not to say there shouldn't be a dollar value included, however. REPRESENTATIVE BRICE remarked that there is a pretty clear understanding of what a facility is. However, he is concerned about the specialized, state-owned buildings such as the laboratories. He is concerned about losing the expertise and understanding of what is needed for those state facilities. COMMISSIONER ALLEN noted that he was referring to the true property management functions - the operating components of a building. In his opinion, program implementation is not a proper management function. REPRESENTATIVE BRICE said the requirements for the state labs are not the same as for other buildings. He is concerned that the people who are maintaining or managing these facilities ... [ends mid-speech because of tape change]. TAPE 99-26, SIDE B COMMISSIONER VALESKO referred to the diverse interests of the state and asked whether the state wants to "property manage" the Pioneers Home differently than the state office buildings, for example. He said he'd originally commented on this subject because, according to his understanding, the new state office building is run privately. Therefore, if the motion is to study and look into the true cost of privatization, then he is in favor of it. But if the motion is to recommend privatization without looking into the true cost, then he is opposed to it because the true nomenclature would be "profitization" - allowing a private entity to make a profit from state dollars - not privatization. COMMISSIONER ALLEN said the idea behind this is to determine the cost per square foot, a property management program - in other words, the private versus the public sector. The question is: What will it cost, and what will the benefits be to state government to privatize? MR. PIGNALBERI asked the maker of the motion whether it is his intention to state who should make the determination. CO-CHAIR WARD said the legislature has the ultimate authority to make that determination, working in conjunction with the administration; it doesn't need to be stated. CO-CHAIR WARD called for the question and asked Mr. Pignalberi to reread the motion. MR. PIGNALBERI stated: The commission recommends determination of the true costs/benefits to privatize property management of all state buildings. COMMISSIONER FINK reiterated that the motion is too broad and the commission hasn't laid any groundwork for it. COMMISSIONER THOMAS said she thinks the commission has laid a lot of groundwork to start looking at this type of thing in a general form. She agreed that perhaps this motion is a little premature. COMMISSIONER VALESKO said he looks at it as a sure failure in the legislature because of the several-million-dollar appropriation that will have to go along with it. COMMISSIONER WUERCH also expressed worry that the motion is overly broad. He made a motion to substitute the following language: The commission recommends determination of the true costs/benefits to privatize property management of all University of Alaska buildings. COMMISSIONER ALLEN seconded the motion. CO-CHAIR WARD asked whether there was any objection to substituting the new language. COMMISSIONER NOTTI called for the question. CO-CHAIR WARD requested a roll call vote. The motion carried by a vote of 9-2. Co-Chairs Ward and Cowdery, Senator Adams, and Commissioners Allen, Fink, Harper, Notti, Thomas, and Wuerch voted "yea." Representative Brice and Commissioner Valesko voted "nay." Student housing COMMISSIONER ALLEN made a motion that the commission recommend determining the true costs/benefits of privatization of student housing. SENATOR ADAMS stated his understanding that "property management" is broad enough to encompass that. CO-CHAIR WARD said that is his understanding as well. COMMISSIONER ALLEN noted that the Department of Administration does an excellent job on outsourcing; however, the Division of Retirement and Benefits outsources its claims to a Seattle firm that probably employs 50 to 75 people. It seems that if the state is going to outsource and reduce the cost of state government, it is just as important that the state hire Alaskans to provide these services, he said. It may be true that the expertise required is not available in Alaska. But it seems that if the state is going to contract out work that requires more than 25 employees, the company that has the expertise should be able to relocate to Anchorage, Juneau or Fairbanks, and to hire and train Alaskans. REPRESENTATIVE BRICE said it is only appropriate to bring those types of functions back into the state. He commented on the lack of opportunity for students who graduate from college in-state. COMMISSIONER FINK disagreed, saying the state should not be building up business in Alaska based upon a subsidy. The state ought to compete in the United States, if not the world market. Subsidies are self-defeating. He said today the finance field is building in the state and doing business throughout the country without any subsidies. He certainly is in favor of local hire and local opportunities, but the competitive, free-market system will develop that better than any other way. He is opposed to creating any new preferences. COMMISSIONER ALLEN said he doesn't disagree with Commissioner Fink's logic. The free market on a competitive basis could dictate those terms. He emphasized that in some fashion, whether it be points on a contract evaluation or whatever, more attention or credit should be given to a company willing to staff and handle a particular function with Alaskans, in Alaska, as opposed to outsourcing to a company that staffs its people outside of Alaska. He doesn't know that a subsidy is required, however. COMMISSIONER FINK remarked that as soon as points or price preferentials are given, it is a subsidy. The free market will work. If it is an RFP, there is enough discretion among those who make the decision. He said he might have bought this 25 years ago, but the state is in the process of maturing to the point of being able to compete in the world market. COMMISSIONER WUERCH said he doesn't believe in subsidies, but he believes more can be done to put work in Alaska. For example, the state convinced the oil industry that modules could be built in Alaska, and they've been built in Anchorage and the Kenai Peninsula Borough. Furthermore, financial houses have taken on the investments of some of the public funds in Anchorage. But missing in many of the contract awards is the hidden cost of those who love to travel to the Lower 48 to "administer" a contract, for example. If every single travel dollar used to support a contract awarded out-of-state were added to the cost of the contract, more Alaskan firms would win these types of contracts. COMMISSIONER VALESKO pointed out that the state had approximately 60,000 claims pending with NYLCare [health insurance company] one month ago, which is unacceptable. The state needs something to keep money here in the state. He appreciates the comments made by Commissioner Fink regarding subsidies, he concluded, but even a subsidy creates more of a flow for money to stay in the state. COMMISSIONER ALLEN said he would like to have the privilege to come back later with a motion on what was just discussed. Receipt of 250,000 acres REPRESENTATIVE BRICE referred to Recommendation 1 and noted that there is concern with the mining, timber and oil industries about how it would be conducted. The recommendation read: The commission recommends giving 250,000 acres to the University of Alaska. REPRESENTATIVE BRICE made a motion to add the following clause to Recommendation 1: "with due consideration of potential impacts to current economic development". COMMISSIONER ALLEN seconded the motion. COMMISSIONER FINK said he is opposed to adding limitations. The current administration has resisted this issue and has vetoed three bills that would have made land available to the university. It is hard to believe that anybody in the mining or oil industry would object to the university's getting 250,000 acres because they know it will be made available to them. In addition, one purpose of Recommendation 1 is to say, in effect, to the state, "Quit fooling around and give them 250,000 acres." Therefore, he is opposed to any watering down of the recommendation. REPRESENTATIVE BRICE replied that a substantial reason why the current administration has vetoed legislation regarding this issue is because of the Alaska Miner's Association, as it relates to the title to the land. Therefore, this recommendation should reflect those concerns. SENATOR ADAMS said he supports the amendment to Recommendation 1. However, there are Native regional corporations that have not yet finalized their selections. There are people in front of the university that need to make their selections and finalize them before the state can look at giving 250,000 acres to the university. COMMISSIONER THOMAS stated concern about the amount of work required if the commission starts "word-smithing" each recommendation. COMMISSIONER FINK pointed out that Recommendation 1 doesn't say this is a priority on any state land; it just says that the commission recommends giving the university 250,000 acres of land. In response to Representative Brice's concerns on restricting the land, he doesn't buy the argument. As mayor [of Anchorage], he himself dealt with the Alaska Mental Health Trust Authority to free up a lot of land titles. Even though he is not a big supporter of the mental health trust concept, he had agreed to any land in the city because he knew it would be developed. Similarly, the university is not interested in any land sitting idle; they want it to produce income. CO-CHAIR WARD asked Representative Brice to restate the motion. REPRESENTATIVE BRICE restated the motion as follows: The commission recommends giving 250,000 acres to the University of Alaska with due consideration of potential impacts of economic development. CO-CHAIR WARD requested a roll call vote. The motion failed by a vote of 5-6. Senator Adams, Representative Brice, and Commissioners Allen, Notti and Valesko voted "yea." Co-Chairs Ward and Cowdery and Commissioners Fink, Harper, Thomas and Wuerch voted "nay." DEPARTMENT OF ADMINISTRATION COMMISSIONER ALLEN moved the following recommendation for the Department of Administration: The commission recommends all work considered for outsourcing wherein the scope of work involved the staff, 25 or more, favorable consideration be given to firms located in Alaska and for Alaskan residents. UNIDENTIFIED SPEAKER seconded the motion. COMMISSIONER FINK reiterated his position on letting the market operate. He said the way to help Alaskans is to help them be competitive. UNIDENTIFIED SPEAKER asked whether "favorable consideration" means that it must be awarded in the case of a tie? COMMISSIONER ALLEN replied that favorable consideration would be all things being equal in the case of a tie. COMMISSIONER FINK indicated favoritism could be a lot of things and could apply to more than a tie. In addition, the people who make these awards and decisions are Alaskans. They perhaps would naturally help Alaskans, but an Alaskan who didn't cut it in the competitive process wouldn't get the award. COMMISSIONER THOMAS stated her concern that the recommendation is trying to dictate an RFP process before a performance standard has been set. It is almost the cart ahead of the horse. REPRESENTATIVE BRICE voiced his opinion that the commission is establishing sideboards to an RFP process rather than dictating one, which is perfectly appropriate. COMMISSIONER WUERCH said that so often contracts are awarded on the face amount of the bid, without considering the hidden costs. In fact, some contracts are awarded not realizing that the travel cost is treated as an advance. Honestly, too often there isn't a full cost accounting of what a service contract is going to cost the state. He agreed that this recommendation is trying to define an RFP process, which is a level of detail this commission shouldn't get into. He restated that many Alaskans love to go to Southern California to administer a contract. CO-CHAIR WARD requested a roll call vote. The motion failed by a vote of 5-6. Senator Adams, Representative Brice, and Commissioners Allen, Harper and Valesko voted "yea." Co-Chairs Ward and Cowdery and Commissioners Fink, Notti, Thomas and Wuerch voted "nay." DRAFT TRANSMITTAL LETTER, REPORT AND LEGISLATION COMMISSIONER FINK referred to the section addressing core governmental responsibilities in the draft transmittal letter and suggested making it a recommendation because it relates to the draft legislation. At first blush, he said, he does not support it because it sets up another bureaucracy. The concept of making every department list the core services or "noncore" services is good, but this sets up an annual report by each department showing its governmental activities. In the long run, it will be a huge paper mill, not to mention the review and appeal processes involved. He called this a million dollar bill. All things considered, this is another reason why he is opposed to the draft transmittal letter. MR. PIGNALBERI replied that a list of core governmental activities is primary and fundamental before considering any kind of privatization. A list doesn't require the additional hiring of personnel or the establishment of a new office. It simply requires the cabinet-level departmental personnel to come up with a list of what they consider as their core governmental activities. SENATOR ADAMS said the draft letter of transmittal indicates that the state is going to mirror federal law, not adopt it. He thought that the commission was going to try to extend itself for three months so that it can communicate with the administration and legislators, he added, to see the actual cost of putting something like this into statute and regulation. CO-CHAIR WARD invited Commissioner Fink to make a motion regarding the transmittal letter. COMMISSIONER FINK said he is opposed to the draft transmittal letter as it relates to the proposed bill. The bill requires an annual report by each department of its nongovernmental activities, which requires a lot of work. MR. PIGNALBERI clarified that the commission is "adapting" - not "adopting" - the federal model to fit within the structure of the state's statutes. Furthermore, the legislature will have its way with the bill as it goes through the legislative processes, and changes will be made. The commission members cannot expect the final version to appear as it is now. Nevertheless, no matter what successive process finally develops to handle privatization, this fundamental activity must take place. COMMISSIONER ALLEN asked Mr. Pignalberi why it is important for this to be in statute. MR. PIGNALBERI replied that it is important because otherwise there is no way to require the administration to do it. In addition, according to all of the reports that he has read on privatization, it is important to lay out the process clearly, with some teeth. UNIDENTIFIED SPEAKER said he agrees with Senator Adams in that it probably should be included in the draft report. He also agrees with Mr. Pignalberi in that what needs to happen is addressed in the proposed legislation. He would like to see it incorporated into the report to the governor and to have it highlighted in the transmittal letter. He doesn't see the necessity of making it law, however. CO-CHAIR WARD asked whether the previous speaker was recommending that this particular item come out of the draft transmittal letter and go into the draft report as part of a recommendation. UNIDENTIFIED SPEAKER replied that it should become a part of the recommendations and be highlighted as part of the transmittal letter, to call attention to it. CO-CHAIR WARD asked whether the commission should take any action on it. UNIDENTIFIED SPEAKER affirmed that idea. REPRESENTATIVE BRICE asked Mr. Pignalberi to clarify the notation of the word "delete" on page 4 of the proposed legislation. MR. PIGNALBERI replied that the bill drafter had indicated in a cover letter that the particular section is redundant. COMMISSIONER WUERCH made a motion to delete the following paragraph from the draft transmittal letter: We learned from our review of federal programs that the most fundamental privatization task is to make a distinction between "core governmental responsibilities" and discretionary activities. Core governmental responsibilities are not candidates for privatization. All others are. In 1998 Congress enacted the Federal Activities Inventory Reform Act. Basically, this law requires the Executive Branch to make a determination about which of its activities are not inherently governmental activities. We adapted this federal law to Alaskan statutes and it is presented in a draft bill for which we urge your support. COMMISSIONER FINK seconded the motion. UNIDENTIFIED SPEAKER said there is a lot of merit in the concept, but he believes that in the absence of much discussion at the subcommittee level, making it a highlighted item at this time is not giving it its due diligence. He would rather see it incorporated into the body of the draft transmittal letter. REPRESENTATIVE BRICE referred to the last line in the paragraph [ends mid-speech because of tape change]. TAPE 99-27, SIDE A REPRESENTATIVE BRICE continued, saying he thinks it is appropriate for the commission to highlight it in the transmittal letter. CO-CHAIR COWDERY said he supports the entire paragraph and suggests including the last sentence of the paragraph in the other recommendations. CO-CHAIR WARD asked whether there was any objection to the motion. UNIDENTIFIED SPEAKERS replied yes. CO-CHAIR WARD requested a roll call vote. The motion carried by a vote of 6-5. Senators Ward and Adams and Commissioners Fink, Harper, Valesko and Wuerch voted "yea." Representatives Cowdery and Brice and Commissioners Allen, Notti and Thomas voted "nay." COMMISSIONER WUERCH made a motion to incorporate the deleted language into the draft report, to be placed at the direction of staff. UNIDENTIFIED SPEAKERS seconded the motion. UNIDENTIFIED SPEAKER objected. COMMISSIONER FINK explained that he objects to the motion because he doesn't really know where it will go in the report or how it will work. If it is going to be another recommendation, then he understands the motion. MR. PIGNALBERI explained that if it is going to be another recommendation, it will simply be the next number. COMMISSIONER ALLEN asked whether the federal law is being adapted since the paragraph has been deleted. MR. PIGNALBERI said according to his understanding, the amendment is conceptual and staff will work on the appropriate language. COMMISSIONER ALLEN said he is interested in laying the groundwork, but he doesn't think that it requires a statute to be enacted. COMMISSIONER FINK stated that if the deleted paragraph is adopted as a recommendation, he will make a motion to strike the last sentence. UNIDENTIFIED SPEAKER announced that would work for him. COMMISSIONER WUERCH referred to the draft report and asked Mr. Pignalberi whether Article X, "Recipe for Success," is the appropriate place to insert the adoption of the statute. MR. PIGNALBERI replied that it is an excellent place to put it. COMMISSIONER WUERCH indicated the suggestion now removes the question of whether it will be a recommendation. CO-CHAIR WARD asked Commissioner Wuerch whether his motion includes the last sentence in the paragraph. COMMISSIONER WUERCH replied yes, but he would accept an amendment to delete the last sentence. In addition, the word "adapted" just means the taking of federal law and recasting it into state statute; it doesn't mean that "we" voted for it. COMMISSIONER FINK made a motion to delete the last sentence, which read: We adapted this federal law to Alaskan statutes and it is presented in a draft bill for which we urge your support. UNIDENTIFIED SPEAKER seconded the motion. CO-CHAIR WARD asked whether there was any objection [to the amendment to Commissioner Wuerch's motion]. There being none, the motion carried. CO-CHAIR WARD asked whether there was any objection to the motion [to incorporate the deleted language, as amended]. There being none, the main motion carried as well. COMMISSIONER FINK stated, in relation to the draft report, that it is too long. It ought to be an appendix. There ought to be an executive summary at the beginning of the report listing those things that have been adopted, illustrating the standards used, and illustrating what is attached. The recommendations are the most important thing that the commission has done, while the list that the commission members have done is the second-most important thing; therefore, it ought to be attached. The subcommittee reports and the memberships of the subcommittees ought to be attached as well so that the people who read [the report] realize who came up with the ideas. He passed out to members an example of what he is talking about and read the following into the record: FINDINGS AND RECOMMENDATIONS TO THE GOVERNOR AND THE LEGISLATURE Pursuant to CSSB 33, the Commission on Privatization and Delivery of Government Services makes the following report. CSSB 33 states that the annual cost of state government is exceeding the annual revenue and that our commission is to study government services and make determinations along the following lines: 1. Services that should be eliminated. 2. Services that ought to be contracted out to private organizations. 3. Services that ought to be performed by local government or regional service organizations. 4. Services that ought to be performed by the federal government. 5. Services that ought to be consolidated for efficiency purposes. 6. Services that can most effectively and efficiently be delivered by the state. This commission appointed 20 subcommittees to review the various elements of state government. There were about 250 people active on these subcommittees. Each subcommittee returned a report and, in the aggregate, made 291 recommendations for changes. The commission considers most of the recommendations to be very valid and ought to be followed by the state government. In an attempt to zero in on a limited number of those recommendations, each commissioner was asked to prepare a list of recommendations that he or she wanted to take up in the full committee. The committee then took up, discussed, and voted upon those recommendations that each committee member put forward during our meeting. The commission members did not put forward all of the items which were listed on each of their personal privatization recommendations list. The following 19 recommendations received majority approval of the commission members: (List 19 recommendations) Also attached to this report are the individual commissioners' lists of recommendations, a list of the 291 recommendations made by all the subcommittees with the backup material, a copy of each ... subcommittee's full report, and a list of the subcommittee members and chairman. We did not vote on all the subcommittees' recommendations as time did not permit a full review. The Privatization Committee did meet with each of the subcommittees to receive their written and oral reports. We recommend that the administration and the legislature follow through on the recommendations of this commission and that the appropriate legislative committees review all of the recommendations of the subcommittees. This commission expires on January 1, 2000, but all the members of this commissions and the members of the subcommittees are available to the legislature or the Governor. Signed, [Co-Chair] Cowdery [Co-Chair] Ward COMMISSIONER FINK said something like the above would more likely be read, and would allow the reader to zero in on the various segments. He made a motion to adopt the above summary. CO-CHAIR COWDERY pointed out that certain things require a lengthy report because of their complexity. CO-CHAIR WARD noted that there will be a space for individual reports by commissioners, which will be highlighted. REPRESENTATIVE BRICE seconded the motion for discussion purposes. COMMISSIONER WUERCH said this type of summary will go a long way towards getting the recommendations read, whether it is in the form of an executive summary or incorporated into the transmittal letter. The question is: How much time will people spend reading a 20-page document verses a 2-page document? MR. PIGNALBERI said it would be appropriate to attach an executive summary to the front of the report. However, his job as staff is to ensure that the commission complies with statute, which should be illustrated in a report. COMMISSIONER FINK suggested that doesn't have to be recited in an executive summary but could be in the appendix, which would include the draft report. COMMISSIONER ALLEN stated that there appears to be a lot of duplication between the transmittal letter and Commissioner Fink's recommended executive summary. He would like to see the two incorporated, with the draft report as the appendix. COMMISSIONER ALLEN made a motion to amend the initial motion to incorporate the two with one transmittal letter, including the findings and recommendations, and the report to the Governor, as the appendix. UNIDENTIFIED SPEAKER seconded the motion. UNIDENTIFIED SPEAKER objected. COMMISSIONER VALESKO explained his opposition to the amendment to the motion. He said the draft report has not been thoroughly discussed and considered; otherwise, he supports combining the executive summary and the draft transmittal letter. SENATOR ADAMS said he understands the draft transmittal letter and will go along with what staff and Co-Chair Ward have recommended. CO-CHAIR WARD requested a roll call vote. The motion, as amended, failed by a vote of 4-7. Senator Ward and Commissioners Allen, Fink and Wuerch voted "yea." Senator Adams, Representatives Cowdery and Brice, and Commissioners Harper, Notti, Thomas and Valesko voted "nay." UNIDENTIFIED SPEAKER suggested, as a friendly amendment to Commissioner Fink's executive summary, to correct the number of recommendations to reflect the actual number, and to include the individual reports made by the commissioners. CO-CHAIR COWDERY commented that he thinks the individual reports are part of the report. UNIDENTIFIED SPEAKER said there is room in the executive summary to include a list of the recommendations but not individual reports by the commissioners. COMMISSIONER FINK said he would accept the suggestion as a friendly amendment. CO-CHAIR WARD asked Commissioner Fink to restate the original motion. COMMISSIONER FINK made a motion to include, in addition to a transmittal letter, the findings and recommendations to the governor and the legislature, as amended. SENATOR ADAMS objected. He said he is happy with the report that staff has prepared because no matter how a report is presented, it will be thick but people interested in privatization will read it. CO-CHAIR COWDERY agreed. COMMISSIONER ALLEN asked where the findings and recommendations would go. COMMISSIONER FINK said those would go behind the letter of transmittal, titled "The Findings and Recommendations to the Governor and the Legislature." SENATOR ADAMS said he would like to see an area for each commissioner to put a report, in order to express the minority opinion, for example. COMMISSIONER WUERCH made a motion to title the recommended report by Commissioner Fink as "Summary of Findings and Recommendations." COMMISSIONER FINK accepted that as a friendly amendment. SENATOR ADAMS objected. CO-CHAIR WARD requested a roll call vote. The motion carried by a vote of 9-2. Senator Ward, Representative Brice, and Commissioners Allen, Fink, Harper, Notti, Thomas, Valesko and Wuerch voted "yea." Representative Cowdery and Senator Adams voted "nay." [An unidentified speaker made a motion to adopt the draft report, which was seconded by another unidentified speaker.] CO-CHAIR WARD asked Mr. Pignalberi to address the concerns of the gaps in the draft report. MR. PIGNALBERI said the gaps in the draft report are information that will come from the articles provided earlier to the commissioners: for example, the pitfalls of privatization; examples of privatization that have occurred in other cities, states and countries; a budget number for procurement; and a table illustrating the number of meetings that each subcommittee held. The gaps would not include editorial comments. It is simply a fleshing out of the material in order to give readers a broader picture. CO-CHAIR WARD announced that there is still a motion pending to adopt the draft report as the appendix to the final report. COMMISSIONER ALLEN stated that he fully supports the draft report and asked that the commissioners adopt it. It is more along the lines of information rather than any editorial comments, he added. CO-CHAIR WARD asked whether there was any objection. UNIDENTIFIED SPEAKER objected. COMMISSIONER VALESKO referred to Article VIII of the draft report and asked for clarification on the second step. He thought the commission had just taken action not to require the executive branch to identify activities which are inherently governmental and to privatize those that are not, he said. CO-CHAIR WARD asked Mr. Pignalberi to comment on the discrepancy. MR. PIGNALBERI said he will reconcile any inconsistencies in the draft report with the actions of the commission. The commission has voted to take that paragraph out of the transmittal letter, he noted, but has not voted on the proposed legislation. CO-CHAIR COWDERY stated that staff has put a lot of effort into the draft report; therefore, the commission should just adopt it, especially in light of the fact that staff will not be available after today. REPRESENTATIVE BRICE announced that his "no" vote on the adoption of the draft report does not reflect his appreciation for the work done by staff. However, in response to the concern regarding Article VIII, the third step should be under the recommendation section rather than included in the body of the report. Otherwise, he supports a lot of what has been written. COMMISSIONER FINK commented that there are a lot of things going into the appendix that he and Representative Brice probably would not approve of. REPRESENTATIVE BRICE clarified that he thinks two of the statements in Article VIII should be in the recommendations section rather than in the body of the report. They are two steps that he disagrees with. CO-CHAIR WARD asked for a roll call vote. The motion carried by a vote of 9-1. Senators Ward and Adams, Representative Cowdery, and Commissioners Allen, Fink, Notti, Thomas, Valesko and Wuerch voted "yea." Representative Brice voted "nay." [Commissioner Harper was off-line.] [The commissioners expressed appreciation to staff, each other, and the public for their time and commitment to the issue of privatization.] CO-CHAIR WARD announced a press conference tomorrow [December 14, 1999] conducted by Mr. Pignalberi. COMMISSIONER ALLEN suggested that the commission's time would be wasted unless this issue is continued by the legislature. COMMISSIONER VALESKO pointed out that the commission had only looked at the state services that are not being provided by the private sector. He suggested looking into state services that are being performed by the private sector at an additional cost to government. TAPE 99-27, SIDE B There being no further business before the commission, the Commission on Privatization and Delivery of Government Services was adjourned.