Legislature(2015 - 2016)HOUSE FINANCE 519

02/05/2016 01:30 PM House FINANCE

Note: the audio and video recordings are distinct records and are obtained from different sources. As such there may be key differences between the two. The audio recordings are captured by our records offices as the official record of the meeting and will have more accurate timestamps. Use the icons to switch between them.

Download Mp3. <- Right click and save file as

Audio Topic
01:34:07 PM Start
01:34:45 PM HB256 || HB257 || HB255
01:34:47 PM Fy 17 Budget Overview: Department of Commerce, Community and Economic Development
02:51:13 PM Fy 17 Budget Overview: Department of Administration
03:34:01 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Scheduled but Not Heard
Scheduled but Not Heard
Scheduled but Not Heard
+ FY17 Budget Overviews: TELECONFERENCED
- Dept. of Commerce, Community, & Economic
- Dept. of Administration
+ Bills Previously Heard/Scheduled TELECONFERENCED
HOUSE BILL NO. 256                                                                                                            
     "An  Act making  appropriations for  the operating  and                                                                    
     loan  program  expenses  of state  government  and  for                                                                    
     certain    programs,    capitalizing   funds,    making                                                                    
     reappropriations,  making supplemental  appropriations,                                                                    
     and making  appropriations under  art. IX,  sec. 17(c),                                                                    
     Constitution  of   the  State   of  Alaska,   from  the                                                                    
     constitutional budget  reserve fund; and  providing for                                                                    
     an effective date."                                                                                                        
HOUSE BILL NO. 257                                                                                                            
     "An  Act making  appropriations for  the operating  and                                                                    
     capital    expenses   of    the   state's    integrated                                                                    
     comprehensive mental health  program; and providing for                                                                    
     an effective date."                                                                                                        
HOUSE BILL NO. 255                                                                                                            
     "An  Act   making  appropriations,   including  capital                                                                    
     appropriations,     reappropriations,     and     other                                                                    
     appropriations;  making  appropriations  to  capitalize                                                                    
     funds; and providing for an effective date."                                                                               
1:34:45 PM                                                                                                                    
Co-Chair Neuman reviewed the agenda for the meeting. He                                                                         
directed members to hold their questions until the end of                                                                       
each presentation.                                                                                                              
^FY 17  BUDGET OVERVIEW:  DEPARTMENT OF  COMMERCE, COMMUNITY                                                                  
AND ECONOMIC DEVELOPMENT                                                                                                      
1:34:47 PM                                                                                                                    
CHRIS   HLADICK,  COMMISSIONER,   DEPARTMENT  OF   COMMERCE,                                                                    
COMMUNITY, AND ECONOMIC  DEVELOPMENT, introduced himself and                                                                    
thanked  members  for the  opportunity  to  come before  the                                                                    
House Finance  Committee. He  relayed that  the department's                                                                    
FY 17  request was $194  million of which $21.9  million was                                                                    
undesignated general funds (UGF).  The department spent less                                                                    
than 3 percent of the  state's total UGF and contributed $80                                                                    
million  to the  general fund  (GF). He  continued that  the                                                                    
state's economic goals were to  have plentiful good jobs for                                                                    
Alaskans presently  and into the future.  The department was                                                                    
strongly identified with  marketing and business assistance,                                                                    
but  had  a  much  more  comprehensive  role  in  supporting                                                                    
Alaska's development. The  Department of Commerce, Community                                                                    
and   Economic   Development   (DCCED)   provided   services                                                                    
essential  to fostering  a  strong  economy. The  department                                                                    
provided a dependable financial  system through a regulation                                                                    
of banks,  securities, and  insurance corporations.  It also                                                                    
provided capital  through Alaska Industrial  Development and                                                                    
Export  Authority  (AIDEA),  commercial fishing,  and  other                                                                    
loan   programs.  It   provided   energy   programs  and   a                                                                    
consistently regulated utility  system through Alaska Energy                                                                    
Authority (AEA)  and Regulatory Commission of  Alaska (RCA).                                                                    
It  also provided  certification of  qualified professionals                                                                    
needed  throughout  the  economy. The  department  supported                                                                    
effective,  functioning  local   governments  without  which                                                                    
economic  growth  was  almost  impossible.  Whether  through                                                                    
participation    in   the    department's   loan    program,                                                                    
professional  licensure,  or  support to  local  government,                                                                    
DCCED touched the lives of  many Alaskans. He introduced the                                                                    
PowerPoint presentation: "Department  of Commerce, Community                                                                    
and Economic Development Department Overview."                                                                                  
1:36:29 PM                                                                                                                    
Commissioner  Hladick   began  with  slide   2:  "Department                                                                    
Organization." He  highlighted the  six divisions  and seven                                                                    
corporate entities  within the division. The  department had                                                                    
549  permanent full-time  positions not  including positions                                                                    
at  the railroad.  The railroad  was a  special organization                                                                    
unto  itself.  The  other   corporate  entities  within  the                                                                    
department  included  AEA,  the Alaska  Gasline  Development                                                                    
Corporation (AGDC),  the Alaska Seafood  Marketing Institute                                                                    
(ASMI),  the Alcohol  and Marijuana  Control Board,  and the                                                                    
Regulatory Commission of Alaska.                                                                                                
Commissioner   Hladick  turned   to  slide   3:  "Department                                                                    
Makeup."  The slide  split the  corporations  from the  core                                                                    
divisions.  He  reported  62  percent  of  the  department's                                                                    
spending  was  for  the corporations,  of  which  about  $40                                                                    
million was  for Power Cost Equalization  (PCE) distribution                                                                    
payments to communities.                                                                                                        
Commissioner Hladick  discussed slide  4: "Mission  and Core                                                                    
Services."  The  department's  mission   was  to  promote  a                                                                    
healthy  economy  and  strong  communities  and  to  protect                                                                    
consumers  in  Alaska.  Its   core  services  were  consumer                                                                    
protection,   economic  growth,   strong  communities,   and                                                                    
affordable energy.                                                                                                              
1:37:31 PM                                                                                                                    
Commissioner Hladick  scrolled to  slide 5: "Budget  by Core                                                                    
Services."  The slide  depicted the  department's budget  by                                                                    
core services  broken out by  UGF, designated  general funds                                                                    
(DGF), other,  and federal. He  noted that UGF was  shown in                                                                    
blue. The  total department spend  was $194 million  and the                                                                    
break out by fund type was shown.                                                                                               
Commissioner  Hladick advanced  to slide  6: "Fund  Groups &                                                                    
Self-Supported  Agencies."  He offered  that  in  FY 17  the                                                                    
department  was   requesting  $194  million;  DGF   was  $83                                                                    
million,  other  was $69,  etc.  He  pointed out  the  self-                                                                    
supported programs  that contributed to the  GF. He reviewed                                                                    
the  list: Banking  and  Securities; Corporations,  Business                                                                    
and  Professional Licensing;  Insurance; Alcoholic  Beverage                                                                    
Control Board;  RCA; and  AIDEA. He  noted that  the largest                                                                    
self-supporting program was the  Division of Insurance which                                                                    
equaled $62 million.                                                                                                            
Commissioner  Hladick continued  to  slide 7:  "Unrestricted                                                                    
General Funds." He indicated that  the UGF was broken out by                                                                    
division  or  corporation.  The Division  of  Community  and                                                                    
Regional  Affairs totaled  33 percent,  etc. The  department                                                                    
had  reduced UGF  by 45.9  percent since  FY 15,  from $40.5                                                                    
million down to $21.9 million.  He noted there was a further                                                                    
break out of various activities.                                                                                                
1:38:59 PM                                                                                                                    
Commissioner   Hladick   moved   to   slide   8:   "Consumer                                                                    
Protection." He  would be  discussing each  one of  the core                                                                    
services  by division  or corporation.  He began  by stating                                                                    
that the  Division of Banking  and Securities,  the Division                                                                    
of  Corporations, Business  and Professional  Licensing, and                                                                    
the Division  of Insurance were all  self-supporting with no                                                                    
Commissioner  Hladick   continued  to  slide   9:  "Consumer                                                                    
Protection."  He  noted  that   the  Alcohol  and  Marijuana                                                                    
Control Office  was not self-supporting. There  was a budget                                                                    
request  of $1.5  million to  support. It  was difficult  to                                                                    
gauge when  it would be  self-supporting with the  fees that                                                                    
had  been  set.  The  department  thought  it  would  happen                                                                    
between FY  18 and  FY 20  but had no  idea how  many people                                                                    
would enter into the business.  The Regulatory Commission of                                                                    
Alaska was self-supported, as well.                                                                                             
Commissioner Hladick discussed  slide 10: "Economic Growth."                                                                    
He  relayed that  the Division  of Economic  Development was                                                                    
split into  three sections. There  were 11  positions within                                                                    
the  economic development  section  and  2 positions  within                                                                    
tourism  and marketing.  The  investment  section housed  37                                                                    
positions  and was  self-supporting.  However, the  economic                                                                    
development  and tourism  marketing sections  were supported                                                                    
by UGF.                                                                                                                         
1:40:12 PM                                                                                                                    
Commissioner  Hladick  continued   to  talk  about  economic                                                                    
growth on  slide 11: "Economic  Growth." The  Alaska Seafood                                                                    
Marketing Institute's  budget totaled  $24 million  of which                                                                    
the  UGF request  was $3.4  million.  The Alaska  Industrial                                                                    
Development and  Export Authority  showed 103  positions but                                                                    
it also included  AEA's employees as well  (he two divisions                                                                    
shared employees). He noted that AIDEA did not require UGF.                                                                     
Commissioner  Hladick  scrolled  to  slide  12:  "Affordable                                                                    
Energy." He  stated that AEA  had a total budget  request of                                                                    
$13 million,  of which only  $2 million was UGF.  Power Cost                                                                    
Equalization  was housed  within  AEA and  the total  budget                                                                    
request was  $40.3 million  in DGF.  He reported  that there                                                                    
was no  request for  UGF in  FY 17 for  AGDC, but  there had                                                                    
been UGF requests in previous years.                                                                                            
Commissioner   Hladick  advanced   to   slide  13:   "Strong                                                                    
Communities." He  noted that the  Division of  Community and                                                                    
Regional  Affairs  appeared  under  strong  communities.  He                                                                    
pointed to  the fisheries  taxes, national  forest receipts,                                                                    
and  payment  in  lieu  of  taxes.  He  explained  that  the                                                                    
fisheries  taxes  distribution   was  an  existing  business                                                                    
fisheries tax  that had  been in place  for many  years. The                                                                    
national forest receipts  and payment in lieu  of taxes were                                                                    
from  the federal  government. He  continued that  community                                                                    
revenue  sharing   was  proposed  at  $50   million  as  the                                                                    
distribution to  communities; however, the amount  was up to                                                                    
the legislature.                                                                                                                
Commissioner  Hladick continued  to  slide 14:  "Department-                                                                    
Wide   Services."  He   reported   that   the  Division   of                                                                    
Administrative services  had a total budget  request of $4.9                                                                    
million,  of  which  $711,000  in  UGF.  The  Commissioner's                                                                    
office had a request of $73,000 in UGF.                                                                                         
1:43:07 PM                                                                                                                    
Commissioner  Hladick  moved  to  slide  15:  "FY2015-FY2017                                                                    
Priorities." He reviewed the list on slide:                                                                                     
   · Maintain services to communities                                                                                           
   · Maintain revenue-generating and self-funded programs                                                                       
     at current levels of service                                                                                               
   · Continue effectively marketing Alaska's industries                                                                         
     with reduced state support                                                                                                 
   · Ensure marijuana is safely and effectively regulated                                                                       
     in Alaska                                                                                                                  
Commissioner Hladick  turned to slide 16:  "Status of FY2016                                                                    
     ($9,976.0) UGF Reduction in FY2016 -24.7%                                                                                  
     · $13,041.2 total reduction -6.1%                                                                                          
     · Eliminated 27 positions totaling $2.0 million;                                                                           
        $528.4 UGF.                                                                                                             
     · Communications Coordinator, Grants Administrator,                                                                        
        support  for  Alaska  Native  Language  Preservation                                                                    
        Council,     4     Analyst/Programmers,     Business                                                                    
        Registration  Examiner,  2  Development  Specialists                                                                    
        (film & general), Planner, loan issuance and support                                                                    
        positions, utility analysts                                                                                             
     Removed multiple named recipient grants                                                                                    
     · ($300.0) Alaska Native Arts Marketing (UGF)                                                                              
     · ($300.0) Ilisagvik College (UGF)                                                                                         
     · ($600.0) Marine Exchange of Alaska (CPV Tax)                                                                             
     Contracts and marketing efforts reduced                                                                                    
     · ($6,810.6) Tourism Marketing                                                                                             
     · ($1,863.9) Alaska Seafood Marketing Institute                                                                            
     · Marketing activities occur in advance of Alaska                                                                          
        visitation and  seafood sales;  the  full effect  of                                                                    
        these reductions is not yet known                                                                                       
     · Continued UGF reductions in FY2017                                                                                       
Commissioner Hladick discussed slide 17: "Status of FY2016                                                                      
Reductions & Additions":                                                                                                        
        Unallocated Reductions                                                                                                  
        · ($161.5) UGF/DGF Unallocated  travel reduction was                                                                    
          reallocated to divisions based on average travel                                                                      
          costs over three years (same methodology as LFD).                                                                     
        · ($1,100.0)  UGF Executive  Branch-wide unallocated                                                                    
          reduction was allocated to multiple divisions                                                                         
             · ($600.0 Tourism marketing, $400.0 seafood                                                                        
               marketing, $50.0 Alaska Energy Authority,                                                                        
               $38.9 Commissioner's Office, $11.1 FY2016                                                                        
               COLA over-appropriation)                                                                                         
        Regulation of marijuana is on-going                                                                                     
        · FY2015: $785.7                                                                                                        
        · FY2016: $1,574.4                                                                                                      
        · FY2017 request: $1,574.4                                                                                              
        · General funds will  be incrementally replaced with                                                                    
          program receipts as they are reliably collected                                                                       
        · Anticipated   to  be   fully  funded   by  license                                                                    
          receipts by FY2020                                                                                                    
1:44:30 PM                                                                                                                    
Commissioner Hladick reviewed slide 18: "FY2017 Budget                                                                          
     · Reduced Commissioner's Office staff from 7 to 5 in                                                                       
        FY2017,  and  reduced   UGF  support   in  Executive                                                                    
        Administration by 49.6% from FY2015                                                                                     
    · Reduce UGF support for large marketing contracts                                                                          
        · Shift   from  state-managed   to  industry-managed                                                                    
          Tourism Marketing                                                                                                     
        · Shift from state UGF support to industry support                                                                      
          for seafood marketing                                                                                                 
     · Coordinate with DMV to preserve reduced level of                                                                         
        visitor center assistance in Tok                                                                                        
     · Reorganize Community and Regional Affairs to improve                                                                     
        operations and community support                                                                                        
     · On track to ensure marijuana is regulated and                                                                            
1:45:16 PM                                                                                                                    
Commissioner Hladick  scrolled to  slide 19:  "FY2017 Budget                                                                    
by Core  Service." He indicated  that the slide  reflected a                                                                    
budget  summary   by  core  services  that   was  previously                                                                    
reviewed but was  shown all on one slide. He  pointed to the                                                                    
department's total  reduction of  $8.2 million in  the lower                                                                    
right-hand corner.                                                                                                              
Co-Chair  Neuman asked  if there  were any  other items  the                                                                    
commissioner  wanted to  point  out on  the slide  including                                                                    
differences. Commissioner  Hladick asked if  Co-Chair Neuman                                                                    
was  referring  to differences  from  the  FY 16  Management                                                                    
Co-Chair Neuman  responded in  the affirmative.  He wondered                                                                    
if  Commissioner Hladick  had any  comments on  the changes.                                                                    
Commissioner Hladick did not have any comments.                                                                                 
Co-Chair  Neuman  suggested  that the  committee  may  [have                                                                    
comments] when Commissioner Hladick was finished.                                                                               
Commissioner  Hladick  advanced  to slide  20:  "Summary  of                                                                    
FY2017  Budget."  He explained  that  the  slide showed  the                                                                    
summary of the department's  budget. The summary showed line                                                                    
item  reductions  and was  another  way  of looking  at  the                                                                    
previous  slide  with  more detail  about  the  changes  and                                                                    
corresponding  line items.  He  also  noted the  percentages                                                                    
listed at the bottom of the slide.                                                                                              
Commissioner  Hladick continued  to  slide  21: "Summary  of                                                                    
FY2017  Budget."  He  offered  that  the  slide  showed  two                                                                    
different  metrics. The  slide at  the top  showed how  many                                                                    
communities  were  holding   public  meetings,  doing  their                                                                    
financial  disclosures, and  having elections,  etcetera. as                                                                    
tracked  by  DCCED.  The  bottom  chart  showed  that  AIDEA                                                                    
created 1,300 jobs for the economy in FY 15.                                                                                    
Commissioner  Hladick  asked  the  chair  if  he  should  go                                                                    
through any of the legislative lookbacks.                                                                                       
Co-Chair  Neuman  replied  affirmatively if  there  was  any                                                                    
significant  information the  commissioner  wanted to  point                                                                    
Commissioner Hladick reviewed the  LFD slide 23: "Department                                                                    
of  Commerce, Community  and Economic  Development Share  of                                                                    
Total Agency  Operations (GF Only)."  He explained  that the                                                                    
slide  showed a  combination of  UGF and  DGF. He  noted the                                                                    
downward trend and  the fact that the  department spent only                                                                    
2.17 percent of the total agency budgets.                                                                                       
Commissioner Hladick  scrolled to  slide 24:  "Department of                                                                    
Commerce,   Community   and  Economic   Development   Salary                                                                    
Adjustment  Increases  and   Personal  Services  Costs  (All                                                                    
Funds)."  He  reported  that  the  slide  showed  the  total                                                                    
salaries including  fringe benefits  and employer  costs. He                                                                    
noted the summary on the  right-hand side and mentioned that                                                                    
the  department   largely  did  not  have   control  of  the                                                                    
Commissioner  Hladick turned  to  slide 25:  "Appropriations                                                                    
within the  Department of  Commerce, Community  and Economic                                                                    
Development (GF  Only)." He indicated that  the slide showed                                                                    
the fluctuations  and changes  which were  either structural                                                                    
or program  changes (additions  or subtractions)  over time.                                                                    
He added that the slide reflected GF only.                                                                                      
1:48:29 PM                                                                                                                    
Commissioner  Hladick  advanced  to the  final  presentation                                                                    
slide   26:  "Appropriations   within   the  Department   of                                                                    
Commerce, Community  and Economic Development  (All Funds)."                                                                    
He  thought the  slide provided  good information  and noted                                                                    
that it reflected all fund types.                                                                                               
Co-Chair  Neuman  mentioned   having  discussions  with  the                                                                    
commissioner  in the  past about  continuing  to reduce  the                                                                    
amount of  money going  to some of  the programs  within the                                                                    
department  or to  reduce the  programs altogether  to avoid                                                                    
inefficient   government.   He  specifically   noted   their                                                                    
conversations regarding  AEA. He had asked  the commissioner                                                                    
about the  opportunity to fold  AEA into AIDEA.  He wondered                                                                    
if it  was possible to do  so and whether it  would save the                                                                    
state money in administrative costs.                                                                                            
Commissioner Hladick thought  that considering the [state's]                                                                    
budget   problems,  everything   was   on   the  table   for                                                                    
discussion. He would be taking a hard look at the idea.                                                                         
1:49:52 PM                                                                                                                    
Co-Chair  Neuman  spoke  of  the  cost  of  setting  up  the                                                                    
Marijuana   Board.  He   noted  that   the  cost   would  be                                                                    
approximately   $1.5  million.   He  thought   it  was   the                                                                    
expectation  that  when the  state  began  to receive  money                                                                    
associated  with  marijuana  that   $1.5  million  would  be                                                                    
repaid.  He  wondered  if  the  commissioner  had  the  same                                                                    
Commissioner Hladick  believed that the fees  were set based                                                                    
on the  anticipated costs  for one  year. Presently,  he was                                                                    
unable to determine  how many people would sign  up. Some of                                                                    
the fees  were $5000 for  a license. There were  some fairly                                                                    
hefty  fees, but  he had  not spoken  directly to  the board                                                                    
about the  expectation that they  would repay what  had been                                                                    
spent in GF.                                                                                                                    
Co-Chair Neuman  commented that the state's  intent was that                                                                    
when funds  began to be  received the money would  be repaid                                                                    
to the GF.  He added that all the costs  would be covered by                                                                    
industry receipts.                                                                                                              
1:51:02 PM                                                                                                                    
Representative Gara  did not understand  slide 7.  The slide                                                                    
indicated  that since  2015 the  UGF had  decreased by  45.9                                                                    
percent.  He  asked  if  the   items  listed  on  the  slide                                                                    
represented reductions  or the FY 17  proposal. Commissioner                                                                    
Hladick answered  that the slide reflected  the department's                                                                    
request for FY 17.                                                                                                              
Representative Gara  asked if AEA  and AIDEA were  housed in                                                                    
the  same   building  in  Anchorage.   Commissioner  Hladick                                                                    
answered, "Correct."                                                                                                            
Representative Gara  asked if  the deputy  director position                                                                    
had  been  eliminated  leaving just  a  director  in  place.                                                                    
Commissioner Hladick responded  that Representative Gara was                                                                    
Representative Gara  understood that a fair  portion of cuts                                                                    
had been  cuts to  tourism marketing  and ASMI.  He wondered                                                                    
that with  a 45.9 percent  cut already if there  were things                                                                    
the department was  not doing that the  commissioner felt he                                                                    
should be doing  but lacked money. He posed  his question in                                                                    
another way. He  asked if the commissioner  had cut anything                                                                    
that  he thought  served  the community  well  that was  not                                                                    
available anymore.                                                                                                              
Commissioner  Hladick  responded  that  the  department  was                                                                    
given targets to  meet and instructed to continue  to try to                                                                    
meet  the services.  He supposed  it was  possible that  the                                                                    
services would not  be met as well as they  had been four or                                                                    
five years earlier.  The department was looking  for as many                                                                    
efficiencies as possible.                                                                                                       
1:53:08 PM                                                                                                                    
Representative  Gara   asked  if   there  were   things  the                                                                    
department  was no  longer doing  because of  the prior  two                                                                    
years  of  reductions  that he  felt  were  important  state                                                                    
functions.  Commissioner Hladick  replied  that  he had  not                                                                    
spent  much time  thinking about  the specific  question but                                                                    
had focused  on meeting  the department's targets  and doing                                                                    
what he had been asked to do.                                                                                                   
Representative  Gara  commented  that  he wanted  to  see  a                                                                    
government that was  doing the things it was  supposed to do                                                                    
as  efficiently as  possible. However,  he did  not want  to                                                                    
budget  only based  on meeting  monetary targets.  He opined                                                                    
that  if legislators  were just  automatons,  then a  monkey                                                                    
could cut the budget. He wanted  to know what was being done                                                                    
and what was not being  done. He suggested that anyone could                                                                    
come  up  with  a  number. However,  monkeys  did  not  read                                                                    
numbers very  well. He stated the  commissioner's answer did                                                                    
not help him very much.                                                                                                         
Co-Chair Neuman  rebuked that the  state was just  trying to                                                                    
hit monetary numbers. He countered  that the legislature was                                                                    
trying to  create a  budget to  ensure the  state's survival                                                                    
amidst  $30/bbl oil  prices. The  budget had  been based  on                                                                    
$100/bbl oil and dramatic reductions  had to be made or many                                                                    
other   taxes  would   be  increased.   He  disagreed   with                                                                    
Representative Gara's comments.                                                                                                 
Representative Gara clarified that  he was only referring to                                                                    
the  commissioner's   answer.  The   answer  was   that  the                                                                    
department was  trying to meet  targets. The answer  did not                                                                    
help him.                                                                                                                       
Co-Chair Neuman interjected, "That was his answer."                                                                             
Representative Gara concurred.                                                                                                  
1:55:11 PM                                                                                                                    
Co-Chair Thompson  reported that he had  received complaints                                                                    
from more than one board  member about a couple of different                                                                    
issues. Some members  indicated they had been  told how much                                                                    
to  pay for  their licenses  to cover  their expenses  which                                                                    
were  sometimes inflated  due to  department investigations.                                                                    
He continued that  when fines were issued the  money did not                                                                    
get reimbursed  to offset the  investigations but  went into                                                                    
the GF.  A particular  board would look  at it  because they                                                                    
needed  to  meet  in  person   to  review  applications  for                                                                    
professional licensing  and continuing education.  The board                                                                    
paid dues,  its own  travel costs, and  covered the  cost of                                                                    
travel for  a board member  to attend a  national conference                                                                    
in order to  ensure that the State of Alaska  was keeping up                                                                    
with  other  states  and their  rules.  Board  members  were                                                                    
paying  more  than what  was  determined  by the  state.  He                                                                    
reported that three of the  boards had received letters from                                                                    
the commissioner's office and  the governor's office stating                                                                    
that  travel  would  not  be  authorized.  It  sounded  like                                                                    
members   were  paying   for  their   own  travel   but  the                                                                    
commissioner  would not  let them.  He thought  it was  like                                                                    
stealing their  money. He was  upset and wanted a  reply. He                                                                    
also asked  about AEA and AIDEA  just put out a  Request for                                                                    
Proposal  (RFP) so  they could  relocate  their offices.  He                                                                    
asked  what was  going  on  and whether  there  would be  an                                                                    
Commissioner Hladick was  not aware of the RFP  for a change                                                                    
in facilities but  would look into the matter.  He was aware                                                                    
of  the travel  issue  and  had been  dealing  with it.  The                                                                    
orders were  that there  would be no  UGF travel.  The state                                                                    
had gone back and allowed  travel for those boards that were                                                                    
paying  for themselves.  There was  some confusion  when the                                                                    
order first came  out. He thought the issue  had been worked                                                                    
out  with  the  administration.  If the  situation  was  not                                                                    
sorted out  he would appreciate  the details and  would look                                                                    
into it.                                                                                                                        
1:58:13 PM                                                                                                                    
Vice-Chair Saddler  echoed that for  many years a  number of                                                                    
boards  and commissions  had  experienced  a difficult  time                                                                    
getting  access  to the  records  of  what they  were  being                                                                    
charged  for travel,  administration, and  investigation. He                                                                    
thought the  real estate board  in particular would  like to                                                                    
know what they  were being charged for and  was having great                                                                    
difficulty in  finding access to that  information. He asked                                                                    
the  commissioner to  encourage  the  division directors  to                                                                    
make the information available. He  referred to slide 25. He                                                                    
asked about  the lookback  relating to  PCE and  noted there                                                                    
was a big spike in FY  09 when there was legislation passed.                                                                    
It  had crept  up again  since  then about  $10 million.  He                                                                    
asked  for  more  information  as to  the  increase  in  the                                                                    
ceiling on reimbursable PCE costs.                                                                                              
Commissioner  Hladick   asked  if  Vice-Chair   Saddler  was                                                                    
talking about UGF.                                                                                                              
Vice-Chair Saddler again referred  to slide 25. Commissioner                                                                    
Hladick would look into it and would follow up.                                                                                 
Vice-Chair Saddler stated that it  appeared there had been a                                                                    
large reduction in the first year  but it had crept back up.                                                                    
He anticipated that the last down  tick was due to the price                                                                    
of  fuel. He  wanted  to  know more  about  the $10  million                                                                    
Vice-Chair  Saddler referred  to slide  21 which  showed the                                                                    
summary  of  the FY  17  budget.  He  pointed to  the  chart                                                                    
concerning  the percentage  of  local governments  providing                                                                    
essential  public  services.  He thought  the  increase  was                                                                    
significant.  He  wondered  if  it  was  due  to  additional                                                                    
funding to the function or something else.                                                                                      
Commissioner Hladick would follow up with an answer.                                                                            
Vice-Chair Saddler  referred to slide  13 and asked  why the                                                                    
figures were  broken out.  He asked if  they were  under the                                                                    
same division. He did not understand the slide.                                                                                 
Commissioner  Hladick  responded  that   it  was  split  out                                                                    
because the  fisheries taxes were collected  and distributed                                                                    
by  the state.  He added  that the  forest receipts  and the                                                                    
payments in  lieu of taxes  were federal receipts.  He added                                                                    
that the  Community Revenue Sharing  was distributed  by the                                                                    
Division  of Community  and Regional  Affairs. It  was shown                                                                    
separately because it was sort of a separate function.                                                                          
Vice-Chair  Saddler  asked if  the  $14.1  million was  DGF.                                                                    
Commissioner Hladick indicated UGF was zero.                                                                                    
CATHERINE  REARDON,  DIRECTOR,  DIVISION  OF  ADMINISTRATIVE                                                                    
SERVICES,  DEPARTMENT OF  COMMERCE,  COMMUNITY AND  ECONOMIC                                                                    
DEVELOPMENT,  answered  that  some  of the  money  would  be                                                                    
federal receipts.  There would  be a variety  of categories.                                                                    
She explained that  the reason there were  two breakouts for                                                                    
the Division  of Community and Regional  Affairs was because                                                                    
one was  money the  division was spending  to run  a program                                                                    
and the other  was money the division was  just passing out.                                                                    
She  repeated  that  the  top of  the  slide  reflected  the                                                                    
activities of  the division itself to  provide services. The                                                                    
bottom  of  the slide  reflected  the  division passing  out                                                                    
money, hence the distinction. Some  of the money was federal                                                                    
funds  being  distributed  and   some  was  state  community                                                                    
revenue  sharing dollars.  She  added  that distribution  of                                                                    
community   revenue  sharing   correlated  to   seeing  more                                                                    
functional  communities on  the  chart he  last referred  to                                                                    
[slide 21]. She noted the  rise in communities meeting their                                                                    
basic activity needs.                                                                                                           
Vice-Chair  Saddler  referred  to  slide 10  and  wanted  to                                                                    
better  understand the  revolving loan  fund under  the last                                                                    
section  under investments.  He  wondered if  there was  any                                                                    
overlap between what AIDEA, AHFC,  or any other entities and                                                                    
asked about the unique functions of DCCED.                                                                                      
Commissioner Hladick responded  that the investment programs                                                                    
were  alternative energy  conservation, commercial  fishing,                                                                    
rural   development   initiative   fund,   Alaska   Capstone                                                                    
Avionics, Community  Quota Entity, Mari  culture, Commercial                                                                    
Charter  Fisheries,  fisheries   enhancement,  Alaska  Micro                                                                    
Loan, and small business economic development.                                                                                  
Vice-Chair   Saddler  saw   some  potential   overlaps  with                                                                    
commercial  fishing   and  energy.   He  assumed   that  the                                                                    
subcommittees  would   look  at  duplication   and  possibly                                                                    
economies of scale  by lumping them together.  He wished the                                                                    
commissioner good luck in trying to find savings.                                                                               
2:05:05 PM                                                                                                                    
Co-Chair Thompson  noted that he  had misspoken  earlier. He                                                                    
had stated  that there was an  RFP from AEA and  AIDEA for a                                                                    
remodel/rehab rather than for  relocation. He opined that it                                                                    
was still a sizable amount of  money to spend when the state                                                                    
did not have any.                                                                                                               
Co-Chair Neuman  commented that they  might have to  use the                                                                    
same old chairs.                                                                                                                
2:05:31 PM                                                                                                                    
Representative   Gattis   appreciated   the   commissioner's                                                                    
succinct presentation.  She commented about  loan servicing.                                                                    
She mentioned  that the state  had loans in  other different                                                                    
agencies  and  departments.  She  asked  if  the  department                                                                    
serviced loans.                                                                                                                 
Commissioner Hladick responded affirmatively.                                                                                   
Representative  Gattis asked  if he  thought his  department                                                                    
could service other  loans. She wondered if  the state could                                                                    
save  some   money  by  placing   other  loans   within  his                                                                    
department.  She   assumed  it  could  be   done  more  cost                                                                    
effectively if all loans were place in one area.                                                                                
Commissioner Hladick  was not familiar with  the other loans                                                                    
but assumed  it was a  possibility. He would have  to better                                                                    
understand the circumstances.                                                                                                   
Co-Chair Neuman commented that both  questions of whether it                                                                    
could be  done cheaper and  whether it could be  done better                                                                    
had to be answered.                                                                                                             
2:07:13 PM                                                                                                                    
Representative Edgmon  referred to  slide 25  regarding PCE.                                                                    
In  answer to  Vice-Chair Saddler's  question, he  explained                                                                    
that  the rise  and  fall of  the line  related  to the  PCE                                                                    
outlays - as  high as $45 million - was  built into statute.                                                                    
In statute PCE was based  on the average between the utility                                                                    
costs of  Anchorage, Fairbanks, and Juneau.  The line really                                                                    
tracked the rise and fall of  oil prices. He noted the spike                                                                    
in  FY 08  and  the  decrease in  FY  17.  He mentioned  the                                                                    
possibility   of  oil   prices   going   down  further.   He                                                                    
highlighted   the   commissioner's   background   in   local                                                                    
government as  the city manager  of Galena,  Dillingham, and                                                                    
Unalaska  for  more than  20  years.  He supposed  that  the                                                                    
commissioner had  been in his  current position  long enough                                                                    
to understand  the important role  his department  played in                                                                    
fostering  a healthy  local  government.  He recognized  the                                                                    
department   providing  technical   assistance  to   smaller                                                                    
communities, working  with the Alaska Municipal  League, and                                                                    
handling pass-through monies.                                                                                                   
Representative Edgmon  moved on to emphasize  the importance                                                                    
of  reducing  the  budget  because  of  the  state's  fiscal                                                                    
crisis. However, he  wanted to avoid making  cuts that would                                                                    
actually increase  costs somewhere else in  state government                                                                    
or  shift  costs in  a  way  that was  counterproductive  to                                                                    
smaller communities.  He wanted to give  the commissioner an                                                                    
opportunity to expand  on his comments. He  had prefaced his                                                                    
comments with  the fact that  the legislature had  to reduce                                                                    
the  budget. He  asked Commissioner  Hladick to  comment and                                                                    
potentially  weave revenue  sharing  into  his response.  He                                                                    
also wanted him  to talk about why it was  important for the                                                                    
department to  maintain constitutional  responsibilities for                                                                    
local government services and  the broader services provided                                                                    
by DCCED.                                                                                                                       
2:09:57 PM                                                                                                                    
Co-Chair Neuman  requested that the commissioner  put on his                                                                    
former   hat  as   a  city   administrator   to  provide   a                                                                    
Commissioner  Hladick  explained that  he  had  been a  city                                                                    
manager for 26  years and reported that when  he started the                                                                    
services provided  by DCCED were  very important.  There had                                                                    
been a  number of problems at  the City of Galena  but there                                                                    
was training available. He had  never talked to an attorney,                                                                    
drafted  a budget  before; many  individuals had  helped him                                                                    
through  the process.  The  department  provided some  basic                                                                    
training  that  was  critically  important  to  the  smaller                                                                    
Alaska  communities.  He was  concerned  about  the loss  of                                                                    
revenue sharing and what  might happen. Municipal bankruptcy                                                                    
was not  an option in  Alaska. Even if a  municipality could                                                                    
not make  payroll they could  not file for bankruptcy.  If a                                                                    
community  could   no  longer  provide  water,   sewer,  and                                                                    
electric,  it would  likely  toss in  the  keys leaving  the                                                                    
state  to take  over.  He suggested  that  any funding  that                                                                    
would help to forestall such  a scenario would be money well                                                                    
spent.  He lauded  the Division  of  Community and  Regional                                                                    
Affairs  for  keeping  the pulse  on  communities  in  rural                                                                    
Alaska. He  would hate to  see revenue sharing go  away, but                                                                    
understood the  fiscal situation and recommended  ramping it                                                                    
down gradually if it had to come to an end.                                                                                     
Representative   Edgmon   thought   the   commissioner   had                                                                    
encapsulated the  importance of  a department  that, outside                                                                    
of the Department of Fish and  Game, was as near and dear to                                                                    
his  heart as  any of  the agencies  given the  relationship                                                                    
amongst so many of the facets  of DCCED to the well-being of                                                                    
all of Alaska, not just rural Alaska.                                                                                           
2:12:34 PM                                                                                                                    
Representative  Kawasaki  referred  to slide  24.  He  asked                                                                    
about the growth  line between the FY 17  Management Plan to                                                                    
the  present day.  He wondered  why  it seemed  so steep  in                                                                    
comparison to many of the other agencies.                                                                                       
Commissioner Hladick  could not  explain it, as  it occurred                                                                    
before his tenure started with the department.                                                                                  
Ms. Reardon  remarked that she  did not  entirely understand                                                                    
the question.                                                                                                                   
Representative  Kawasaki  asked  for justification  for  the                                                                    
growth  in personal  services between  FY 07  and FY  17. He                                                                    
realized the  graph was  a LFD graph.  It appeared  that the                                                                    
growth was not due to salary increases.                                                                                         
Ms. Reardon  pointed to  the lower  right and  detailed that                                                                    
about  half of  the  increase  reflected increased  personal                                                                    
services  versus salary  increases. She  explained that  the                                                                    
department had several programs  that entered and exited the                                                                    
department. For example,  at one point AGDC  entered with 38                                                                    
positions,  which  in  a  department   that  has  about  500                                                                    
positions, was  a significant percentage. As  the department                                                                    
expanded  in the  number of  professions and  the volume  of                                                                    
professionals  requesting licensure  increased,  so did  the                                                                    
department's  position  control   number  (PCN)  count  even                                                                    
though the division was self-funded.  The division had had a                                                                    
dramatic  increase in  the  number  of license  applications                                                                    
over the years. She could provide additional information.                                                                       
Representative  Kawasaki recognized  the  increase for  AGDC                                                                    
and   for   marijuana.    However,   the   graph   increased                                                                    
significantly even  before FY 15  and FY 16. He  wondered if                                                                    
some of the  increase had to do with the  disposal of grants                                                                    
through  the  department  when the  state  had  much  larger                                                                    
budgets. He was not sure  if there was staff affiliated with                                                                    
specific grants.                                                                                                                
Ms. Reardon responded  that there was an  increase over time                                                                    
of  three  grant  administrators.  She  would  be  happy  to                                                                    
provide   more  of   a   breakdown   year-by-year  of   what                                                                    
constituted the changes.                                                                                                        
Co-Chair  Neuman  suggested  that Ms.  Reardon  provide  the                                                                    
information for distribution to the committee.                                                                                  
Representative  Kawasaki thought  that  the  slide from  the                                                                    
previous  day reflecting  PCN counts  would help  members of                                                                    
the  committee  understand  how   the  department  had  been                                                                    
impacted by recent budget cuts.                                                                                                 
2:16:27 PM                                                                                                                    
Representative  Kawasaki asked  Ms. Reardon  to explain  the                                                                    
change  to travel  and tourism  marketing. He  wondered what                                                                    
was envisioned for the future.                                                                                                  
Commissioner  Hladick  responded that  historically  tourism                                                                    
marketing  had gone  back and  forth between  the state  and                                                                    
industry.  The   industry  had  approached   the  department                                                                    
requesting  to  take  it  back   over  which  was  what  the                                                                    
department was currently facilitating.  He reported being on                                                                    
the  ASMI  board.  The  board  was  very  cognizant  of  the                                                                    
situation the  state was  in and  was working  diligently to                                                                    
reduce the  budget and  to take  on more  responsibility for                                                                    
the  budget  as  the  state dollars  depleted.  He  reported                                                                    
having  been asked  whether ASMI  should plan  for no  state                                                                    
funding within  two years.  The commissioner  concurred with                                                                    
the idea  given the state's  fiscal situation and  the price                                                                    
of oil.                                                                                                                         
Representative  Kawasaki  asked  about the  expectations  of                                                                    
industry to participate in funding  certain programs such as                                                                    
tourism  marketing and  seafood marketing.  He asked  if the                                                                    
administration was  pursuing negotiations  specifically with                                                                    
the old Alaska Travel  Industry Association (ATIA) and ASMI.                                                                    
He wondered what it would look like.                                                                                            
Commissioner  Hladick answered  that it  was ATIA  that came                                                                    
forward with a proposal.  He believed the administration had                                                                    
talked  to  ATIA on  the  matter.  The department  had  been                                                                    
working   with  the   administration  and   the  Office   of                                                                    
Management  and  Budget  to facilitate.  He  continued  that                                                                    
regarding  ASMI the  expectations were  that there  would be                                                                    
less  funding.  They were  not  going  to raise  fishermen's                                                                    
fees, as it was not a good  year to do so. He mentioned that                                                                    
the  sentiment  of   the  board  was  to   buckle  down  and                                                                    
Co-Chair Neuman recognized  former House Representative Mary                                                                    
Sattler in the audience.                                                                                                        
2:19:13 PM                                                                                                                    
Representative   Gara  wanted   to   clarify  his   previous                                                                    
questions.  He wanted  to better  understand about  the cuts                                                                    
being made to  the department. He wondered if  the cuts were                                                                    
reasonable or  whether the  department was  being cut  to or                                                                    
past the  bone. He commented  that it would be  difficult to                                                                    
paint an accurate  picture for the legislature  to know what                                                                    
services  remained in  place that  were  necessary and  what                                                                    
services were  not. He hoped  the subcommittee  would decide                                                                    
what  was important  to the  agency,  to the  state, and  to                                                                    
Alaska's  communities. He  was not  getting the  information                                                                    
currently.  He  did   not  think  a  monkey   could  do  the                                                                    
commissioner's job. However,  when the commissioner's answer                                                                    
was that the  department was meeting goals, it  did not help                                                                    
him understand what was being  cut. He referred to slides 19                                                                    
and  20 and  remarked that  there were  some very  important                                                                    
functions DCCED performed.                                                                                                      
Co-Chair  Neuman  was  certain  the  commissioner  would  be                                                                    
willing to talk to him any time he wanted.                                                                                      
Representative Gara commented  that it would be  nice to get                                                                    
answers in committee also.                                                                                                      
Co-Chair Neuman stated, "We'll get you the schedule."                                                                           
Representative  Gara countered  that  the  state could  also                                                                    
raise revenue to  deal with the budget gap.  He continued to                                                                    
slide 19  and he compared UGF  in the FY 16  Management Plan                                                                    
to  the FY  17 Governor's  Plan.  He noted  an $8.5  million                                                                    
proposed  reduction from  $30.4  million  to $21.9  million.                                                                    
Next he  referred to slide 20  and pointed out that  the UGF                                                                    
governor's decrements  added up  to $5.4 million.  He wanted                                                                    
to know which number was accurate in UGF cuts.                                                                                  
Ms. Reardon  asked about the $5  million Representative Gara                                                                    
was referring to.                                                                                                               
Representative Gara  responded that on  page 20 under  FY 17                                                                    
governor's  decrements  the  UGF reductions  equaled  $5.402                                                                    
million. Whereas, the decrement  looked like $8.5 million in                                                                    
UGF  cuts. He  wanted to  understand the  difference in  the                                                                    
Ms.  Reardon  acknowledged  there   was  a  difference.  She                                                                    
explained  that  the $8.2  million  number  was the  correct                                                                    
amount.  The difference  was that  one was  compared to  the                                                                    
adjusted base and one to  management plan. It was a starting                                                                    
point for the comparison.                                                                                                       
Representative Gara referred to  slide 19 and observed there                                                                    
was a  $3.4 million difference  from $25.3 million  to $21.9                                                                    
million when compared to the  adjusted base. On slide 20 the                                                                    
UGF cut  was $5.4  million. There  were three  different UGF                                                                    
numbers from  FY 16  to FY 17:  $3.3 million,  $5.4 million,                                                                    
and   $8.2  million.   He  expressed   confusion  over   the                                                                    
Ms. Reardon was confident of  the accuracy of the charts but                                                                    
was  having   difficulty  following   Representative  Gara's                                                                    
Representative  Gara   pointed  to  the  FY   17  governor's                                                                    
decrements of  $5.402 million UGF  on slide 20. On  slide 19                                                                    
comparing  the UGF  from the  management plan  the decrement                                                                    
was  over  $8  million.   When  comparing  UGF  between  the                                                                    
governor's plan  and the  adjusted base  the cuts  were $3.4                                                                    
million. He  continued to  review the  numbers on  the slide                                                                    
for clarity.                                                                                                                    
Ms.  Reardon  mentioned   that  the  substantial  difference                                                                    
between management  plan and  adjusted base  had to  do with                                                                    
marijuana.  It looked  large because  marijuana funding  was                                                                    
done for FY 15 and FY  16 as a one-time-only [increment] for                                                                    
the adjusted base. The $2  million swing that Representative                                                                    
Gara  was  seeing  had  to  do with  having  to  remove  the                                                                    
marijuana money and reinserting it  as an increment in order                                                                    
for the  budget to be the  same as the previous  budget (due                                                                    
to a  two-year funding of marijuana  in FY 15 and  FY 16. It                                                                    
was in  the capital budget  as an operating item.  There was                                                                    
something unusual  looking. She was confused  because of his                                                                    
comment regarding $3  million. She offered to  sit down with                                                                    
the representative to review the numbers.                                                                                       
Co-Chair Neuman clarified  that she had backed  out the $1.5                                                                    
million for FY 16 and placed  it into FY 17 for a difference                                                                    
of $3 million.                                                                                                                  
2:26:15 PM                                                                                                                    
Representative Gara  asked for the most  accurate number for                                                                    
the department's  budget cuts between  the FY  16 management                                                                    
and the  governor's proposal.  Ms. Reardon  responded $8.272                                                                    
million in UGF.                                                                                                                 
Co-Chair Neuman  asked the commissioner's  staff to  look at                                                                    
the numbers  and provide an answer  to Representative Gara's                                                                    
2:27:02 PM                                                                                                                    
Representative  Guttenberg  referred  to water  problems  in                                                                    
Flint, Michigan and  suggested it was an example  of a local                                                                    
community taking  care of its  own problems.  He highlighted                                                                    
the  RCA and  the  Division  of Insurance  and  did not  see                                                                    
either   division    living   up   to   its    mission   and                                                                    
responsibilities. He  mentioned that  there was  a broadband                                                                    
taskforce  that  came  out  with  a  report  with  languish.                                                                    
Connect Alaska, a federal program,  had also come out with a                                                                    
broadband  report. He  remarked  on  the report's  expansive                                                                    
size  and believed  it was  an  absolute waste  of time.  In                                                                    
speaking with  individuals and  all entities  about economic                                                                    
development, broadband  was the  common thing  that everyone                                                                    
agreed  was   lacking.  He  opined  that   providing  proper                                                                    
broadband  was  the one  thing  that  would help  to  expand                                                                    
commerce and diversify  the state. He was aware  the RCA was                                                                    
going to  Washington DC to  encourage the  Federal Elections                                                                    
Commission  to  implement  "The  Alaska  Plan"  which  would                                                                    
provide the  industry to plan  for the future.  He suggested                                                                    
that no  one was drawing  entities together to help  to move                                                                    
Alaska to the  next level. He argued that Alaska  was on the                                                                    
verge of  not being able  to communicate because  the speeds                                                                    
have to  be three times  faster every day. He  expressed his                                                                    
concerns about the state not  taking the issue seriously and                                                                    
not moving fast  enough. He spoke to  former Governor Walter                                                                    
Hickel's  comment,  "A budget  built  on  cuts alone  is  no                                                                    
vision at  all." He  suggested that  as the  legislature cut                                                                    
the budget and contracted  government the legislators should                                                                    
be looking for  places to create opportunities.  He asked if                                                                    
the  department  was doing  anything  or  if the  governor's                                                                    
office had any vision.                                                                                                          
Commissioner  Hladick  had  read the  report  Representative                                                                    
Guttenberg  had referred  to. His  observation was  that the                                                                    
price  tag  surprised  several   people.  He  mentioned  the                                                                    
Quintillion broadband  project which he thought  was a great                                                                    
idea. He  did not know  how far  along the project  was. The                                                                    
department  whole heartedly  supported them.  He added  that                                                                    
the state did not have  the money to make broadband possible                                                                    
at present. He agreed the state should be doing something.                                                                      
Representative  Guttenberg communicated  he  had some  ideas                                                                    
and would be talking about them.                                                                                                
2:31:05 PM                                                                                                                    
Representative   Guttenberg  segued   into  discussing   his                                                                    
concerns about  the Division of  Insurance. He spoke  to the                                                                    
increase in  medical and insurance  rates for the  state. He                                                                    
thought a key  to the increase was the cost  of medicine and                                                                    
how it  was billed  to insurance. He  opined that  the state                                                                    
needed  to get  control of  medical costs.  He believed  the                                                                    
Division of Insurance was a key  to doing so. He wondered if                                                                    
there  was a  plan  to facilitate  a  billing database  that                                                                    
would allow  the state to  compare rates and costs  in order                                                                    
to  negotiate  better  rates  for  the  state.  It  was  his                                                                    
understanding that the state was  only able to insure within                                                                    
the  state.  He noted  some  entities  grouping together  to                                                                    
negotiate  terms.  He  thought  the same  concept  could  be                                                                    
applied to  the state.  A medical executive  had recommended                                                                    
that Alaska begin to practice  tourist medicine. The concept                                                                    
behind tourist medicine was to  send people outside to shake                                                                    
things up.  It was something  he had objected to  because of                                                                    
what  it might  do to  the medical  industry. He  emphasized                                                                    
that  the   administration  needed  to  consider   the  cost                                                                    
differentials inside of Alaska  and Alaska and other places.                                                                    
He asked the commissioner to comment.                                                                                           
Commissioner   Hladick   replied   that  it   was   a   long                                                                    
conversation that  was also political. He  thought the state                                                                    
owed it to  the people who had spent time  and money setting                                                                    
up  their businesses  to  talk  to them  about  the cost  of                                                                    
healthcare before  sending them out  of state. He  felt that                                                                    
it  was  important  to  have  the  discussion  with  several                                                                    
2:33:56 PM                                                                                                                    
Representative  Guttenberg  mentioned   the  possibility  of                                                                    
having  a  cost database.  The  state  would have  a  better                                                                    
picture of the  cost differentials and know who  to talk to.                                                                    
He wondered if it had been discussed within the department.                                                                     
Commissioner  Hladick  replied that  he  had  not talked  to                                                                    
anyone specifically  about the database issue  and could not                                                                    
Co-Chair  Neuman  suggested that  Representative  Guttenberg                                                                    
was thinking of the All Payer Database.                                                                                         
Representative Guttenberg responded in the affirmative.                                                                         
Co-Chair Neuman explained that the  All Payer Database was a                                                                    
place where  hospitals would be  required to post  the costs                                                                    
of medical  procedures online to facilitate  people shopping                                                                    
and  perhaps bringing  down costs  with  competition in  the                                                                    
marketplace.  He had  spoken with  Department of  Health and                                                                    
Social  Services  Commissioner  Valerie Davidson  about  the                                                                    
issue  and  recommended asking  her  when  she came  to  the                                                                    
Representative  Guttenberg  noted   that  sometimes  it  was                                                                    
difficult to determine  who to speak to about  the issue. He                                                                    
suggested  having all  the parties  involved sitting  at the                                                                    
Representative  Wilson pointed  to $2.05  million UGF  under                                                                    
economic  development   on  slide  10.  She   wondered  what                                                                    
portions  were comprised  of grants  and salaries.  She also                                                                    
wanted to know who the state  was granting the money to. She                                                                    
also highlighted  $4.5 million UGF under  tourism marketing.                                                                    
She was fairly certain that  state statute indicated a 50/50                                                                    
split.  She stressed  that  the amount  was  not 50/50.  She                                                                    
clarified  that the  budget  for  tourism marketing  totaled                                                                    
$8.103 million of which $4.5 million was UGF.                                                                                   
Ms. Reardon replied in the affirmative.                                                                                         
Representative Wilson  asked about ASMI. She  noted that its                                                                    
budget was $24  million and the state  was only contributing                                                                    
$3.4  million. She  asked if  she was  correct. Ms.  Reardon                                                                    
answered positively.                                                                                                            
Representative  Wilson noted  there was  a large  percentage                                                                    
between the two amounts and asked  if there was a reason for                                                                    
the  disparity. Commissioner  Hladick replied  that in  part                                                                    
ASMI  was supported  through a  small tax  to fishermen  and                                                                    
also  federal dollars.  He believed  the largest  portion of                                                                    
dollars going to  ASMI were the fisheries  dollars. He would                                                                    
supply the breakdown.                                                                                                           
Representative  Wilson   asked  for  the   same  information                                                                    
related  to tourism.  Commissioner  Hladick  replied in  the                                                                    
Representative  Wilson   pointed  to  slide  13   under  the                                                                    
Division  of Community  and Regional  Affairs. She  asked if                                                                    
the department  could provide the  breakdown of  UGF dollars                                                                    
in the amount of $7.2 million.                                                                                                  
2:38:20 PM                                                                                                                    
Commissioner Hladick replied positively.                                                                                        
Representative  Gattis   spoke  about  broadband.   The  co-                                                                    
chairman had directed her to  delve deeply into the issue of                                                                    
broadband  at  the  subcommittee   level.  She  agreed  with                                                                    
Representative  Guttenberg's comments  about the  importance                                                                    
of  technology as  a tool  to be  used to  make things  more                                                                    
affordable.   She  remarked   that   the  broadband   report                                                                    
indicated  that Alaska's  technology was  old and  outdated.                                                                    
She  indicated   that  her   subcommittee  was   looking  at                                                                    
combining the  education, library,  and health  broadband to                                                                    
be more  efficient. She was  also working on the  issue with                                                                    
the federal delegation.                                                                                                         
Co-Chair Neuman mentioned the  commissioner working with the                                                                    
Division of  Insurance. Recently  he had been  notified that                                                                    
the state  was not  allowing Moda  insurance to  practice in                                                                    
the state;  the state currently had  one insurance provider,                                                                    
Premera.  He   wondered  how   the  commissioner   saw  that                                                                    
influencing  the  cost  and availability  of  insurance  for                                                                    
Commissioner Hladick  replied that  the order  of impairment                                                                    
was issued  that stopped Moda  from writing new  policies or                                                                    
renewals.  Moda  still  had  a  certificate  to  operate  in                                                                    
Alaska.  The administration  had been  negotiating with  the                                                                    
company for the previous 7 days,  10 to 12 hours per day. He                                                                    
thought  there  was going  to  be  an agreed  upon  solution                                                                    
shortly. He  hoped to have  a positive press release  by the                                                                    
following Monday.                                                                                                               
Co-Chair Neuman  noted he had  had constituents  calling his                                                                    
office  asking for  information.  He referenced  individuals                                                                    
with  current Moda  contracts and  asked  if their  policies                                                                    
would be honored.                                                                                                               
Commissioner Hladick  replied in the affirmative.  He stated                                                                    
that  if  a  person  had  a policy  with  Moda  they  should                                                                    
continue to  go to the  doctor and submit their  claims. The                                                                    
state  was working  diligently to  ensure  that claims  were                                                                    
Co-Chair  Neuman  asked  if  information  was  going  to  be                                                                    
released  on  the  following  Monday.  Commissioner  Hladick                                                                    
replied in the affirmative.                                                                                                     
Representative Gara  clarified that  Moda would  continue to                                                                    
honor the claims for people who  had gone to the doctor from                                                                    
the  present  day and  in  the  past.  He also  wondered  if                                                                    
policies would continue into the future.                                                                                        
Commissioner  Hladick   replied  that  the   department  was                                                                    
working hard to make sure it was into the future.                                                                               
Representative Gara  spoke to  the state's  small population                                                                    
and the lack  of diversity in insurance  pools making things                                                                    
more difficult for  costs and insurance. If  Alaska was able                                                                    
to pool with  other states, it might drive down  the cost of                                                                    
insurance. He had  been told that under  the Affordable Care                                                                    
Act the director of the  insurance division could take steps                                                                    
to pool  with other  states. He asked  if anything  had been                                                                    
done on the issue.                                                                                                              
Commissioner Hladick would look into the matter.                                                                                
Co-Chair Neuman asked if the  department had any information                                                                    
on Representative Gara's prior questions.                                                                                       
2:43:07 PM                                                                                                                    
Ms. Reardon  replied in the affirmative.  She indicated that                                                                    
the numbers  were reflected the  same on both slides  19 and                                                                    
20.  She thought  part of  the  confusion may  have been  in                                                                    
reading down  and adding without following  it cumulatively.                                                                    
She began with  looking at slide 19 at the  FY 16 management                                                                    
plan UGF total  of $30 million. She flipped to  slide 20 and                                                                    
pointed  to the  top  line  that also  reflected  the FY  16                                                                    
management  plan UGF  total of  $30  million. She  continued                                                                    
reading down following  the FY 17 adjusted  base backing out                                                                    
items to  get the  adjusted base total  UGF of  $25 million.                                                                    
Referring back to  slide 19 the FY 17  adjusted base equaled                                                                    
$25 million.  She switched again  to slide 20  and continued                                                                    
reading down  the UGF  column. She reported  that the  FY 17                                                                    
governor's  increments  returned  marijuana money  that  had                                                                    
been  removed  as  one  time   money  and  unallocated  cuts                                                                    
totaling $1.9 million UGF. She  moved on to highlight the FY                                                                    
17 governor decrements totaling  $5.4 million. By adding the                                                                    
increments  and subtracting  the decrements  from the  FY 17                                                                    
adjusted base totaled $21 million.  She returned to slide 19                                                                    
reading  from  left to  right.  The  FY 16  management  plan                                                                    
reflected a  total of $30  million, the FY 17  adjusted base                                                                    
totaled $25 million,  and the FY 17  governor's plan totaled                                                                    
$21 million.                                                                                                                    
2:46:27 PM                                                                                                                    
Representative  Gara stated  that  the  only discrepancy  he                                                                    
noticed was that Ms. Reardon  had been talking about an $8.2                                                                    
million  cut  from   FY  16  management  plan   UGF  to  the                                                                    
governor's proposal but it looked like an $8.5 million cut.                                                                     
Ms.  Reardon replied  that the  $8.2 million  reflected "all                                                                    
funds" and $8.5 million reflected UGF.                                                                                          
Vice-Chair Saddler  commented that  he had seen  the tourism                                                                    
marketing costs  decline. He had heard  the tourism industry                                                                    
ask questions and protest. He  wondered what would happen if                                                                    
the  entire state  support for  tourism marketing  went away                                                                    
leaving the  burden to private industry  which received much                                                                    
of the  benefit. He was not  advocating for it but  was just                                                                    
asking the question.                                                                                                            
Commissioner  Hladick  responded  that  in  2006  the  state                                                                    
provided  about   $5  million.   The  funding   levels  were                                                                    
returning to the FY 05 and  FY 06 levels. He relayed that he                                                                    
had not spoken with anyone  about what would happen if state                                                                    
funding for the tourism industry was discontinued.                                                                              
Co-Chair Neuman  indicated that the committee  would move to                                                                    
the   next   budget   overview  with   the   Department   of                                                                    
Administration (DOA).                                                                                                           
2:48:44 PM                                                                                                                    
AT EASE                                                                                                                         
2:50:54 PM                                                                                                                    
^FY 17 BUDGET OVERVIEW: DEPARTMENT OF ADMINISTRATION                                                                          
2:51:13 PM                                                                                                                    
SHELDON FISHER, COMMISSIONER,  DEPARTMENT OF ADMINISTRATION,                                                                    
introduced  himself  and his  colleagues.  He  moved to  the                                                                    
PowerPoint     Presentation:    "Alaska     Department    of                                                                    
Administration Department Overview."                                                                                            
Commissioner  Fisher began  with slide  2: "DOA  Mission and                                                                    
Organization."  He relayed  that  he would  attempt to  move                                                                    
quickly through the slides.                                                                                                     
Co-Chair  Neuman  asked  the   commissioner  to  review  the                                                                    
numbers for the benefit of all who were listening.                                                                              
Commissioner  Fisher  explained  that  the  mission  of  the                                                                    
Department of  Administration was to provide  consistent and                                                                    
efficient   support   services   to  other   agencies.   The                                                                    
department  also had  a  material set  of  services that  it                                                                    
provided  to  the public.  The  services  provided to  other                                                                    
state agencies fell within  specific divisions. The Division                                                                    
of Finance provided accounting and  finance functions of the                                                                    
state.  The Division  of General  Services provided  leasing                                                                    
and purchasing services for the  state. The Division of Risk                                                                    
Management  provided  the   risk  management  and  insurance                                                                    
functions for the state.  The enterprise technology Services                                                                    
provided  the information  technology functions.  Lastly, he                                                                    
noted  the Division  of Personnel  and  Labor Relations  was                                                                    
Commissioner Fisher  continued that in terms  of services to                                                                    
the public the  Division of Motor Vehicles  and the Division                                                                    
of  Retirement  and Benefits  were  housed  within DOA.  The                                                                    
department also  had two legal and  advocacy functions which                                                                    
were  the Public  Defender Agency  (PDA) and  the Office  of                                                                    
Public  Advocacy (OPA).  There  were  also four  commissions                                                                    
that    were   quasi-independent    that   the    department                                                                    
administered   including  the   Oil  and   Gas  Conservation                                                                    
Commission,  the  Violent  Crimes  Compensation  Board,  the                                                                    
Alaska  Public Offices  Commission,  and  the Alaska  Public                                                                    
Broadcasting Commission.                                                                                                        
2:53:06 PM                                                                                                                    
Commissioner   Fisher  discussed   slide   3:  "DOA   Budget                                                                    
Reductions  by  Component."  He  explained  that  the  slide                                                                    
reflected the department's General  Fund reductions that had                                                                    
occurred or  planned to  happen in  the current  budget that                                                                    
had  been submitted.  The  funds were  broken  down by  core                                                                    
services  which  were  at  the top  of  the  list  including                                                                    
hearings,  general services,  the Public  Offices Commission                                                                    
etc.  The department  separated out  OPA and  PDA. He  noted                                                                    
that  the  administration's   legal  and  advocacy  services                                                                    
accounted for  65 percent  of the  general funds  within the                                                                    
department. They  were critical  functions to  Alaska's most                                                                    
needed  and vulnerable  members of  society. The  department                                                                    
had  attempted in  budget cuts  over the  past few  years to                                                                    
minimize the  impact on those organizations.  Although it is                                                                    
displayed  that  over  the past  two  years  the  department                                                                    
reduced  UGF  spending  by  34 percent.  In  the  legal  and                                                                    
advocacy functions  the department had reduced  its spending                                                                    
by a little  over 5 percent. He highlighted  the funding for                                                                    
Public  Broadcasting and  AIRRES  [Alaska Information  Radio                                                                    
Reading and Education Service] which  was down by 32 percent                                                                    
over a period  of two years. He also noted  that the special                                                                    
system  under the  formula program  referred to  the Elected                                                                    
Public  Officer's Retirement  System  was  down 10  percent.                                                                    
There was not  much the state could do to  reduce it because                                                                    
it was a general funded  retirement system and was driven by                                                                    
mortality rate.                                                                                                                 
Commissioner Fisher  continued that some of  the drivers for                                                                    
the   department   non-formula  core   services   reductions                                                                    
included  furloughs,  layoffs,   and  an  increased  vacancy                                                                    
factor. There were reductions  to travel, support contracts,                                                                    
and cell  phone usage. The department  had renegotiated cell                                                                    
phone  contracts,  reduced subscriptions,  reduced  building                                                                    
services and  other janitorial  services. He  suggested that                                                                    
much  of the  department was  supported through  rates which                                                                    
had not been increased  for other agencies. The department's                                                                    
Enterprise Technology  Services group had also  cut rates by                                                                    
a little over $1.6 million  to other agencies in addition to                                                                    
a reduction of 34 percent.  He advocated that the department                                                                    
was doing its best to try  to not only reduce its budget but                                                                    
to reduce the budget to other divisions that it supported.                                                                      
Commissioner   Fisher   reported   that   the   department's                                                                    
procurement arm  reached out to virtually  every vendor that                                                                    
was funded  by GF  in the past  year seeking  concessions in                                                                    
contracts and  was able  to reduce  procurement by  about $5                                                                    
million  in existing  contracts across  the state.  He added                                                                    
that the savings did not  just impact DOA's budget. He spoke                                                                    
to some of the measures OPA  took to help reduce the budget.                                                                    
He  noted that  the  division had  previously used  contract                                                                    
lawyers  in  certain  instances and  have  hired  additional                                                                    
lawyers bringing the  work in house and  reducing the budget                                                                    
by  about  $640,000.  Both agencies  had  aggressively  used                                                                    
furloughs over  the current year.  Also the  Public Defender                                                                    
Agency  had been  centralizing a  number  of functions  that                                                                    
were   previous   completed   in   each   office   improving                                                                    
efficiencies. All of the divisions  were using vacancies and                                                                    
teleconferencing to minimize costs.                                                                                             
2:57:58 PM                                                                                                                    
Commissioner Fisher  turned to  slide 4:  "DOA FY  17 Budget                                                                    
INCS,  DECS." The  slide  showed the  FY  17 increments  and                                                                    
decrements from  the budget submitted by  the department. He                                                                    
pointed  to  the  largest increment  associated  with  third                                                                    
party  administrator costs  of $2.4  million. The  money was                                                                    
associated  with the  state's AETNA  contract. He  knew that                                                                    
the  number   was  an   obviously  significant   number.  He                                                                    
indicated  that  there  would be  further  discussion  about                                                                    
healthcare  and  AETNA.  He  thought  it  was  important  to                                                                    
recognize that  in the request  for proposal  the department                                                                    
had  initiated a  couple of  years  prior the  focus was  to                                                                    
drive network  savings. He believed the  department had seen                                                                    
a  fairly substantial  decrease  in  network savings  across                                                                    
both the retiree and active plans  to the extent of over $40                                                                    
million  in savings  over  the network  the  state had  used                                                                    
previously.  He added  that  while the  state  was paying  a                                                                    
third-party    administrator   more    than   before,    the                                                                    
administrator  was aggressively  working with  the state  to                                                                    
build a more  cost effective network of which  the state was                                                                    
enjoying substantial savings overall.                                                                                           
Commissioner  Fisher moved  down the  slide to  point out  a                                                                    
decrement  that eliminated  a subsidy  to the  Linny Pacillo                                                                    
Parking  Garage  and  the  Nome  State  Office  Building  in                                                                    
Anchorage in the amount of  $292,000. The decrement impacted                                                                    
other  agencies,   but  the  department  had   been  working                                                                    
aggressively to  replace the revenue with  other revenue and                                                                    
had found  tenants and  the public to  lease the  garage. He                                                                    
thought the  revenue would be  replaced largely  with third-                                                                    
party receipts  from non-state  users. The  department would                                                                    
be able to offset the decrease in revenue.                                                                                      
Commissioner  Fisher  indicated   the  reduced  funding  for                                                                    
Elected  Public Officers  was associated  with mortality  in                                                                    
the   group.  The   following  two   line  items   reflected                                                                    
maintenance  and  operations  and the  maintenance  contract                                                                    
work  completed by  the Enterprise  Technology group,  which                                                                    
had  been done  to reduce  contracts and  maintenance costs.                                                                    
There  was   a  funding  reduction  to   Public  Radio.  The                                                                    
department  proposed a  fairly material  reduction, although                                                                    
it  was  in  line  on  a percentage  basis  with  the  other                                                                    
reductions that have  been submitted for other  parts of the                                                                    
department's  core operations.  He  reviewed  the $644,  000                                                                    
reduction for  bringing more legal  work in  house resulting                                                                    
in more  efficiencies. He  noted that at  the bottom  of the                                                                    
page there were  a couple of increments  associated with OPA                                                                    
and  PDA of  increased  receipts for  appointed council  and                                                                    
public guardian fees. He explained  that it was in effort to                                                                    
collect more  from clients.  There was  a process  where the                                                                    
court determined that a person  could contribute to the cost                                                                    
of their  defense, although not  100 percent. In  past years                                                                    
there had been lapses and DOA  wanted to collect to the full                                                                    
extent.  The department  was also  assessing  whether a  fee                                                                    
increase was appropriate. He  additionally reported that the                                                                    
public guardian fees  had not increased for  many years. The                                                                    
department  intended  to  apply   an  inflation  factor  and                                                                    
increase  public  guardian  fees   to  offset  some  of  the                                                                    
decreases that OPA had received.                                                                                                
3:02:06 PM                                                                                                                    
Co-Chair Neuman wanted to allow  for questions at the end of                                                                    
the presentation and time was limited.                                                                                          
Commissioner  Fisher  mentioned  some  of  the  supplemental                                                                    
requests  which  included an  increase  of  $200,000 due  to                                                                    
Legislative  Audit increasing  its fees  to the  department.                                                                    
Also,  the Office  of Public  Advocacy provided  defense for                                                                    
one  of   the  defendants  in  "The   Fairbanks  Four."  The                                                                    
department  incurred  some  unexpected  charges  which  were                                                                    
reflected in the supplemental budget.                                                                                           
Commissioner  Fisher skipped  the  following  four pages  to                                                                    
slide  9: "Core  Initiatives  and  Challenges." He  reported                                                                    
that when  he had presented  in the previous session  he had                                                                    
discussed five core  initiatives within DOA. They  had to do                                                                    
with labor  which was  both wages  as well  as productivity,                                                                    
healthcare   costs,   IT  consolidation,   purchasing,   and                                                                    
facilities  management. The  department  was describing  and                                                                    
talking  about  the  initiatives  in a  different  way.  The                                                                    
department  was   also  approaching   them  in   a  slightly                                                                    
different way  - a more mature  way. All of the  prior areas                                                                    
of  focus  were  included  in   the  presentation.  He  also                                                                    
mentioned  talking about  challenges having  to do  with OPA                                                                    
and  PDA.   He  noted  that   there  would  be   a  specific                                                                    
subcommittee  meeting  regarding  Alaska Land  Mobile  Radio                                                                    
3:04:17 PM                                                                                                                    
Commissioner  Fisher moved  to  slide  11: "Bargaining  Unit                                                                    
(BU)  Detail." Labor  negotiations were  currently beginning                                                                    
with  four bargaining  units  representing approximately  78                                                                    
percent   of  DOA's   employees.  Typically   the  non-union                                                                    
employees  followed  the  arrangements the  department  made                                                                    
with the  bargained employees. In  effect 86 percent  of the                                                                    
department's  employees would  be  impacted  by the  current                                                                    
round of negotiations.                                                                                                          
Commissioner Fisher  advanced to slide 12:  "DOPLR - Current                                                                    
Status  of  Contracts."  In June  of  2014,  the  department                                                                    
reached  a   tentative  agreement  with   Marine  Engineer's                                                                    
Beneficial  Association  (MEBA).  The agreement  included  a                                                                    
number  of  terms  including a  cost  of  living  adjustment                                                                    
(COLA)  of 0  percent  in 2014,  1 percent  in  2015, and  2                                                                    
percent in  2016. The legislature had  approved the contract                                                                    
and MEBA  had not  sent it  to its members  for a  vote. The                                                                    
Marine  Engineer's Beneficial  Association  felt that  there                                                                    
was  a misunderstanding  and the  department was  looking at                                                                    
mediation  to resolve  the issue.  The  department had  also                                                                    
reached a  tentative agreement with the  Teacher's Education                                                                    
Association of  Mt. Edgecombe (TEAME)  that did  not include                                                                    
COLAs. He reported that an  agreement (not on the slide) had                                                                    
been  reached   the  previous  evening  with   Alaska  State                                                                    
Employees Association (ASEA) often  times referred to as the                                                                    
general  governmental  unit  (GGA)  which  was  the  largest                                                                    
bargaining unit that the department negotiated with.                                                                            
3:06:20 PM                                                                                                                    
Commissioner  Fisher  continued  to  slide  14:  "Status  of                                                                    
Alaskacare Health  Plan." He reported  that the  state spent                                                                    
between  its active  employees and  its retirees  between an                                                                    
excess of  $600 million on healthcare.  Between $120,000 and                                                                    
$130,000 of  that was associated  with active  employees and                                                                    
the rest was  associated with state retirees.  In looking at                                                                    
the  chart  in 2010  the  department  had started  seeing  a                                                                    
dramatic increase  in healthcare spending. He  reported a 16                                                                    
percent increase  between FY 10 and  FY 11 and a  13 percent                                                                    
increase between FY 11 and FY  12. As he mentioned the prior                                                                    
administration went  out for an RFP  aggressively seeking to                                                                    
find  an  administrator  that  could   bring  a  more  cost-                                                                    
effective  network of  providers  for member  to use.  After                                                                    
that a  leveling out  and a  flattening of  healthcare costs                                                                    
could be  seen. He continued  that between  FY 14 and  FY 16                                                                    
there was  a dip in  the amount the department  budgeted for                                                                    
healthcare costs  on a per-employee basis.  A spike occurred                                                                    
in  the  state's healthcare  costs  when  the state  started                                                                    
discussing  temporarily   furloughing  or  laying   off  its                                                                    
workers.  Typically when  workers felt  threatened with  the                                                                    
possibility of being laid off  or losing their position they                                                                    
tend to consume more healthcare  than they would in ordinary                                                                    
times. The  department was  currently seeing  a spike.  As a                                                                    
result,  the department  believed  that the  rate of  $13.46                                                                    
million for FY 17  was too low and it was  in the process of                                                                    
evaluating its strategies and tools  around how to deal with                                                                    
the circumstances.                                                                                                              
Commissioner  Fisher  scrolled   to  slide  15:  "Mitigation                                                                    
Measures." He spoke  to four primary levers  the state could                                                                    
manipulate  as  the  state thought  about  how  to  mitigate                                                                    
increased  costs. The  first was  that the  department could                                                                    
negotiate  better  rates  with providers.  He  informed  the                                                                    
committee that  the department  was in  current negotiations                                                                    
with Alaska Regional Hospital  and Providence Medical Center                                                                    
and also working  to improve rates with  other providers. He                                                                    
added  that employees  could contribute  more to  their plan                                                                    
which was included as a  topic in bargaining discussions. He                                                                    
suggested that the state could  also change the plan design.                                                                    
Deductibles,   co-payments,  and   other  things   could  be                                                                    
increased.   The  state   could  also   make  an   increased                                                                    
contribution. The  department was exploring all  options and                                                                    
expected that  all of them  would be necessary to  close the                                                                    
fiscal  gap.  The department  was  also  doing an  audit  of                                                                    
dependents to ensure everyone on the plan was eligible.                                                                         
3:10:14 PM                                                                                                                    
Commissioner  Fisher  discussed  slide 17:  "Current  state:                                                                    
Decentralized."   He  explained   that  one   of  the   core                                                                    
strategies  that  the  department  was  developing  was  the                                                                    
notion  of  centralizing services  in  an  affective was  to                                                                    
reduce costs.  The diagram represented the  recognition that                                                                    
many  of the  back office  functions were  decentralized. He                                                                    
prefaced that  shared services would never  touch what might                                                                    
be  considered a  mission critical  function.  The idea  was                                                                    
intended to  provide a more  efficient and effective  way to                                                                    
deliver  the common  administrative tasks.  A number  of the                                                                    
tasks  included, fiscal,  human resources,  procurement, IT,                                                                    
and   facilities.  Currently   every  department   had  some                                                                    
function on the list. The  state was aggressively looking at                                                                    
how to  centralize functions and drive  efficiency. He noted                                                                    
that  DOA would  be making  a detailed  presentation on  the                                                                    
subject  on  the following  Thursday  to  the House  Finance                                                                    
Commissioner  Fisher reviewed  slide 18:  "IT Consolidation:                                                                    
Cross-Agency IT Projects." He reported  that there were four                                                                    
initiatives underway to improve  the state's IT services. He                                                                    
mentioned  the rural  broadband  initiative.  The state  was                                                                    
redesigning its  network to rural  Alaska. It  would improve                                                                    
the level of  service and decrease costs.  He indicated that                                                                    
it required that the state  rebuild the network and purchase                                                                    
new equipment. The department did  not seek an appropriation                                                                    
for  that  purchase  but  rather took  a  modest  amount  of                                                                    
funding that it had from  the operating budget, took a first                                                                    
location, purchased the equipment,  and as the costs reduced                                                                    
would take  the savings to  then fund the purchase  for each                                                                    
successive  location. He  reported that  the department  was                                                                    
about  50 percent  of the  way  through the  rollout of  the                                                                    
network.  He thought  that when  it was  fully deployed  the                                                                    
state would see a savings of about $800,000.                                                                                    
Commissioner Fisher turned to  slide 19: "IT Consolidation -                                                                    
Procurement." He  explained the department had  initiated an                                                                    
IT spend review  board. Any purchase of IT  equipment in any                                                                    
department that came  to a centralized board.  The board was                                                                    
made up of  individuals from the department as  well as from                                                                    
the  other  departments.  The board  reviewed  purchases  to                                                                    
ensure  that spending  was efficient  and  that the  state's                                                                    
purchasing capacity was being leveraged properly.                                                                               
3:13:17 PM                                                                                                                    
Commissioner Fisher moved  to slide 21: "DGS  - office space                                                                    
Portfolio."  He emphasized  that  DOA was  trying to  reduce                                                                    
lease  costs.  The department  had  been  working with  both                                                                    
buildings  the  state owned  and  managed  and working  with                                                                    
lessors  to   reduce  the  scope  of   janitorial  expenses,                                                                    
cleaning,  and window  washing. In  the process  of renewing                                                                    
leases  the department  had been  looking to  negotiate more                                                                    
aggressively,  recognizing the  state's fiscal  challenge as                                                                    
well  as  the  challenge  of  the market  as  a  whole.  The                                                                    
Department  of Administration  saw  opportunities to  reduce                                                                    
leases and was  trying to leverage those. He  pointed to the                                                                    
bottom  of  the  chart  noting  the  Linny  Pacillo  Parking                                                                    
Garage. The  department had made  a large effort to  bring a                                                                    
tenant in to provide some revenue opportunity.                                                                                  
3:14:11 PM                                                                                                                    
Commissioner Fisher  advanced to slide 23:  "OPA Caseloads."                                                                    
He reported a  trend of increased caseloads in  both OPA and                                                                    
PDA.  The  Office  of  Public  Advocacy  had  three  primary                                                                    
functions. They  provided a guardian  ad litem  function for                                                                    
juveniles, a guardian function for  adult wards that were no                                                                    
longer  able   to  take  care   of  themselves   and  needed                                                                    
assistance, and  legal functions  in cases which  the public                                                                    
defended  had a  conflict  of interest.  He  pointed to  the                                                                    
chart which  showed the caseload had  increased dramatically                                                                    
in the previous  year driven primarily due to  child in need                                                                    
of aid cases or CINA cases).  It had been driven by a change                                                                    
in   the  way   the  Office   of  Children's   Services  was                                                                    
administering  the program  combined with  increasing issues                                                                    
of  heroin and  other drug  abuse.  In the  past year  alone                                                                    
there had been  1,000 more appointments than  the prior year                                                                    
and the trend was continuing.                                                                                                   
3:15:48 PM                                                                                                                    
Commissioner Fisher  continued to slide 24:  "PDA Historical                                                                    
Caseload Growth."  He noted a  similar grow in  civil cases.                                                                    
The  child-in-need-of-aid cases  were civil  cases that  had                                                                    
had a 43 percent increase year  over year within PDA. It had                                                                    
been  somewhat   offset  with   downward  trends   in  post-                                                                    
conviction  cases,  felony   cases,  and  misdemeanor  case.                                                                    
Overall  PDA's  caseload  was up.  Both  organizations  were                                                                    
meeting  deadlines,  their constitutional  obligations,  and                                                                    
working  diligently  to  control  costs in  the  face  of  a                                                                    
growing caseload.                                                                                                               
Vice-Chair Saddler  asked to what extent  the department was                                                                    
trying to  embrace the  missions and  measures results-based                                                                    
budgeting effort.                                                                                                               
Commissioner Fisher reported that  the department was in the                                                                    
process of  establishing missions  and measures. He  did not                                                                    
feel that the  missions and measures inherited  by the prior                                                                    
administration really represented the  core functions of the                                                                    
department;  the items  had referred  to things  like family                                                                    
services. He  detailed that  some of  the numbers  seen were                                                                    
included  "in  that." He  viewed  missions  and measures  as                                                                    
another  way  of setting  smart  goals.  The department  was                                                                    
developing  smart  goals,  which  were  specific  measurable                                                                    
goals to  drive the  department. He would  be happy  to come                                                                    
back to present on the topic.                                                                                                   
Vice-Chair Saddler  thought they  were very  effective tools                                                                    
for advocating for and defending  reductions. He asked about                                                                    
the funding for public  broadcasting and ARRIES. He referred                                                                    
to  slide 3  that listed  a 32  percent reduction  in Alaska                                                                    
public  broadcasting  and ARRIES.  He  wondered  if the  cut                                                                    
applied  to just  ARRIES or  if it  pertained to  the entire                                                                    
public broadcasting service.                                                                                                    
Commissioner Fisher replied that it  was both. He noted that                                                                    
ARRIES was  a fairly modest  portion. He thought  the ARRIES                                                                    
portion of the reduction was about $50,000.                                                                                     
3:18:33 PM                                                                                                                    
Co-Chair Neuman asked about the  potential savings of nearly                                                                    
$67 million per year having  to do with the consolidation of                                                                    
IT and other areas. He asked about the status.                                                                                  
Commissioner Fisher indicated  that the department continued                                                                    
to   push  forward.   He  had   highlighted   some  of   the                                                                    
initiatives.  He suggested  taking  a copy  of the  spending                                                                    
review. The  department was hoping  to achieve a  savings of                                                                    
millions  of dollars.  He had  shared that  there were  four                                                                    
core initiatives that  the department was looking  at to see                                                                    
a  material  savings.  The  department  would  continue  the                                                                    
consolidation  process.  The  department  had  a  three-year                                                                    
Co-Chair Neuman  asked for  an update  as soon  as possible.                                                                    
Commissioner Fisher responded in the affirmative.                                                                               
Co-Chair  Neuman asked  about the  previous administration's                                                                    
space  standards initiative  to save  money. He  wondered if                                                                    
the effort had ceased.                                                                                                          
Commissioner Fisher reported that  the department had paused                                                                    
the effort  for a couple  of reasons. He indicated  that the                                                                    
effort was  viewed as counter-productive in  some regards by                                                                    
other  departments. He  suggested that  just because  it was                                                                    
not popular did not mean  the department would not implement                                                                    
it.  However,  there  was  feedback  that  it  was  actually                                                                    
reducing productivity. Therefore,  the department had paused                                                                    
the  project.  He furthered  that  to  rebuild and  leverage                                                                    
space standards  required the state  to make  an investment.                                                                    
In the current fiscal climate  it was important to determine                                                                    
what  government  would  look  like  on  the  back  end.  He                                                                    
wondered  if  there  would  be  substantial  reductions  and                                                                    
whether functions be  impacted more or less  than others. He                                                                    
wanted  to allow  the process  to  happen in  order to  know                                                                    
where the state was at.                                                                                                         
3:20:46 PM                                                                                                                    
Representative Wilson referred to  slide 23. She asked about                                                                    
the number of cases of each guardian ad litem.                                                                                  
Commissioner Fisher  responded that  he had  the information                                                                    
related to  guardians but not  guardian ad litems.  He would                                                                    
have  to  provide  the information.  He  reported  that  the                                                                    
guardians  in Alaska  had 86  wards,  while the  recommended                                                                    
maximum caseload was 40.                                                                                                        
Representative Wilson  asked if the commissioner  had stated                                                                    
64 or 86. Commissioner Fisher replied, "86."                                                                                    
Representative  Wilson  asked how  many  cases  each of  the                                                                    
public defenders  had. Commissioner Fisher answered  that he                                                                    
did not have the figure on hand.                                                                                                
Representative  Wilson  asked how  many  cases  each of  the                                                                    
conflict attorneys had. She referred  to OCS's estimate that                                                                    
the number  of children in  state custody would  increase by                                                                    
19 percent  and asked  how the  increase would  impact DOA's                                                                    
Commissioner  Fisher answered  that  there  was no  question                                                                    
that  OPA  and PDA  were  stretched.  He hoped  the  members                                                                    
recognized  that   was  why   the  department   had  largely                                                                    
protected  them  in  the budget  cuts.  The  department  was                                                                    
working  with them  to try  to drive  as much  efficiency as                                                                    
possible but the offices were stretched.                                                                                        
Representative Wilson  mentioned silos. She did  not believe                                                                    
the department  could solve the  issue on its own.  She also                                                                    
asked  about  driver's  licenses. She  understood  that  the                                                                    
group running  the safer driver's  license program  had been                                                                    
sold to an international company.  She wondered how it would                                                                    
impact  Alaskans and  how privacy  would be  maintained. She                                                                    
did not believe the state was  saving money by placing it in                                                                    
the hands  of another company.  She was aware that  it would                                                                    
run  out  in  the  following   year.  She  wondered  if  the                                                                    
department  intended  to  renew and  what  privacy  policies                                                                    
would be put into place.                                                                                                        
3:23:49 PM                                                                                                                    
Representative  Guttenberg asked  if the  commissioner would                                                                    
have the  person running the rural  broadband initiative get                                                                    
in touch with him. Commissioner Fisher replied, "Yes."                                                                          
Representative  Gattis read  from a  list of  questions from                                                                    
one of her constituents:                                                                                                        
     · What employees are currently being furloughed?                                                                           
     · Are any union employees being furloughed?                                                                                
     · What would it take to furlough a public employee?                                                                        
     · Are the unions willing to sign a letter of agreement                                                                     
        on the furlough?                                                                                                        
Representative  Gattis asked  the commissioner  to walk  her                                                                    
through  the  process  of  downsizing  and  to  discuss  the                                                                    
challenges for DOA in doing so.                                                                                                 
Commissioner Fisher answered that  regarding furlough it was                                                                    
a subject of bargaining. In  FY 16 many departments utilized                                                                    
furloughs as  a cost savings  measure. However, it  had been                                                                    
utilized  by non-covered  employees largely  on a  voluntary                                                                    
basis. A  number of employees  had taken a furlough  for two                                                                    
to  five days  as a  way of  saving costs.  In terms  of the                                                                    
state's covered  employees, it  required bargaining  and was                                                                    
an element that the department  had been discussing with the                                                                    
unions. The  agreement the department  reached with  the GGU                                                                    
union the previous evening  included mandatory furloughs for                                                                    
those   employees.  The   department   would  continue   its                                                                    
conversations  relating  to   furloughs.  Specifically,  the                                                                    
ability to furlough a union employee required bargaining.                                                                       
3:26:32 PM                                                                                                                    
Representative Gattis  wanted to make sure  that the process                                                                    
was  on record.  She stated  that many  in private  industry                                                                    
were taking  reductions and  were adamantly  vocalizing that                                                                    
public employees should participate in the same process.                                                                        
Representative Kawasaki  referred to slide 17.  He mentioned                                                                    
redundancy  and  appreciated   the  commissioner's  work  on                                                                    
centralizing some of the internal  core functions. He wanted                                                                    
hear  more   about  how  DOA  was   working  with  municipal                                                                    
governments, school districts,  village councils, and tribal                                                                    
governments  in terms  of centralizing  some functions  that                                                                    
the   entities   all   share.  He   would   wait   for   the                                                                    
commissioner's response on the  following Thursday. He noted                                                                    
that  leasing   was  done   through  the   General  Services                                                                    
Division.   Members  had   heard  a   presentation  by   the                                                                    
Department  of Transportation  and  Public Facilities  about                                                                    
the  800   facilities  that   the  department   worked  with                                                                    
directly. He wondered  if there was any  sharing between the                                                                    
two agencies.                                                                                                                   
Commissioner   Fisher  responded   that  he   would  address                                                                    
Representative Kawasaki's  question when the  department met                                                                    
to talk about shared services.  There were other agencies in                                                                    
addition   to  DOT   and  DOA   doing  their   own  building                                                                    
maintenance. One  of DOA's projects  was to  consolidate all                                                                    
of the building maintenance into a single organization.                                                                         
Co-Chair  Neuman  asked  the commissioner  to  look  at  the                                                                    
possibility of providing maintenance  to some of the smaller                                                                    
schools when considering shared services for maintenance.                                                                       
3:29:20 PM                                                                                                                    
Representative  Gara  referred to  slide  23.  He asked  for                                                                    
verification that  guardian ad  litems were  responsible for                                                                    
advocating  for  children,  including  their  placement  and                                                                    
ensuring proper care. Commissioner Fisher concurred.                                                                            
Representative  Gara  assumed that  in  FY  16 the  division                                                                    
would likely break the record  in terms of caseloads for the                                                                    
guardian   ad  litems.   He  asked   if  he   was  accurate.                                                                    
Commissioner Fisher agreed.                                                                                                     
Representative Gara mentioned that from  FY 12 through FY 15                                                                    
caseloads had  roughly doubled.  He asked  if the  number of                                                                    
guardian  ad  litems   had  increased.  Commissioner  Fisher                                                                    
replied, "It has not."                                                                                                          
Representative Gara asked  if it was fair to  assume that by                                                                    
FY 16  caseloads had more than  doubled. Commissioner Fisher                                                                    
thought it  was fair  but did  not have  a figure  with him.                                                                    
However, he confirmed the trend was continuing.                                                                                 
Representative Gara asked if the  commissioner had spent any                                                                    
time with  the guardian ad litems  to see if they  were able                                                                    
to adequately help the children they were assigned.                                                                             
Commissioner  Fisher responded  that there  was no  question                                                                    
that the  organization was under stress.  The department had                                                                    
strived  to  minimize any  impact  on  the particular  group                                                                    
because of the very  issues Representative Gara highlighted.                                                                    
He added that there was  no question that DOA was challenged                                                                    
with OPA.                                                                                                                       
Representative Gara asked if the  children were being fairly                                                                    
and  adequately represented  in  court  to ensure  promoting                                                                    
their interests and  improving outcomes. Commissioner Fisher                                                                    
believed  that through  diligent efforts  and hard  work DOA                                                                    
was meeting the  needs of the children and  also meeting the                                                                    
state's constitutional obligations.                                                                                             
3:32:03 PM                                                                                                                    
Representative Gara  asked if he was  aware whether guardian                                                                    
ad  litems were  spending time  with their  clients or  just                                                                    
opening  the children's  case  files the  night  prior to  a                                                                    
court hearing.                                                                                                                  
Commissioner Fisher  reported having conversations  with the                                                                    
director of  the group. He  could not speak to  any specific                                                                    
case. However, it was a mix depending on the circumstances.                                                                     
Representative  Gara  asked if  the  state  had the  highest                                                                    
guardian ad litem caseloads in the nation.                                                                                      
Commissioner Fisher  would provide  the information.  He was                                                                    
aware that the state's guardian  caseload was the highest in                                                                    
the nation. However, he did  not know specifically about the                                                                    
guardian ad litem caseload.                                                                                                     
Representative Gara requested that  the commissioner let him                                                                    
know where the state ranked.                                                                                                    
3:33:15 PM                                                                                                                    
Vice-Chair  Saddler commented  that the  state had  had some                                                                    
success in  recent years in  getting legislation  through to                                                                    
mandate  the  private insurers  in  the  state cover  autism                                                                    
therapies. The  legislature had thought  that the  next step                                                                    
would be  for the  State of  Alaska's employee  insurance to                                                                    
cover  it   and  the   previous  administration   had  begun                                                                    
evaluating  the possibility  and potential  cost benefit  of                                                                    
doing so. He wondered if  the commissioner had any update on                                                                    
the status of that effort in his department.                                                                                    
Commissioner  Fisher  did  not  have  an  update  but  would                                                                    
provide the information.                                                                                                        
Vice-Chair Saddler  communicated his intent to  speak to the                                                                    
commissioner offline.                                                                                                           
HB  255  was  HEARD  and   HELD  in  committee  for  further                                                                    
HB  256  was  HEARD  and   HELD  in  committee  for  further                                                                    
HB  257  was  HEARD  and   HELD  in  committee  for  further                                                                    
Co-Chair  Neuman  reviewed  the  agenda  for  the  following                                                                    
Monday.  The  committee  would   be  hearing  FY  17  budget                                                                    
overviews for  the University of  Alaska and  the Department                                                                    
of Military and Veterans Affairs.                                                                                               

Document Name Date/Time Subjects
DCCED FY17 HFC Overview.pdf HFIN 2/5/2016 1:30:00 PM
DOA-HFIN_DeptOverview FINAL 2.5.16.pdf HFIN 2/5/2016 1:30:00 PM