Legislature(2003 - 2004)
04/02/2003 09:00 AM FIN
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
SENATE BILL NO. 115 "An Act allowing expenses of the correctional industries program that may be financed from the correctional industries fund to include the salaries and benefits of state employees." This was the first hearing for this bill in the Senate Finance Committee. Co-chair Wilken informed the Committee that this bill involves a $963,000 fund source change from the general fund to the Correctional Industry Fund. He stated that the Senate Rules Committee, at the request of Governor Murkowski, sponsors the bill. JERRY BURNETT, Director, Division of Administrative Services, Department of Corrections stated that this bill would amend the Alaska Correctional Industries' (ACI) statutes to allow ACI State employees salaries to be paid from ACI product-cost revenues, from which "all other administrative costs" are currently paid, rather than from the general fund. He expressed, that were this bill adopted, the Division of Correctional Industries would be 100- percent self-supporting. Mr. Burnett specified that ACI operates eight programs in the State including: two laundries, a wood furniture plant, an office furniture plant, a metals plant, an auto body shop, and two garment shops. Additionally, he specified, ACI cooperates with the Department of Natural Resources to operate the Mt. McKinley Meat Plant in Palmer. Senator Taylor asked whether ACI programs generate a net profit. Mr. Burnett responded that a net revenue of $150,000 is projected in FY 03. He continued that with improved marketing, improved products, and program oversight, ACI is expected to begin FY 04 with a fund balance of approximately $300,000. Senator Taylor asked how the fund balance would be utilized. Mr. Burnett stated that the beginning FY 04 fund balance, combined with FY 04 projected revenues, would allow the Department to pay salary expenses and allow ACI to expand its programs. Senator Taylor asked whether the current $960,000 general fund expense provides for such things as materials and supplies in addition to salary expenses. Mr. Burnett clarified that the $960,000 exclusively provides for salaries and benefits. Senator Taylor commented that ACI currently grosses approximately $3 million annually. Mr. Burnett agreed and voiced optimism that ACI would gross in excess of $4 million in FY 04. Senator Taylor summarized, therefore, that the ACI fund balance of approximately $300,000 and projected FY 04 revenues would provide for all Department expenses, including $960,000 in salary expenses. Mr. Burnett concurred. Senator Taylor puzzled as to "how exchanging one fund source for another" would allow for ACI program expansion. He further questioned whether there should be an additional $300,000 in savings to the general fund because of the ACI FY 04 beginning fund balance. Mr. Burnett expressed that the goal of this fund source change request is to save $960,000 in general fund expenditures relating to ACI salaries. Senator Taylor voiced concern that this would be identified "as another dedicated fund within the revenue streams of Alaska." He asked whether program expansion would require additional personnel. Mr. Burnett responded that no increases in personnel are expected, and that consideration is being given to form partnerships with public entities to market Correctional Industries products. Senator Taylor voiced support for ACI efforts to develop industry "to provide meaningful activities and training to individuals;" however, he declared, aggressive marketing and program expansions should not compete with private industry. Co-Chair Green asked how ACI programs are evaluated; specifically the criteria used to determine whether a program is self- sufficient. Mr. Burnett responded that a Correctional Industries Board reviews each program to evaluate its viability and to ensure that the service does not compete with private industry. Senator Bunde noted that the Mt. McKinley Meat Processing Plant has experienced "difficulties in functioning successfully." He asked "at what point," it might be decided that this program should be eliminated. He additionally asked how the plant's closure would affect ACI finances. Mr. Burnett clarified that the Department of Natural Resources owns the facility and provides for salaries of the ACI personnel. He noted that the salaries paid to ACI employees generate a small profit for the Department of Corrections. Mr. Burnett informed the Committee that the eight ACI industries would be reviewed this year to determine program continuance and expansion as well as to consider the development of new industries. Senator Bunde surmised, therefore, that the Department has mechanisms in place to expand or terminate programs. Mr. Burnett concurred. Co-Chair Wilken asked for confirmation that the Department's fiscal note is incorporated into the Governor's proposed FY 04 budget. Mr. Burnett confirmed. Senator Taylor moved to report SB 115 from Committee with individual recommendations and accompanying fiscal note. There being no objection, the bill REPORTED from Committee with previous fiscal note #1 from the Department of Corrections.