Legislature(2017 - 2018)HOUSE FINANCE 519
02/03/2017 01:30 PM House FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| HB61 | |
| HB95 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 61 | TELECONFERENCED | |
| *+ | HB 95 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| + | TELECONFERENCED |
HOUSE BILL NO. 95
"An Act making supplemental appropriations, capital
appropriations, and other appropriations; making
reappropriations; amending appropriations; repealing
appropriations; and providing for an effective date."
2:25:13 PM
Co-Chair Seaton invited Ms. Pitney to come to the table.
PAT PITNEY, DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET,
OFFICE OF THE GOVERNOR, would be reviewing the components
of the supplemental budget request. She would highlight
some of the more significant items. The information packet
provided to members had a list of every change presented in
the "FY 2017 Supplemental Bill" (copy on file).
Ms. Pitney reviewed slide 2: "FY2017 Supplemental Summary."
She reported that the total supplemental request was $51.7
million unrestricted general funds (UGF) and $113 million
in total. The supplemental request under review was one of
the smaller requests in the past several years.
Ms. Pitney continued to slide 3: "UGF/DGF/Other/Fed Summary
by Department (1088)." She indicated that the slide showed
a breakout of the operating supplemental request by
department. The unrestricted general fund operating request
totaled $51.6 million and $95 million in total funds.
Ms. Pitney detailed slide 4: "Statewide Department Summary
- Capital Budget (1183)." The slide showed the capital
appropriations which totaled $75,000 UGF and $18 million in
total funds.
Ms. Pitney advanced to the detail sheet on slide 5: "FY2017
Supplemental Bill - Page 1 of 10." She would not review
every item but was happy to answer any questions about any
numbers she did not cover. She referred to line 2. The
first request was an increase which included UGF for a
health insurance rate increase. The rate would be
increasing from $1346 per month to $1555 per month. In the
previous year the administration had requested an amendment
for the FY 17 budget once it recognized that the state's
reserves were getting low and that the state would need to
have a rate increase for FY 17. She continued that rather
than a rate increase, there was a deposit into the working
reserve in FY 16 that bolstered the reserve amount. It
allowed the state to receive the same rate from July to
January. The Department of Administration had put in
savings measures and had increased the cost to all
employees for their health care premiums. All the actions
were not enough to keep the reserve healthy. Therefore, the
department had to impose a mid-year rate increase which was
out of the ordinary. It was the same rate that was in the
FY 18 budget request. The total came to $6.0 million of
which $5.3 million was UGF. She relayed that in the
previous year the UGF was not provided, but many of the
non-general fund components were provided for a health rate
increase. It was the reason the general fund was a larger
part currently.
Ms. Pitney moved to the item listed on line 3. She reported
that furlough days were negotiated into the supervisor
union contracts. The negotiation ended after the budget was
put together the previous year. The result was that the
budget was reduced in accordance with the mandated furlough
days.
Vice-Chair Gara commented that the court system had a
budget savings measure by offering their own voluntary
retirement incentive plan. If a person was 3 years past
retirement age they were offered 3 months pay. As a result,
several folks retired generating a significant cost
savings. He wondered if such a plan was in place in other
departments. Ms. Pitney thought the question would be
better answered another day.
2:31:41 PM
Ms. Pitney scrolled to slide 6 (Page 2): "FY2017
Supplemental Bill - Page 2 of 10." She pointed to line 6.
She explained that the Public Defender agency received
receipts from collections for representing clients. Often
those collections came from garnishing clients' PFDs. The
collections were down because of the lower dividend rate.
The supplemental request would replace the amount expected
from collections not materialized.
Representative Wilson asked when the last time the
administration reviewed the criteria for qualifying for a
public defender. She was aware that a formula was applied
based on income. There were some clients that would qualify
even though they did not have money immediately. She
thought that was the reason for the $455,000 request. She
wondered if the criteria needed updating. Ms. Pitney
responded that the amount a defendant paid was based on a
court decision. The issue concerning the criteria used by
judges to determine how much should be paid was currently
being addressed. She commented that conversations among the
different affected parties were some of the best outcomes
of the justice reform effort in the previous year.
Ms. Pitney reviewed item 7, a federal grant that would
allow the state to address some audit issues pertaining to
commercial driver's license examiners. The state would
incur an ongoing cost of $36,000 for the software that
would be implemented.
Ms. Pitney detailed that line 8 was an increase due to a
classification study completed in December of 2016.
Occupational licensing examiners would move from a range 13
to a range 14. There was also a corresponding amount in the
FY 18 budget.
Representative Pruitt asked for the amount. Ms. Pitney
responded that it was approximately $165,000 or $170,000.
She would provide the exact number later.
Ms. Pitney discussed slide 7: "FY2017 Supplemental Bill -
Page 3 of 10." The two items listed were technical in
nature.
Ms. Pitney spoke to slide 8: "FY2017 Supplemental Bill -
Page 4 of 10." Lines 11, 12, 13, and line 14 on page 5
[slide 8] were supplemental requests for the Medicaid
program. She recalled that in the prior summer the state
relayed payments in FY 16 pushing them into FY 17 because
the FY 16 budget was insufficient to cover the payments.
The state essentially wrote 2 checks in FY 17. The amount
requested reflected the 2 checks. The amount of money in
Medicaid was about $580 million. The total would be $27
million higher with the supplemental request. She reported
that the amount was just over $60 million less than it had
been in FY 15. In FY 17, not counting the expansion
population, there had been a 9 percent enrollment increase
and a 12 percent increase in utilization. Therefore, all
the reform efforts moving billing from state funding to
federal funding has allowed the Medicaid program to remain
steady and below where the state was in FY 15.
2:37:33 PM
Vice-Chair Gara asked her to repeat her previous comments
about the increase in utilization and the associated
increase in costs and the comparison between fiscal years.
Ms. Pitney reported that in 2017 the number of people
eligible for Medicaid increased 9 percent. The utilization
was up a total of 12 percent. She clarified she was
speaking of the regular Medicaid program, the non-expansion
program. She reported that there were reform efforts and
several savings initiatives occurring prior to the reform
efforts. The state was about $60 million below where it was
in FY 16 on an annual basis. It was a recurring savings.
Co-Chair Seaton asked if it was before or after the
supplemental request. Ms. Pitney responded after the
request.
Representative Wilson asked for an actual number of
participants. She wanted to know how many participants made
up the 9 percent she mentioned. She thought the percentage
was substantial. She wondered what the reason was for the
substantial increase. Ms. Pitney could provide the numbers
after the meeting. She thought the increase was reflective
of the economy and job losses and the number of Alaska's
aging population.
Representative Wilson was aware there was not a cap for the
regular Medicaid program. She thought that for the optional
portions of Medicaid a limit could be set. She thought the
legislature had set a limit. She wondered if she was
correct. Ms. Pitney would have to consult with the
Department of Health and Social Services.
Representative Wilson wanted the information. She was under
the impression that the optional programs were capped. She
knew the medical portion cold not be capped. However, the
dental and other programs could be capped.
Co-Chair Seaton asked if Representative Wilson was talking
about a dollar cap or a limitation of services.
Representative Wilson thought there was a dollar cap for
the optional plans. Co-Chair Seaton suggested asking HSS.
2:42:28 PM
Vice-Chair Gara was confused. He referred to pages 4 and 5
[slides 8 and 9] and noted that for each line item the
descriptions reflected FY 16 costs that the state delayed
paying until FY 17. He indicated there were 4 items with
various amounts including: $2.9 million, $219,000, $15.9
million, and $7.6 million. There were also unanticipated
costs associated with more people using Medicaid in FY 17.
He only saw delayed payments on the slides.
Ms. Pitney responded that the savings initiatives,
memorandum of agreements with providers allowing higher
billing on the federal side, and utilization management
initiatives put in place by the Department of Health and
Social Services (DHSS) would offset unanticipated growth.
The program was being managed to keep costs contained. She
suggested that, had the department not had to write the
checks in FY 17 from FY 16, it would have met the overall
budget target. They were doing many things and would be
very tight at the end of the year in meeting the
department's overall costs. She reported the department
believed it would "Squeak in under the wire" with the
savings initiatives and the reforms put into place.
Vice-Chair Gara stated that in terms of the unanticipated
increase in the number of people applying for Medicaid, the
state was not seeking a supplemental request because enough
savings had been generated. The savings would compensate
for the increase in the number of people qualifying for
Medicaid and who the state was paying for. He asked if he
was accurate. Ms. Pitney made one correction - 17.
Vice-Chair Gara asked why the line items were 4 separate
components. Ms. Pitney replied that each were different
allocations within the appropriation.
Ms. Pitney addressed to slide 9: "FY2017 Supplemental Bill
- Page 5 of 10." She noted that the rest of the items on
page 5 and the first few items on page 6 [slide 10] were
smaller grants or accounting technical changes.
Ms. Pitney explained to slide 10: "FY2017 Supplemental Bill
- Page 6 of 10." She referred to line 24, the first capital
supplemental request for the Whale Pass organizational
grant. She explained that when a new city was formed it was
entitled to a $75,000 grant from the Department of
Commerce, Community and Economic Development. The item
satisfied statute.
2:46:48 PM
Representative Guttenberg asked about the money provided to
new municipalities. He asked if calculations had been
created for second class cities. He mentioned student
enrollment counts and municipal assistance. Ms. Pitney
would have to get back to him. She noted that community
revenue sharing would be a factor.
Vice-Chair Gara stated that the previous year the
department had come to the legislature reporting they would
be getting more aggressive with leveraging extra federal
funds to try to replace state funds. He recalled that many
initiatives had been presented to reduce the FY 17 by
generating extra federal funds. Currently, more people had
applied for Medicaid than anticipated (12 percent more)
generating extra costs. He wondered how the costs would be
offset by federal savings which he thought was already
reflected in the budget in the prior year. He did not want
to see the department absorb all the extra costs. He was
unclear about the real costs having to do with the
increased Medicaid recipients. He asked if there was extra
federal savings that the department generated that was not
reflected in the FY 17 budget.
Ms. Pitney relayed that 9 percent reflected the
additionally eligible, and 12 percent was the actual change
year over year. Some of the increase was anticipated,
However, 12 percent was not anticipated. She thought Vice-
Chair Gara's question was complex. She would be happy to
sit down with DHSS to discuss the numbers. She mentioned
that among the savings initiatives, some were working
faster than others generating a higher-than-expected
savings. She mentioned pharmacy and travel agreements. She
would be happy to have a stand-alone discussion.
2:50:46 PM
Vice-Chair Gara was concerned with having a large gap for
the budget in FY 17 for Medicaid. The budget in FY 18 for
Medicaid would reflect the extra people. He was concerned
with the FY 17 budget absorbing all the costs for the extra
people. He was unsure if the comparison of the budget years
would be true.
Co-Chair Seaton thought there was some confusion. He
clarified that Ms. Pitney was saying that in FY 17 the
state had 9 percent more eligible people and the state had
12 percent greater Medicaid utilization overall. The
increases were offset in FY 17 with savings that had
occurred. The costs from FY 16 that were being paid in FY
17 were independent of the number of new eligible people
and the utilization rate. He asked if he was correct. Ms.
Pitney responded, "That is correct."
Co-Chair Seaton further commented that the committee should
have had 2 conversations separately because the number of
people eligible and the utilization rate were not included
in any of the figures. The costs were being absorbed in the
cost savings generated in the current year. He thought
Vice-Chair Gara was asking if the state had anticipated the
questions and had reduced the budget by the amount of
savings, or was the savings greater than anticipated for FY
17.
Ms. Pitney responded the FY 17 budget was reduced from the
FY 16 budget for savings initiatives. Many of the cost
savings were going well and others were not. Independently,
the Medicaid group was managing the program and managing
their care utilization to limit costs where possible. The
administration was asking the department to manage as tight
as possible. The administration believed the FY 17 budget
would be adequate to meet FY 17 costs. There was a small
chance the state might have to check write into FY 18.
Early on, it became apparent that the administration would
have to come back to the committee.
2:54:58 PM
Vice-Chair Gara thought the math did not add up. He
reported that he had heard from the department that they
were trying to achieve the federal savings in the budget
the prior year. The department had not been able to achieve
all the savings. On one hand, the state had less federal
money coming in than was expected. Also, there was some
portion of the 12 percent of people seeking Medicaid that
the state anticipated in the previous year and put in the
budget. Additionally, there were more people that received
Medicaid services. It appeared that Alaska had less federal
dollars coming in for federal replacement money than the
state had hoped for and more Medicaid costs going out. He
did not understand how there could be less federal funds
and more state expenditures, without asking for a
supplemental.
Ms. Pitney responded that his logic was fair. The federal
savings did not line up program-by-program, but lined up
collectively. The state would receive a savings. The
administration was watching the department items including
expenditures and every check that was written monthly. The
administration believed that through the department's
efforts it could get through the current fiscal year with
the amount of money being requested. There was a slight
chance that a small amount would have to be written in FY
18.
Vice-Chair Gara was frustrated because the costs were FY 17
expenses. He anticipated that there would be real FY 17
costs. He argued that more people could not be treated with
Medicaid services for free with annual increases to medical
care costs. He opined that there would be an FY 18 amended
budget that would add costs to the budget when they were
really FY 17 costs that should be paid. He thought the
budget comparison between years would be skewed making it
appear that the budget was increasing.
Ms. Pitney acknowledged Vice-Chair Gara'S concerns. The
administration was confident enough that the FY 17 budget
would meet the FY 17 needs. There was a chance that all the
management efforts would fall a little short. If that was
the case, the administration would come back to the
legislature. The administration felt confident enough. It
wanted to keep the supplemental requests low while leaving
the pressure to manage the program high. The administration
thought it could get through the current year with the
amount requested.
Representative Guttenberg reported that the expansion of
Medicaid brought in a new group of people, more than
anticipated. Some of the projected savings was intangible.
He spoke of fewer emergency rooms and better handling of
chronic illnesses. He asked if there was an aspect of
measuring the changes. He wondered about the effect of the
new group on intangible items. He asked if the department
was trying to measure the changes with the expanded
Medicare [Medicaid] group. Ms. Pitney responded
affirmatively.
2:59:46 PM
Representative Ortiz returned to the $60 million. He
understood that the state spent $60 million less for
Medicaid than it did in 2015. He asked if he was accurate.
Ms. Pitney answered, "Yes." Representative Ortiz replied,
"I feel good about that. Thanks."
Ms. Pitney advanced to slide 11: "FY2017 Supplemental Bill
- Page 7 of 10." She explained that items 25 and 26 were
the Department of Fish and Game (DFG) supplemental
requests. The first was for a continuation of studies that
began in 2013. There were 2 groups, Pacific Seafood
Processors and Northern Southeast Regional Aquaculture
Association Incorporated, that were funding the
continuation of the studies. The second request fulfilled a
necessary match and the federal funds to receive the
Pittman Robertson funds that were available for Alaska. The
match source would come from DFG funding. She expounded
that the money was designated for several capital projects
that were part of a prioritized list.
Co-Chair Seaton asked whether the funding match would be
ongoing or if additional federal funding had become
available that had not been anticipated. Ms. Pitney
reported there had been periodic capital requests for
Pittman Robertson funding. The current item was a periodic
request. In the past, the request had been submitted on a
regular basis as part of the supplemental bill, which she
had not been aware of. However, she believed the request
should have been part of the FY 17 or FY 19 budget.
Ms. Pitney highlighted line 30 on page 7 [slide 11]. The
request was technical in nature. She explained that 2 years
prior, capital project funding had been inserted because of
several ongoing negotiations. The request would allow the
Department of Administration to continue to use the funds
in labor negotiations as necessary.
Ms. Pitney continued to line 31 on the same slide. She
detailed the request for an appropriation for the Alaska
Land Mobile Radio (ALMAR) system. The amount of the request
was $3 million. The amount would come from money originally
appropriated for a car driving range at the Sitka Police
Academy. The Department of Public Safety felt the money
would be better spent maintaining the ALMAR system. The
administration was $1.5 million short of the needed funds
outside of the $3 million and was currently looking for
another source for the additional monies.
3:04:51 PM
Representative Pruitt asked if the money would be used to
maintain or upgrade the system. Ms. Pitney responded that
the money would be used for both the equipment maintenance
and a refresh of the system.
Representative Pruitt asked about what the legislature
should expect in the future in terms of funding requests.
Ms. Pitney indicated that the amount would be consistent.
State records showed $5 million to $7 million being spent
on the system each year. It was an expensive system used
throughout the state by public safety employees. It was the
state's statewide emergency communications system.
Representative Pruitt asked if the state upgraded the
system each year. He asked for clarification. Ms. Pitney
used the example of software upgrades. They did not happen
every year. However, the equipment maintenance happened
every year. It depended on what maintenance was being done
each year. It was cyclical.
Ms. Pitney advanced to slide 12: "FY2017 Supplemental Bill
- Page 8 of 10." She spoke to line 32, which would allow
the state to receive a federal grant. Line 33 was a
significant item. The amount of the request was $8 million
for the Department of Corrections (DOC). One of the
Medicaid expansion savings came in the form of the
department being able to bill Medicaid for prisoners
hospitalized for more than 24 hours. She noted that
although the provision was working, the total healthcare
costs for inmates did not materially change by being able
to bill for extended hospital stays. The department was
seeing increased costs because of nursing staff turnover
resulting in overtime and temporary hiring costs. Higher
drug costs and higher than anticipated utilization also
contributed to increased costs. She reported that the
department had asked for $11 million to cover the costs.
The administration worked with the department to look at
management action that could be taken to contain costs. The
funding of $11 million included the $8 million request and
cost savings resulting from tighter management within the
healthcare area. Hiring nurses to provide adequate coverage
would be the most effective method of reducing costs within
the department. She asked the commissioner and his
management team to scrutinize every cost to find $3 million
in savings. She reiterated that only $8 million was being
requested from the general fund.
3:10:22 PM
Representative Wilson understood if an inmate was at a
halfway house or on electronic monitoring they would be
able to take advantage of Medicaid expansion. Yet, the
Department of Corrections had reduced the number of halfway
houses by about $8 million. The electronic monitoring
program (EMP) had also been cut in half from 400 to 200. In
terms of high medical costs, halfway houses and EMP were
two avenues the state was not utilizing. She had heard
stories of people walking away from halfway houses, which
she considered to be a contract issue. She believed it was
up to the contractor to make sure [people did not walk
away]. She thought it was unreasonable to hope to see the
savings by prisoners only being hospitalized for 24 hours.
She imagined hospitals would want to them [prisoners] out
as soon as possible to avoid paperwork. She thought the
high costs were due to prisoners not being able to utilize
options such as halfway houses and the EMP. She argued that
further savings could not only be found in Medicaid
expansion but within the prison system itself. Ms. Pitney
would investigate the issue.
Vice-Chair Gara was concerned with the corrections issue.
The commissioner of DOC had said that the department had
$11 million in unanticipated costs. The department
requested an $11 million increment to deal with the
shortfall. In turn, the administration directed the
department to find $3.7 million in savings that was never
identified in the budget in the previous year and limited
its supplemental request to $8 million. He asked if he was
right in his interpretation. Ms. Pitney replied, "Yes."
Co-Chair Seaton stated that DOC had identified one of the
problems having to do with medical facilities not
identifying the times people were out [hospitalized],
hence, the 24-hour period was not tracked. Therefore, there
was no mechanism to bill Medicaid for the 95 percent
federal reimbursement. He asked if the issue had been taken
care of. Ms. Pitney responded that the staff of the
commissioner's office looked at the bills to confirm the
timeframe. The office was actively managing the issue. In
the case where someone had stayed over 24-hours they sent
it back. The office was managing the issue on a case-by-
case basis.
Co-Chair Seaton asked if things were now being tracked
properly. Ms. Pitney responded that there was a
disincentive for the provider: It was easier to bill DOC
than to bill Medicaid. Also, providers received higher
reimbursements if they billed DOC rather than Medicaid. She
relayed that there were some built-in incentives and
disincentives that she hoped to manage. She thought the
issues were longer-term contract management issues.
3:15:09 PM
Representative Guttenberg suggested that if the provider
billed DOC they received a higher reimbursement rate than
if they billed Medicaid. He wondered what rate the state
received when it returned to Medicaid for billing for the
same service - the higher or lower rate. Ms. Pitney asked
Representative Guttenberg to repeat his question.
Representative Guttenberg heard Ms. Pitney state that the
provider would rather bill DOC because they received a
higher reimbursement rate than if they billed Medicaid
directly. He wondered if the state got reimbursed a
comparable amount. He wondered which number the state
received. Ms. Pitney answered that the provider received
the Medicaid rate if they were billed on Medicaid which was
lower than if they billed DOC directly. She added that the
rate could be adjusted after the transition.
Vice-Chair Gara asked if the $11 million shortfall for DOC
had anything to do with withheld felon PFD funds. Ms.
Pitney responded in the negative. The current year's felon
funds were based on the prior year's check amount. The
amount in the budget was lagging a year.
Ms. Pitney advanced to slide 13: "FY2017 Supplemental Bill
- Page 9 of 10." She spoke to line 37 which was a special
appropriation for a class V injection well consent decree.
The agreement between the Department of Transportation and
Public Facilities and the Environmental Protection Agency
had to do with the clean-up of how oil was collected in the
maintenance stations. She addressed line 38 having to do
with refinancing. There was a savings of $655 million by
refinancing the Goose Creek debt.
Representative Pruitt asked what terms changed in the
refinancing agreement. He wondered if the state obtained a
better financing rate or extended the financing for a
longer time. Ms. Pitney was happy to provide more details.
However, the change was made primarily because of an
interest rate reduction. Representative Pruitt confirmed he
wanted to see the refinancing details.
3:19:11 PM
Ms. Pitney advanced to slide 14: "FY2017 Supplemental Bill
- Page 10 of 10." Ms. Pitney spoke about line 39 regarding
a $3 million request for the disaster relief fund. The fund
balance was currently about $2 million. The amount would
replenish the fund to the normal level of about $5 million.
She thought that in the years before her tenor she thought
the amount might have been significantly higher.
Representative Wilson noted that wildfire relief was not a
part of the current supplemental request. Typically, relief
funding associated with wildfires in Fairbanks would appear
in the supplemental request each year. She asked if, in the
current year, relief funding for wildfires was paid for by
the federal government. Ms. Pitney would have to check into
the issue. She thought plenty of funds were available.
Representative Wilson wondered how much was in the fund.
She indicated there had been discussion about putting an
actual amount in the fund.
Co-Chair Seaton asked if it was different than the disaster
relief fund. Ms. Pitney would get back to the committee.
Representative Pruitt would love to see if the state
returned money to the general fund for wildfire relief. He
commented that the state issued its "make whole" payments
to welfare recipients in October because of the Permanent
Fund. He asked if the PF was reduced to a point where a
supplemental request was necessary. Ms. Pitney would follow
up with an answer.
Vice-Chair Gara was told by a few people that the
legislature would see a supplemental for fire suppression
expenses in the current year. He asked if the state was
using up more of the fund than normal. In other words, was
the state changing its policy about the amount of reserve
funds to have available for fire suppression. Ms. Pitney
reported that the administration was not changing the
policy. She had not received a supplemental request from
the Department of Natural Resources. She would find out.
HB 95 was HEARD and HELD in committee for further
consideration.
Co-Chair Seaton thanked Ms. Pitney and reviewed the agenda
for the following meeting.