Legislature(2011 - 2012)HOUSE FINANCE 519

04/12/2011 08:30 AM FINANCE

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* first hearing in first committee of referral
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= bill was previously heard/scheduled
Heard & Held
Heard & Held
Scheduled But Not Heard
Heard & Held; Assigned to a Subcommittee
Moved CSHB 89(RES) Out of Committee
+ Bills Previously Heard/Scheduled TELECONFERENCED
SENATE BILL NO. 102                                                                                                           
     "An Act relating to certain payments made under the                                                                        
     Alaska affordable heating program."                                                                                        
8:47:16 AM                                                                                                                    
JAY LIVEY,  STAFF, SENATOR LYMAN  HOFFMAN, explained  that SB                                                                   
102  amended   the  Alaska   Affordable  Heating   Assistance                                                                   
Program (AHAP).  The changes clarified language  that allowed                                                                   
the  Department  of  Health and  Social  Services  (DHSS)  to                                                                   
prorate benefits  due to a  shortage of funds.  He summarized                                                                   
that  in the  prior  year two  of Alaska's  heating  programs                                                                   
were  combined.  The  legislature  combined  the  Low  Income                                                                   
Heating  and Energy  Assistance Program  (LIHEAP) and  Alaska                                                                   
Heating  Assistance Program  to form  the Affordable  Heating                                                                   
Assistance  Program (AHAP).  The  legislation  [SB 220]  that                                                                   
created the  new program  contained language that  authorized                                                                   
DHSS to prorate  benefits. The department was  concerned that                                                                   
the  language did  not provide  sufficient discretion  needed                                                                   
for  benefit pro-rationing.  He  emphasized that  SB 102  was                                                                   
not a change  in policy but a clarification  of the proration                                                                   
language.  Mr.  Livey  elaborated  that  the  Senate  Finance                                                                   
Committee  had  worked  with   DHSS  on  the  legislation  to                                                                   
address   the  concerns.   The   legislation  contained   two                                                                   
provisions   to  ensure  clarification.   The  first   change                                                                   
established  that  the department  could  calculate  benefits                                                                   
differently  from  the customary  calculations  contained  in                                                                   
statute  if pro rationing  was necessary.  The second  change                                                                   
added the  words "on a  pro rata basis"  to clarify  that pro                                                                   
rationing was allowed.                                                                                                          
Co-Chair  Stoltze  surmised  that the  clarification  was  in                                                                   
anticipation  of reduced  federal funds.  Mr. Livey  believed                                                                   
that was  a fair assessment. He  was aware of  federal budget                                                                   
proposals  that reduced  states shares  of federal funds.  He                                                                   
discussed  that  AHAP  was comprised  of  general  funds  and                                                                   
federal money.  In the event of  a shortage of  federal funds                                                                   
DHSS    would   prorate    the    reduction   in    benefits.                                                                   
Alternatively,  the legislature  could choose to  appropriate                                                                   
additional general  funds. Pro rationing would act  as a stop                                                                   
gap  until the  legislature  could  act. Prorating  gave  the                                                                   
department flexibility in either scenario.                                                                                      
Representative  Doogan referred to  language on Page  2, line                                                                   
7,  of the  bill.  His interpretation  was  that the  benefit                                                                   
would  increase if  there was  extra  money in  the fund.  He                                                                   
wondered whether  the bill provided for pro  rationing paying                                                                   
more in  times of  plenty. Mr. Livey  informed that  the bill                                                                   
language  covered pro  rationing  in times  of shortfall  and                                                                   
when  more federal  funds were  received  than expected.  The                                                                   
upward  proration  was necessary  so  no federal  funds  were                                                                   
left "on  the table." He identified  Page 1, lines  11-12, as                                                                   
the department's  ultimate concern;  the clear authority  for                                                                   
downward proration.                                                                                                             
Representative  Doogan asked about  the amount that  could be                                                                   
paid out  on a pro  rata basis. He  inferred from  the bill's                                                                   
language  that  upward  proration  was  allowed  with  excess                                                                   
funds from  any source.  He wondered whether  a floor  or cap                                                                   
on   benefit   disbursement  was   established.   Mr.   Livey                                                                   
elaborated  that  the cap  was  reflected  in the  amount  of                                                                   
federal   funds   authorized    and   state   general   funds                                                                   
appropriated. The  previous bill, SB  220 was not  written as                                                                   
an  entitlement  that  authorized  an  absolute  disbursement                                                                   
based on  eligibility, making  downward proration  necessary.                                                                   
He elucidated  that  upward pro  rationing authority  enabled                                                                   
the state  to spend less  general fund dollars  if additional                                                                   
federal funds became available.                                                                                                 
8:55:10 AM                                                                                                                    
Representative  Doogan did  not see a  limitation on  federal                                                                   
funds in  the bill.  Mr. Livey replied  that he was  probably                                                                   
correct.  He discerned  that DHSS could  continue upward  pro                                                                   
rationing provided  the federal government  increased funding                                                                   
and the legislature authorized the expenditure.                                                                                 
Co-Chair Stoltze asked if the scenario was likely.                                                                              
RON  KREHER,   DIRECTOR,  DIVISION   OF  PUBLIC   ASSISTANCE,                                                                   
DEPARTMENT  OF   HEALTH  AND  SOCIAL  SERVICES,   stated  the                                                                   
scenario  was fairly unlikely.  He added  that typically  the                                                                   
federal government  funding was  not sufficient to  keep pace                                                                   
with the statutorily  required payout. He explained  that the                                                                   
AHAP mandated  benefit payout was  based on the  prior year's                                                                   
value  of a barrel  of North  Slope crude  oil per  community                                                                   
heating  point. The  federal  funding did  not  keep up  with                                                                   
that level of payout.                                                                                                           
Representative  Wilson  provided  an  example  from  personal                                                                   
experience  in  non-profit  work. She  remembered  an  upward                                                                   
proration  benefit  paid  because  less  people  applied  for                                                                   
heating assistance  than expected. The department  aspired to                                                                   
help as many  people as possible and held earlier  payouts at                                                                   
anticipated  levels  of  need.  The  pro  rationing  occurred                                                                   
after the  April application  deadline. Mr. Kreher  concurred                                                                   
with her experience.  The department does  issue supplemental                                                                   
payments with  excess funds at  the end of the  program year.                                                                   
He  explained  that occasionally,  DHSS  did  receive  excess                                                                   
federal  contingency  funds and  only  a fixed  percent  were                                                                   
allowed to carry forward.                                                                                                       
Representative Edgmon  supported the legislation.  He pointed                                                                   
out   the   program's  significant   importance   for   rural                                                                   
communities faced  with exorbitant  home fuel oil  costs. The                                                                   
bulk  of last  year's  AHAP benefits  ($29  million) went  to                                                                   
Fairbanks, Anchorage,  and the  Mat-Su area. The  program has                                                                   
positive statewide impacts.                                                                                                     
8:59:43 AM                                                                                                                    
Mr.  Kreher  confirmed  that 60  percent  of  the  recipients                                                                   
lived  in  urban   areas.  He  added  that   the  payout  per                                                                   
household  was higher  in  rural areas  because  of the  high                                                                   
heating cost.                                                                                                                   
Representative Edgmon  revealed that in the Bristol  Bay area                                                                   
the program served  440 households in FY 09  and increased to                                                                   
653 in FY 10.  The cost of heating fuel was  $6 per gallon in                                                                   
Dillingham. He believed the program was critical.                                                                               
Representative Joule  felt that the people who  were eligible                                                                   
for the  program were appreciative  of the help.  He received                                                                   
complaints  that  some  recipients attempted  to  sell  their                                                                   
benefits.  He  asked   whether  there  was  a   mechanism  to                                                                   
determine if  a person was  bootlegging from the  program and                                                                   
if  there was  a way  to deal  with the  problem. Mr.  Kreher                                                                   
recalled   that  DHSS   can   prosecute   fraud  related   to                                                                   
misrepresentation  of need.  He  was uncertain  if a  statute                                                                   
related to  the resale of  benefited heating oil  existed. He                                                                   
felt the problem was difficult to prove.                                                                                        
Representative  Joule  restated  that  his  constituents  and                                                                   
other  rural  citizens  voiced   concern  about  the  re-sale                                                                   
problem.  He noted  that most  recipients really  appreciated                                                                   
the  program.  The  problem  was   when  people  misused  the                                                                   
benefit. He  perceived that two  issues needed  definition to                                                                   
craft a  solution: what  constituted a  report and  violation                                                                   
and assigning  consequences. He emphasized the  importance of                                                                   
the  issue.  Mr.  Kreher  assured that  DHSS  will  draft  an                                                                   
appropriate regulation  as part of the  emergency regulations                                                                   
that  were  required  for  the   legislation.  Representative                                                                   
Joule  requested   a  copy  of  the  drafted   language  upon                                                                   
Vice-chair  Fairclough wondered  whether a legislative  audit                                                                   
of the program was performed.                                                                                                   
9:05:15 AM                                                                                                                    
Mr. Kreher  affirmed  that an  audit was part  of the  annual                                                                   
review process.  Vice-chair Fairclough wondered  whether DHSS                                                                   
established  annual heating  fuel  consumption per  household                                                                   
data. She  thought that the  data could alert  the department                                                                   
of suspicious use.                                                                                                              
Mr.  Kreher  disagreed  that   suspicious  use  was  easy  to                                                                   
detect.  He argued  that AHAP  was  designed to  meet only  a                                                                   
portion of  home heating  costs. He opined  that it  would be                                                                   
extremely difficult  to accurately monitor and  maintain that                                                                   
information. He  was uncertain how the department  would know                                                                   
that the fuel was being redistributed.                                                                                          
Vice-chair Fairclough  believed that  it was a  fairly simple                                                                   
calculation. She  thought that the data was  collected in the                                                                   
application  process.  She wondered  whether  DHSS  monitored                                                                   
the  average  cost  of  energy  per  household  in  different                                                                   
regions of the state. Mr. Kreher answered in the negative.                                                                      
Vice-chair  Fairclough  explained  that  a  possible  benefit                                                                   
ceiling  might be established  by figuring  the average  cost                                                                   
of energy  and the  percentage of  household income  spent to                                                                   
heat  a home.  She  suggested a  benefit  approximate to  the                                                                   
percentage of income spent to pay for the heating costs.                                                                        
9:08:53 AM                                                                                                                    
Vice-chair  Fairclough asked  whether there  was a  statutory                                                                   
mechanism  that  automatically  re-funded  the  program  each                                                                   
year.  Mr.   Kreher  replied  that  the   statute  originally                                                                   
intended that the  Department of Revenue (DOR)  establish the                                                                   
fund and  a mechanism to refill  the fund based on  the prior                                                                   
year's price per  barrel of crude oil. The  structure was not                                                                   
established.   The  program  received   fixed  general   fund                                                                   
appropriations in past years.                                                                                                   
Vice-chair   Fairclough    wondered   whether    Power   Cost                                                                   
Equalization  (PCE)  was capitalized.  Mr.  Kreher  responded                                                                   
that PCE was not operated by the department.                                                                                    
Mr. Livey interjected  that the PCE program  was endowed. The                                                                   
proceeds from  the endowment contributed  some of  the annual                                                                   
costs of  the program. A  general fund appropriation  made-up                                                                   
the difference.                                                                                                                 
Vice-chair  Fairclough  offered that  she  was attempting  to                                                                   
understand  the  revenue  path  into the  AHAP  program.  She                                                                   
recapped that  the PCE revenue  structure had two  streams of                                                                   
revenue.  Mr.  Livey  agreed.  He elaborated  that  the  AHAP                                                                   
program  consisted of  two streams  of  federal funds:  funds                                                                   
from  LIHEAP   and  Affordable  Heating   Assistance  Program                                                                   
combined embody the total amount of federal funding.                                                                            
Vice-chair   Fairclough  wondered   whether  there   was  any                                                                   
overlap in  who could  qualify for each  program and  if DHSS                                                                   
monitored   qualification.  Mr.   Kreher  replied   that  the                                                                   
federal  guidelines served  households up  to 150 percent  of                                                                   
the  poverty level  and AHAP  up  to 225  percent. The  state                                                                   
funds  were  used  solely  for   the  benefactors  above  150                                                                   
percent  of the  poverty level.  He emphasized  there was  no                                                                   
9:12:54 AM                                                                                                                    
AT EASE                                                                                                                         
9:13:12 AM                                                                                                                    
Mr.  Kreher continued  to  explain  that general  funds  were                                                                   
used  to  augment   the  payment  to  the   federally  funded                                                                   
households.  He   reminded  the  committee  that   often  the                                                                   
federal  funding levels  were  insufficient to  pay the  same                                                                   
dollar  value that  was  required under  statute.  Vice-chair                                                                   
Fairclough explained  that she  appreciated the program.  She                                                                   
was endeavoring to understand how the program operated.                                                                         
Representative   Joule  spoke   to  Vice-chair   Fairclough's                                                                   
question  regarding overlap.  He  shared that  in Kotzebue  a                                                                   
consumer  would  qualify  for  Power  Cost  Equalization  but                                                                   
because  of income  not qualify  for  the heating  assistance                                                                   
program.  Some  people  qualify  for both.  He  reminded  the                                                                   
committee  that PCE  only  covered up  to  500 kilowatts  per                                                                   
Representative   Gara   requested  a   comprehensive   answer                                                                   
related  to  Representative  Joule's  earlier  concern  about                                                                   
bootlegging.  He  offered  DHSS existing  statutes  it  could                                                                   
employ  as  a  deterrent  effect.  He  cited  the  "crime  of                                                                   
unsworn  falsification."  He defined  that  it  was crime  to                                                                   
sign  for a  benefit  that  was gained  from  a  lie. He  was                                                                   
uncertain  the  statute  was applicable.  He  also  suggested                                                                   
that  a  benefactor  could sign  a  statement  declaring  the                                                                   
household  of  use;  if  the benefit  was  not  used  at  the                                                                   
specified   household  that   would   constitute  fraud.   He                                                                   
qualified  that DHSS should  consult with  the Department  of                                                                   
Law  (DOL).  Mr.  Kreher  replied  that  the  prosecution  of                                                                   
unsworn  falsification  was  standard   in  the  Division  of                                                                   
Public Assistance.                                                                                                              
Representative Joule  was uncertain the problem  was rampant.                                                                   
He  received  complaints and  wanted  to  shed light  on  the                                                                   
issue.  He believed  a  mechanism  was necessary  to  prevent                                                                   
fraud and abuse.                                                                                                                
9:18:49 AM                                                                                                                    
Vice-chair Fairclough  added that she was more  supportive of                                                                   
the entire  program when  there was  a monitoring process  in                                                                   
place to ensure  those entitled received the  assistance. She                                                                   
appreciated Representative Joule's concern.                                                                                     
Representative  Neuman asked what  type of fuel  sources were                                                                   
covered  under the  program. Mr.  Kreher  responded that  all                                                                   
forms of heating  fuels were included under  the program. The                                                                   
department  focused on  the primary  heat  source and  repaid                                                                   
the vendor.                                                                                                                     
Representative  Neuman  asked if  a local  firewood  provider                                                                   
was  considered  a  vendor. Mr.  Kreher  responded  that  the                                                                   
department  made  a  direct  payment   to  the  homeowner  if                                                                   
firewood was the main heating source.                                                                                           
Representative  Neuman asked if  the department ensured  that                                                                   
the payments  were spent  appropriately. Mr. Kreher  restated                                                                   
that  the department  made payments  to  the vendor  whenever                                                                   
possible.  Payments  were  made   to  households  as  a  last                                                                   
resort. The  Division of  Public Assistance maintained  lists                                                                   
of vendors.                                                                                                                     
Representative  Neuman  wanted  to  ensure  that  people  who                                                                   
switched  to alternative  heating sources  had access  to the                                                                   
program.  Mr. Kreher  assured  that was  the  case. He  added                                                                   
that proof of heating costs were compulsory.                                                                                    
Representative Edgmon  underscored that in the  vast majority                                                                   
of cases the  program provided money directly  to the vendor.                                                                   
Mr. Kreher  agreed. He noted  the rare exceptions.  Homeowner                                                                   
payment occurred typically with wood heat.                                                                                      
9:26:07 AM                                                                                                                    
Representative  Doogan clarified  that  his earlier  concerns                                                                   
related to  the amount  that the  legislature wanted  to fund                                                                   
the  program. He  determined that  the language  in the  bill                                                                   
mandated  an  upward  pro  rationing   of  excess  funds.  He                                                                   
thought  that prohibited  the  legislature from  establishing                                                                   
the  level  of funding.  He  requested  that DHSS  provide  a                                                                   
history  of  payouts  from  the  program  that  included  pro                                                                   
rationing.  He felt that  the law  provided the program  very                                                                   
broad authority.                                                                                                                
Vice-chair   Fairclough    wondered   whether    supplemental                                                                   
payments   were   provided  to   the   vendor   and  if   the                                                                   
supplemental benefit  were passed on to the  participant. Mr.                                                                   
Kreher  indicated that  supplemental  payments  were paid  to                                                                   
the vendor for the participants account.                                                                                        
Vice-chair Fairclough OPENED and CLOSED public testimony.                                                                       
SB  102  was   HEARD  and  HELD  in  committee   for  further                                                                   

Document Name Date/Time Subjects
HB103-FERC Public Processes.pdf HFIN 4/12/2011 8:30:00 AM
HB 103
SB 102 Eplanation of Benefits.docx HFIN 4/12/2011 8:30:00 AM
SB 102
SB 102 Sponsor Statement.docx HFIN 4/12/2011 8:30:00 AM
SB 102
HJR 4 Legal opinion aviation fuel tax.pdf HFIN 4/12/2011 8:30:00 AM
HJR 4 ltr support businesses.pdf HFIN 4/12/2011 8:30:00 AM
HJR 4 Ltr support Sorenson.pdf HFIN 4/12/2011 8:30:00 AM
HJR 4 supporters.docx HFIN 4/12/2011 8:30:00 AM
HJR4 - Sponsor Stmt Ver D.pdf HFIN 4/12/2011 8:30:00 AM
HJR4 ATIF Payout 6.0.pdf HFIN 4/12/2011 8:30:00 AM
HJR 4 ltr support Harbormasters.pdf HFIN 4/12/2011 8:30:00 AM
HJR4 support ltr Mobility coalition.pdf HFIN 4/12/2011 8:30:00 AM
HJR4 Support Miners 1-2011.pdf HFIN 4/12/2011 8:30:00 AM
CSHB 183 (CRA) Sponsor Statement.pdf HFIN 4/12/2011 8:30:00 AM
HB 183
ANCSA Reference.pdf HFIN 4/12/2011 8:30:00 AM
SFIN 4/17/2011 10:00:00 AM
HB 183
HB 183 CS WORK DRAFT 041111.pdf HFIN 4/12/2011 8:30:00 AM
HB 183
Impact of Proposed CSHB 183 ( ).pdf HFIN 4/12/2011 8:30:00 AM
SFIN 4/17/2011 10:00:00 AM
HB 183
Nenana Letter.pdf HFIN 4/12/2011 8:30:00 AM
HB 183
CS HB 183 ( ) Changes for FIN.pdf HFIN 4/12/2011 8:30:00 AM
SFIN 4/17/2011 10:00:00 AM
HB 183
HB 183 Legal Memo.pdf HFIN 4/12/2011 8:30:00 AM
SFIN 4/17/2011 10:00:00 AM
HB 183
HB 106CS(RES)-NEW DEC-WQ-04-12-11.pdf HFIN 4/12/2011 8:30:00 AM
HB 106