Legislature(1995 - 1996)
03/14/1995 02:08 PM House HES
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* first hearing in first committee of referral
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HHES - 03/14/95 HB 228 - REDUCTION IN PUBLIC ASSISTANCE PAYMENTS Number 899 JIM NORDLUND, Director, Division of Public Assistance, Department of Health and Social Services (DHSS), acknowledged that he was once a representative of Representative Rokeberg's district. He recognized that he and Representative Rokeberg had a good contest, of which Representative Rokeberg was the victor. Mr. Nordlund wished Representative Rokeberg much success in his job. MR. NORDLUND said in his new capacity he does not see himself as partisan or competitive in what takes place in the legislature, rather, his job is to work with both legislative parties to move welfare reform forward. This is going to be a big issue. Number 933 MR. NORDLUND said that he would like to testify on HB 228. This bill is known as the ratable reduction for Assistance to Families with Dependent Children (AFDC) and Adult Public Assistance (APA). While the Administration does not have a written position statement on this bill, he can say with a great deal of confidence that the Administration is opposed to this measure. Mr. Nordlund understands the commitment behind the bill, and he does not think it is not a mean-spirited measure on the part of the bill's sponsors. MR. NORDLUND understands the motivation of the bill is one of trying to reduce the state budget. However, there are other ways of reducing the state budget in terms of welfare payments than reducing benefit levels. The approach of the Knowles Administration is one of reducing the caseload. The calculations are made a little differently, but basically the bottom line could be the same. Less money will be spent on welfare payments. Number 1012 MR. NORDLUND said his office is promoting caseload reduction by finding work for people, particularly in private sector jobs, and getting them off the welfare rolls. The Governor's blueprint for welfare reform is riddled with ideas about moving people from welfare to work. Combined with caseload reduction through jobs, Mr. Nordlund's division will continue to be vigilant to insure benefit payments are accurate. There is always a little bit of error that causes additional benefits to be paid out that should not be. MR. NORDLUND said his office will also continue to be vigilant concerning misuse and fraud that takes place within the system. This is not a budget hearing, but his office has put a budget before the House Finance Committee which shows that the requested AFDC budget is being reduced this year. This is due to the continued efforts to move people into jobs, to make sure payments are accurate, and to insure there is no fraud. Number 1072 MR. NORDLUND mentioned that his staff has been working with the HESS Committee members to make sure that what the HESS Committee plans to do with the bill in terms of benefit reductions are accurate. There were some problems with that. A staff member would testify when the committee came to discussion of that part of the bill. There are federal limits concerning how much payments can be reduced. In some cases, the bill went too far in the original draft. Mr. Nordlund understands that is the reason for the Committee Substitute (CS). MR. NORDLUND commented on the cuts to APA. The Adult Public Assistance program is assistance that goes to blind, aged and disabled adults. Those are people who cannot reasonably find work. They are, by definition, the truly needy. They are the most needy in the state. The APA cuts in this bill are particularly troublesome to Mr. Nordlund for that reason. Number 1126 MR. NORDLUND noted that the sponsor statement contains some wording he would like to correct. The statement says, "Health and Social Services, along with education and state employee benefits and salaries have traditionally been left out of budget reductions." In terms of social services cuts, HB 67, which passed several years ago, was a budget reduction to both AFDC and APA. MR. NORDLUND's office has calculated that the savings for the upcoming fiscal year, FY 96, due to the passage of that bill, will be about $15 million. This saves payments that would otherwise be made if that law had not gone into effect. There definitely have been budget reductions in welfare payments in the past legislature. Number 1188 CO-CHAIR BUNDE thanked Mr. Nordlund for his vigorous pursuit of fraud. One of the problems with welfare reform is public confidence in the system. Pursuing potential fraud raises the public's confidence and makes them more comfortable with the program. REPRESENTATIVE DAVIS said it was nice to see Mr. Nordlund and wished him good luck in his current position. It is the understanding of Representative Davis that the Knowles Administration currently agrees with the disparity in the state's basic AFDC payments compared to the next level of spending in the United States, as seen in Connecticut. Number 1230 MR. NORDLUND said the Administration has not taken a position on the level of benefits in Alaska versus any other state. Mr. Nordlund knows that Alaska is ranked very high in terms of payment amounts, if not the highest. The position of the Administration is that need must be studied. It is an attitude of "we don't care how they do it on the Outside." There are needy people in the state, and it must be determined what is an adequate amount of money to support those people. MR. NORDLUND passed out a sheet which contained the results of an analysis of the APA program. The sheet showed in a typical case, how much recipients get in APA, how much they get in food stamps, and how much they get in federal Supplemental Security Income (SSI), which is a complement to APA. By making some assumptions about what recipients pay in rent, utilities and food, Mr. Nordlund's office determined that a typical recipient family then has $46 left over each month. This $46 would be for transportation, clothing, household and personal care items. Number 1290 MR. NORDLUND said therefore, Alaska might be high compared to other states, but certainly Alaska's recipients are not living "high off the hog" on the assistance paid by Alaska. Mr. Nordlund personally thinks the assistance is adequate, but not too much. CO-CHAIR TOOHEY asked if the chart showed APA, and if the chart assumed it was a family of two. MR. NORDLUND said the analysis was based on a household consisting of a single disabled individual residing in a one-bedroom. The analysis also was based on a nonsubsidized housing unit in Anchorage. A different chart shows what the figures would be like in a subsidized housing unit. In addition, the same sort of analysis is going to be done for AFDC. Number 1350 ANGIE SALERNO, Executive Director, National Association of Social Workers, testified via teleconference. She spoke in opposition to HB 228. She sees this bill as short-sighted social and fiscal policy. This bill is justified by sponsors and supporters as necessary because the state is facing a budget crisis. They also feel a budget gap must be closed. While this is true, and everyone understands that state spending must be brought more closely to state income, it is not true the place to start is with programs that serve poor families and individuals who are elderly or disabled. MS. SALERNO said such statements are misleading at best. Every dollar cut from these programs result in the loss of a federal dollar. Both of these dollars are then lost to the Alaska economy. In return for this false economy, more citizens lose the opportunity for decent productive lives. In addition, the goal of the AFDC program is undermined. Poor families will be less able to care for their families. Number 1403 MS. SALERNO said cutting the social welfare budget is bad business for Alaska. She thanked Director Nordlund for offering a spirit of cooperation and hope for real answers to reform, and for offering some figures on the reality of living off welfare. Ms. Salerno added that welfare has already taken cuts in the last legislative session. Ms. Salerno offered to answer any questions. REPRESENTATIVE DAVIS said that Ms. Salerno made the statement that welfare was not the place to start cutting the deficit. Representative Davis said the legislature has not started with welfare. Seventy-five percent of the state's budget relates to wages, welfare and education. As indicated, with the exception of the $24 a month basic cut from welfare two years ago, all of the other cuts that have been addressed in the last four or five years have come from the remaining 25 percent of the general funds. REPRESENTATIVE DAVIS said welfare is not the place to start, it is just the fact that areas that have not been addressed in the past are now being placed on the table for study. Representative Davis appreciates the problems, concerns and the different degrees of values that are placed on the legislature's attempts. The HESS Committee members will be considering all those. Number 1492 MS. SALERNO said she agreed that everyone has to take cuts. She suggested the state not think about any more cuts. The state should think about enhancing revenues. She said many people are not afraid of the word taxes. People are not taxed highly in this state. She said the permanent fund could be capped. There are options. She said cuts are going to damage the state. That day, HESS Committee members had already considered HB 230, in which education may be cut, and now welfare. She asked that the HESS Committee members think about what kind of state they want in the end. CO-CHAIR BUNDE observed that the decisions are not personally hard to make. The problem lies in finding the majority of people who agree on a course of action. Number 1543 REPRESENTATIVE ROBINSON asked someone to explain last year's cuts. She wanted to know how much they were and other information. CO-CHAIR BUNDE said the cuts took place two years ago. CURTIS LOMAS, Program Officer, Division of Public Assistance, said he did not come with a detailed analysis to speak to Representative Robinson's question, but he can certainly characterize the cuts for her. The cuts occurred in October 1993 as a result of legislation that was sponsored by Governor Hickel. The legislation went through a lot of debate and the cuts originally proposed were substantially larger. MR. LOMAS said the benefit reduction in AFDC payments was roughly 4 percent. That is the closest he can come to an estimate off the top of his head. The cuts were not the same in every category, but the cuts netted out to approximately a 4 percent decrease. The benefit reductions in APA were roughly on the order of 3.5 percent. Number 1600 CO-CHAIR BUNDE suggested that more specific details and accurate numbers could be provided by Ms. Lomas later. MR. LOMAS said the other piece of that bill was that the statutory automatic Cost of Living Allowance (COLA) increases that had previously been awarded annually became subject to the budgetary discretion of the legislature and have not been awarded since. CO-CHAIR TOOHEY said the reduction came to about $12 to $15 every month. CO-CHAIR BUNDE said he has heard up to $24, but he is sure that depends on the inflation factor. MR. LOMAS said typically, previous cuts amounted to about $27 for an AFDC family of three. If they had no other income, their assistance went down about $27 per month. Number 1645 CO-CHAIR BUNDE asked Mr. Lomas to address the fact that the original version of HB 228 is not in compliance with federal law. Therefore, there is a blank CS in the bill packets. He said the HESS Committee members are not asking Mr. Lomas to support the bill, they are just asking him to speak on the need for a CS. MR. LOMAS said he discussed the problems identified with the committee staff for a few days, and the CS results from those discussions. The staff also asked Mr. Lomas to talk with the drafter in Legislative Legal. Two fundamental changes occurred. The first is that the provision in the original bill on line 10 of page 1, which referred to effective dates has been changed. MR. LOMAS said the original bill language would have had the reductions go into effect on July 1 or the effective date of the legislation, whichever is earlier. Both the Attorney General's office and Legislative Legal opined that is illegal. That is making the law go into effect before the law goes into effect. That provision has been eliminated, and the changes would go into effect as of the effective date of the Act. Number 1705 MR. LOMAS said the other change was on line 12 of page 1 of the original version of the bill. The amount listed there is $451.00. That provision came up against the 1988 federal floor. There is a provision in federal law that requires states to maintain their benefit level to a family without an income at the level in effect as of May 1988 or face denial of approval for a Medicaid state plan. MR. LOMAS said recently, the state of California put benefit cuts into effect that are below that level. California was then required by the federal courts to restore benefits to the previous level. Number 1746 MR. LOMAS said there were some changes to AFDC benefit levels. The changes to one and two affected 1993 and the same piece of legislation that was being previously referred to. Also, Mr. Lomas made some technical changes to the standards to bring Alaska's program in compliance with other federal law requirements. The federal law had been pressuring the agency for years to change the way the standards were structured in two areas. MR. LOMAS said the first area was that of families that included only eligible children, and no eligible adults. Those are normally families in which a child or children are living with a relative who is not a parent. Under those circumstances, the caretaker and adult is not required to be needy in his or her own right. Only the children's needs are covered. MR. LOMAS said for years, Alaska had paid one child in that situation twice as much as two children, and then incremented for each additional child at a much smaller amount. It was the same increment that was used in families which included an adult for each additional child. Number 1795 MR. LOMAS said the federal government had problems with Alaska paying more for the first child than for each additional child. So the change in the standards in 1993 had the increment for the second child in families that had no needy adult the same as the increment for each additional child in other families. In order to not violate the federal floor when making that change, the payment for a family of one needy child increased. This was because the state could not reduce the payment for a family of two children below the amount paid in 1988. MR. LOMAS said as a result, the standard was changed to what can be seen in the original version of the statute--to $452 for one child. The increment that was put in place at that time was $102 for each additional child. This brought the total payment for two children living with a non-needy relative to $554. The federal floor is $550. That is the amount paid for two children in that situation in 1988. In effect, the original version of the bill would bring the payment for two children down to $451 plus $87, which is a total of $538, which is below the 1988 floor. Number 1855 MR. LOMAS continued that in order to bring payment levels down to the minimum allowable under the maintenance of effort provision, which Mr. Lomas understood was the will of the committee, it is necessary to increase the amount of payment for one child to $463 so the $87 increment for the second child does not violate the 1988 floor of $550. MR. LOMAS said that is the shortest way to explain those changes. In effect, this is a problem that occurred back in 1993, and this is a fallout from that. The impact is relatively minor. The overall impact of the reductions in the original version of the bill on the assistance payments budget component was 7.1 percent in total payments. The impact of the CS version is 7.0 percent. Therefore, the practical impact of the changes is relatively minor. MR. LOMAS said these cases that actually would receive an increase of $11 a month, account for 1.5 percent of all the children on AFDC. Number 1950 REPRESENTATIVE BRICE asked what the average benefit is for AFDC and APA recipients. It needs to be made clear that there is a big difference between maximum benefit being discussed here and the average benefit paid out. MR. LOMAS said the average benefit under current law for 1996 is projected at $788. That includes all variations in family size and type. This legislation would bring that down to $733. There will be an average reduction of $55 per month. REPRESENTATIVE BRICE said in Section 1 on page 2, lines 7 or 8, the words "or a single person household that does not consist of a dependent child" are being taken out. This bill is taking these words out of statute. MR. LOMAS said he can see how people might object to that language being in there, and that might lead people to believe that is to cover people who are not parents. Mr. Lomas said the reason the language is in there is because federal law requires that in very specific circumstances the state has to pay AFDC benefits to an individual who does not have a child who is included in the AFDC case. That is if the only child in the home meets all the requirements of being a dependent child for AFDC purposes, but instead receives SSI benefits because the child is disabled. MR. LOMAS continued that in those circumstances, the AFDC grant includes only the needs of the adult caretaker because the child's needs are met through the SSI program. Number 1999 REPRESENTATIVE BRICE said therefore, basically those children are no longer eligible to receive any type of benefit by striking that language. MR. LOMAS said as he reads the remaining language, what is left sets the maximum standard for various categories of individuals. It does not prohibit the department from making payments to men or women whose only child receives SSI assistance. It merely eliminates the specificity of the standard. In practical effect, in order to continue to comply with federal law, Mr. Lomas thinks the state will continue to make payments to those individuals and use the state's regulatory authority to do so. Number 2030 CO-CHAIR BUNDE moved to adopt the CS, but announced it is not the Chair's intention to move the bill today. The bill would be addressed again on Thursday. REPRESENTATIVE ROKEBERG said he has not read the bill in-depth, and he is having trouble identifying where the APA line item is. He asked if the amount was not being specified. CO-CHAIR BUNDE read, "to comply with federal requirements, reduce the maximum state contribution..." REPRESENTATIVE ROKEBERG asked if that was a variable amount of APA. CO-CHAIR TOOHEY moved that CSHB 228 be adopted. CO-CHAIR BUNDE asked that the motion be held for just a minute, and asked Mr. Lomas to address Representative Rokeberg's concerns. Number 2083 MR. LOMAS said the language basically effects a 10 percent reduction in APA payments whether it is the maximum level or someone is receiving benefits below the maximum level because the amount of benefits is calculated by subtracting the income from the maximum level. REPRESENTATIVE ROKEBERG asked if there was a variable of factors present. In an individual case, there are going to be variations. CO-CHAIR BUNDE said there is a motion before the committee to adopt the CS for HB 228. There were no objections and the CS was adopted. He asked for further discussion. Number 2112 REPRESENTATIVE BRICE asked how the need standard in the state is affected by all the discussion about reduction of this benefit and that benefit. There should not be any effect on the need standard. Representative Brice asked about the process necessary to increase the need standard. MR. LOMAS said the need standard is set in regulation. What was done when the level maximums were reduced in 1993, is that the needs standard was maintained at the current level. This was largely because if the needs standard is reduced, there are going to be some people receiving very small grants who lose their eligibility for a payment, and thereby lose their eligibility for Medicaid coverage. MR. LOMAS said the legislature expressed, in 1993, a will to reduce the benefit payment level without causing anyone to lose eligibility. Based on that, the same needs standards were kept in regulation. That applies both to AFDC and APA. TAPE 95-20, SIDE A Number 000 CO-CHAIR BUNDE reminded the HESS Committee members and the audience that the bill was being held until Thursday. REPRESENTATIVE ROKEBERG asked about the bills that are coming forward on the permanent fund dividend and hold harmless issues. He asked if Mr. Nordlund and Mr. Lomas will be involved in testifying on those issues. MR. NORDLUND said those bills affect his division. Some of those bills were actually winding their way through the legislative process before Mr. Nordlund was hired to his current position. Mr. Lomas is the primary testifier on those topics. REPRESENTATIVE ROKEBERG asked for the record if anyone had requested Mr. Lomas provide some sort of impact flow charts that could be readily discernible to legislators to show the effects of the various aspects of the proposed legislation on the general fund. He asked if such charts were being worked on. MR. LOMAS said there has been several requests for such charts. Other bills have held up that work, but that is something his office hopes to have out in the next week or so. Some information has been developed for the Senate Finance Committee. There are additional pieces to be developed that should be available. Number 122 CO-CHAIR BUNDE observed that these bills are in a state of flux, and perhaps addressing them in the Finance Committee might be the best place so Mr. Lomas does not do work that is perhaps not necessary. REPRESENTATIVE ROKEBERG asked if those bills were going to be heard before the HESS Committee. CO-CHAIR BUNDE said those bills are well beyond the HESS Committee. CO-CHAIR TOOHEY said probably, Representative Hanley has already requested such numbers.
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