Legislature(2001 - 2002)
03/04/2002 09:10 AM FIN
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
SENATE BILL NO. 340 "An Act relating to treatment of permanent fund dividends for purposes of determining eligibility for certain benefits; and providing for an effective date." SENATOR RANDY PHILLIPS, sponsor, testified that the hold harmless clause has been a "spur under the saddle" for some of his constituents. He noted a predicted increase of $37 million over FY 02 Medicaid expenditures and stated this bill attempts to "alleviate some of that burden." He explained this bill eliminates the hold harmless provision for all but Social Security Insurance (SSI) and Adult Public Assistance (APA) recipients. The remaining recipients of public assistance would decide whether to receive an Alaska permanent fund dividend or public assistance payments. Senator Phillips noted this bill would generate approximately $6 million, which he pointed out would offset the state's revenue shortfall. TAMARA COOK, Director, Division of Legal and Research Services, Legislative Affairs Agency, testified in Juneau that all Alaskans qualify for public assistance, although some programs are based on need. She stated that current statute provides that a person receiving a permanent fund dividend is not disqualified from also receiving public assistance benefits in the event the dividend increases the person's income above that allowed for the program. She noted statute directs state agencies to disregard dividend income when calculating eligibility for state-operated programs. She said in cases involving federal programs that require dividends to be included as income, current state statute provides that the state "make up the difference" so the recipient does not experience a decrease in the amount of aide under these programs. Ms. Cook explained this bill repeals the broad provision that authorizes the state to hold harmless any program administered by the Department of Health and Social Services. She stated the bill provides that the state would continue to hold harmless only those individuals who receive benefits from two programs: supplemental security income from the federal Social Security Administration and the state-operated APA program. She noted these programs primarily serve physically disabled, mentally disabled, the blind and certain seniors. With these exceptions, she continued, recipients of public assistance under other eligibility criteria and who do receive a permanent fund dividend would "suffer the consequences" of an increase of their economic ability as a result of the dividend. She stated the recipient could make the choice, and noted the programs provide counseling for recipients regarding the affects of applying for a dividend. Senator Phillips referenced a chart titled "Hold Harmless" [copy on file] that outlines the $5,953,800 total estimated savings of this legislation. He suggested this could be applied to the $37 million Medicaid increase and subsequently for, "the very people who have been benefiting" from the Medicaid program. Co-Chair Kelly informed the Committee that the "transfer mechanism" necessary for this application is not included in this bill; however an amendment would be drafted to include it. Senator Olson asked how recipients would know whether they are "borderline" for discontinued benefits if they accept a dividend. Ms. Cook responded that program administrators would review recipients' finances and provide counseling on the matter. She was unaware of the details of this counseling, but assured that it does occur. She agreed a recipient must make the decision whether to file for a dividend early in the year. Senator Olson predicted this would be cumbersome. Ms. Cook responded the Department would have to address this. She reiterated this exercise is already undertaken, although it would have to occur more often and for more programs. Senator Hoffman requested the witness expand upon the impact this would have for recipients of Temporary Assistance for Needy Families (TANF) services. Ms. Cook did not know and deferred to the Department of Health and Social Services. She emphasized the hold harmless provision is "drafted with a very broad brush," in that it could be applied to any existing and future program. This bill, she noted, limits the provision to the two aforementioned programs. She suggested other, yet unidentified programs, could be added if desired. Senator Hoffman referenced the Hold Harmless chart and asked about the Contractual Services program that is indicated would remain covered under the hold harmless provision. JIM NORDLAND, Director, Division of Public Assistance, Department of Health and Social Services, testified the Division has questions as to what programs would be affected by this legislation. He presumed that the Alaska Temporary Assistance Program (ATAP), food stamps and possibly Medicaid would be affected. He was unsure about the reference to contractual services. Senator Austerman asked if children's permanent funds would be included in the calculation of a parent's income. Ms. Cook answered yes; the major programs calculate total household income in determining eligibility. Senator Olson asked about the $4.1 million expenditure for ATAP referenced on the chart and asked what specific services would be affected by this legislation. Mr. Nordland explained ATAP is the "basic cash welfare program" for poor families with children in Alaska. Senator Ward expressed that this bill would not affect the actual programs. It would not eliminate any services; rather it would require recipients to choose between receiving a dividend or the services. Mr. Nordland understood that is the intention of the bill. Mr. Nordland next gave testimony on the bill, which he characterized as seemingly simple, but actually complicated. He stated that currently, the department is not allowed to consider permanent fund dividend income against eligibility for public assistance programs. This bill, he understood, removes this restriction and gives an option, but does not require, the Department to consider the dividend as income. Mr. Nordland stated the Department would therefore choose to continue to utilize the hold harmless provision; because of this, a fiscal note has not been prepared. He said that because this legislation would no longer allow use of the permanent fund earnings reserve fund to offset the hold harmless provision, the Department would utilize general funds to cover the $3.1 million cost. He continued that if the bill were amended to require the Department to consider permanent fund dividends as income, the fiscal note would be zero, as those recipients would not receive benefits during the month that the dividend was received. He added that the recipients would regain eligibility the following month and benefits would resume. Mr. Nordland stated the hold harmless provision was originally implemented so poor families in Alaska would receive the same benefits from the permanent fund dividend as all Alaskans. He informed that the total annual income, including permanent fund dividends, of the average family served by public assistance programs is still below the federal poverty level. He granted that the amount of the dividends are increasing, but stressed these funds are often used for such modest purchases as clothing, educational opportunities, eyeglasses and dental care, and beds for children. Mr. Nordland reminded that this issue has been considered in the past. He pointed out the provision would not increase the general fund, but rather would withdraw less from the permanent fund dividend program. He calculated this would result in an increase of approximately $13 to each dividend. He predicted most Alaskans would defer that amount to poor families. Co-Chair Kelly informed that the intent of the sponsor is to transfer the savings of this legislation from the permanent fund to the general fund. Mr. Nordland noted a "dramatic decline" in the caseload of public assistance programs and subsequent reduction of the amount taken from the permanent fund to offset the hold harmless provision. At the same time, he pointed out the dividend payments have increased. Mr. Nordland added that the permanent fund dividends of 37 percent of TANF clients are garnished. He warned that some families would therefore receive neither public assistance benefits for one month nor a dividend. He spoke to "timing", pointing out that public assistance payments are mailed on the first of each month, while permanent fund dividends are issued on the fifteenth; those families would be without any income for two weeks. Mr. Nordland mentioned the "administrative hassle" of removing a recipient from public assistance programs for one month only to re- enlist them the following month. Mr. Nordland concluded the Department "stands by" the hold harmless provision and opposes this bill. Co-Chair Kelly understood that Denali KidCare provides dental and eye care services. Mr. Nordland affirmed these services are provided for children but not for their parents. Senator Ward asked how many recipients of public assistance do not qualify for a permanent fund dividend. He also asked what form of counseling the Department provides to recipients to inform them that applying for a dividend would disqualify them from receiving public assistance benefits. Mr. Nordland was unsure of the answer to the first question. He responded that because of the hold harmless provision, such counseling is unnecessary and therefore not provided. Senator Ward asked if the Department informs recipients that they are eligible to receive both a dividend and benefits, or if the Department "is silent" on the matter. Mr. Nordland responded the Department essentially "is silent". He stated if the legislation stipulated the recipient had to make a choice, the Department would have to consider the matter. He expressed it is hard for him to conceive of an instance where the Department would counsel a family to forgo the dividend in favor of continuing to receive public assistance benefits because of the amount of money involved. He qualified this matter has not been determined yet and his answer is unofficial. Senator Green asked why dividends were subject to a hold harmless provision, as she considered dividends income. Mr. Nordland replied this issue has been discussed in the context of, "at what time is a poor person not poor any more." He suggested the distinction be made at the point where additional income raises a person's total income above the federal poverty level, or the amount determined to be "what it takes for a family to live". Co-Chair Kelly referenced a $50,000 dividend paid to shareholders of the CIRI Native Corporation. He wanted to know how those shareholders who continued receiving public assistance spent those funds. He also wanted to know how other shareholders used that dividend to "improve themselves" to become "productive members of our state." Mr. Nordland relayed that the Cook Inlet Tribal Council provided counseling to shareholders to help them utilize the dividend in such a way as to remain self-sufficient. Senator Green asked if this legislation would apply to non-cash benefits available to public assistance recipients, such as work services, food stamps and Medicaid. Mr. Nordland was unsure. He added childcare support as another work-related benefit and stated the Department supports continuing to provide these services regardless of permanent fund dividend income. Senator Green referenced other proposed federal legislation and asked if it would allow a dividend recipient to continue receiving work-related services. Mr. Nordland replied that bill would give the Department "more flexibility in that regard". SUSAN SULLIVAN, Division of Child Support Enforcement, Department of Revenue, testified via teleconference from Anchorage that during the time a custodial parent receives public assistance, the Division retains any child support collected on behalf of that payment. She stated this amounted to $1.9 million in October of the previous year. She pointed out that under SB 340, the state would not retain any until the custodial parent has been paid in full for current support in arrears. She informed the average arrear owned to custodial parents is approximately $15,000. JOHN MALLONEE, Division of Child Support Enforcement, Department of Revenue, testified via teleconference from Anchorage to reiterate Ms. Sullivan's testimony Co-Chair Kelly informed that Senator Phillips working with the Division of Legal and Research Services to address the fund transfer issue. Senator Phillips replied an amendment would be available later in the day. Senator Ward asked about the $455,000 Contractual Services program listed on the aforementioned chart. Senator Phillips explained this is a reimbursable services agreement (RSA) between the Department of Health and Social Services and the Department of Administration for the day-to-day operations of the hold harmless provision. Senator Ward asked if the amount of this RSA could be reduced given that the workload would decrease. Senator Phillips deferred to the Departments. Co-Chair Kelly asked Senator Phillips to research the matter. Co-Chair Kelly ordered the bill HELD in Committee.