Legislature(2001 - 2002)

03/04/2002 09:10 AM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= 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                                                            
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                                                            
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                                                            
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                                                            
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.                                                                              

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