Legislature(2001 - 2002)
04/03/2002 09:14 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." This was the second hearing for this bill in the Senate Finance Committee. SENATOR RANDY PHILLIPS, sponsor of the bill, testified the Department of Health and Social Services had recommended amending the bill. JON SHERWOOD, Unit Manager, Beneficiary Eligibility Policy, Division of Medical Assistance, Department of Health and Social Services testified that the proposed committee substitute, Version "L", addresses income eligibility for Medicaid. He informed Section 2 of the proposed committee substitute requires the Department to include permanent fund dividends as income when determining eligibility for public assistance programs, with the exception of Medicaid. He noted the federal government recently issued regulations allowing the Department to disregard permanent fund dividend income. Mr. Sherwood cautioned of the possible inequity of including dividends as income, because some recipients would continue to qualify for Medicaid. He also warned that this legislation would adversely impact nursing homes, home and community-based care providers, and other providers who serve Medicaid clients "whose cost of care far exceed the value of the permanent fund divided." He explained the providers would in many instances be unable to recover the lost revenue. Senator Phillips added that the changes proposed in the committee substitute would not impact the fiscal note. Senator Green asked if Medicaid eligibility is determined month by month or annually. Mr. Sherwood replied that for most clients, eligibility is determined month by month, with the exception of children whereby eligibility is continuous for six months. He noted that those children, whose eligibility expires during the month of October, would become ineligible for the next six months based on the income received from the dividend. He qualified that some adult Medicaid recipients qualify on an annual basis; however, they are required to notify the Department of any income changes that occur, in which case they would become ineligible as well. Senator Green asked if the federal government would allow applicants to amortize annual income for the purposes of qualifying for Medicaid coverage. Mr. Sherwood responded there are rules disallowing amortization. He noted income could be disregarded under federal rules, pointing out this is the process currently practiced with permanent fund dividend income. Senator Wilken referenced a chart indicating the amount of State funds saved as a result of this legislation [copy on file], and asked if the proposed committee substitute would change the amounts. Senator Phillips answered there would be no changes. Senator Wilken understood the Department testified that the proposed committee substitute would eliminate the fiscal impact related to the Medicaid program. Mr. Sherwood explained that recently adopted federal regulations allow the exemption of permanent fund dividends from income qualification. Therefore, he stated the current State expenditure for the dividend hold harmless provision would cease regardless of enactment of this legislation. AT EASE 9:23 AM / 9:26 AM DARYL NELSON, Community Advocacy Coordinator, Access Alaska, testified via teleconference from Anchorage that people should not be excluded from receiving a permanent fund dividend because of a physical or mental disability. He asked if federal law requires this legislation. Co-Chair Kelly responded it does not although the Committee must be mindful of federal requirements. Senator Phillips clarified that this legislation would not prohibit residents of the Alaska Psychiatric Institute (API) from receiving dividends. SUSAN SULLIVAN, Child Support Enforcement Division, Department of Revenue, testified via teleconference from Anchorage about the ramifications for custodial parents with child support payments in arrears. She explained that because the State could not retain funds garnished from dividends until the custodial parents are paid in full, the reduced revenue to the general fund is estimated to be $1.458 million in FY 03. She stated the proposed committee substitute would not affect the fiscal note. Co-Chair Kelly asked if the sponsor's projected cost savings includes the impact of child support. Senator Phillips answered the figures listed on the aforementioned spreadsheet are net amounts, but do not include child support. Senator Phillips expressed the intent of this legislation is to utilize the savings garnered from the elimination of the hold harmless provision, for the Medicaid program. He asserted this would benefit the people affected, as opposed to expending the funds for bridge construction or other unrelated purpose. Co-Chair Kelly pointed out the bill does not contain a "transfer mechanism" guaranteeing that the funds would be appropriated to Medicaid. ELMER LINDSTROM, Deputy Commissioner, Department of Health and Social Services, reiterated the Department's opposition to the bill. He appreciated that the proposed committee substitute eliminates "any unintended consequences" relative to the Medicaid program. Mr. Lindstrom stressed the bill would "remove many temporary assistance clients from the temporary assistance rolls for… at least one month." He understood the assumption might be that these recipients would function adequately because of the dividend income. However, he calculated the amount of dividends averaged over 12 months, in addition to benefits received from the Temporary Assistance for Needy Families (TANF) program, places a family of three at 100 percent of the federal poverty level. He noted this allows a discretionary income of approximately $40 per month after housing, food, and other "necessities of life" expenses are deducted. Mr. Lindstrom spoke to the need for discretionary income and noted that up to $100 is allowed for single individuals residing in a nursing home or assisted living facility. He asserted, "you're suggesting that $40 of discretionary funding is somehow extravagant; we simply cannot accept that as a sound conclusion." Senator Hoffman asked if the Department calculated the financial impact of this legislation sorted by community. Mr. Lindstrom responded he would prepare the information. Senator Wilken referenced an impact statement prepared by the Division of Medical Assistance [copy on file] and asked if it is based on the chart provided by Senator Phillips. Mr. Lindstrom responded that by exempting Medicaid, as proposed in the committee substitute, the impact is eliminated. Senator Hoffman asked if the committee substitute would impact the general fund. Mr. Lindstrom replied there would be small administrative costs related to the provisions in the committee substitute. AT EASE 9:37 AM / 9:39 AM Mr. Lindstrom spoke to fiscal notes prepared that would reflect the impact of the committee substitute, specifically the Public Assistance Administration, Public Assistance Field Services fiscal note. He qualified that the $420,300 interagency receipts from the Permanent Fund Dividend Division are for the hold harmless provision, and should be replaced with general funds. He pointed out there would be "administrative complexities" incurred with removing recipients from the program eligibility. Co-Chair Kelly asked if the Department does not currently remove these participants from the programs during the month permanent fund dividends are received. ANGELA SALERNO, Division of Public Assistance, Department of Health and Social Services, answered no and explained the flexibility afforded states by the federal government at the time of welfare reform. AT EASE 9:40 AM / 9:41 AM Co-Chair Kelly asked if the Department reimburses the federal government the cost of providing services to those recipients that would otherwise be removed during the one-month period, or if the recipients are actually removed from the program and the dividend funds are paid to the recipients in lieu of the benefits. Ms. Salerno answered, "The federal government does not require us to remove them from the rolls. We are not required to count permanent fund dividend as income. So we do not remove them from the rolls. Because of our block grant funding, there's no reimbursement or exchange of funds." Senator Green referenced a comment printed on the check stub of permanent fund dividend checks indicating that a portion of the funds are used to augment federal welfare. She noted this statement "generates lots of inquires" and asked for an explanation. Ms. Salerno explained that with advent of welfare reform, the Department was no longer required to remove participants from the program. However, she informed that the permanent fund has been a "funding stream" for one month each year since the inception of the hold harmless provision. She furthered that general funds are sufficient to fund only 11 months of the program, and the dividend funds are necessary to maintain benefit payments for the entire year. Senator Green asked if this is due to "maintenance of efforts" requirements. Ms. Salerno replied the dividend funds are necessary for both maintenance of effort and receipt of federal block grants as they are based on the amount spent for welfare programs in 1994. She stressed that in 1994, general funds were spent for only 11 months th with dividend funds utilized for the 12 month. Senator Hoffman asked if beside the $420,000 general funds for administration costs projected in the fiscal note, whether this legislation would incur additional expense. Mr. Lindstrom replied there would be no additional cost for the Department of Health and Social Services, although he was unsure whether there would be costs for the Child Support Enforcement Division. Senator Green moved for adoption of CS SB 340, 22-LS1361\L, as a working draft. There was no objection and the committee substitute was ADOPTED. Co-Chair Kelly requested the sponsor to calculate the "net effect" of this legislation, less the proposed costs and the impact to the Child Support Enforcement Division. Senator Phillips shared that he had been unaware of the fiscal note before the Committee. Co-Chair Kelly ordered the bill HELD in Committee. 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." This bill was heard and held earlier in the meeting. ELMER LINDSTROM, Deputy Commissioner, Department of Health and Social Services, directed the Committee's attention to a corrected fiscal note. Senator Hoffman asked the amount lost to the general fund for the reimbursement of welfare payments. SUSAN SULLIVAN, Child Support Enforcement Division, Department of Revenue, testified via teleconference from Anchorage that in FY 03, the amount of reimbursement for public assistance would be $1,458,000 as indicated on the fiscal note. Co-Chair Kelly noted the updated fiscal note information is not reflected in the chart prepared by the sponsor, which details the financial impact of this legislation [copy on file.] Senator Green offered a motion "to report SB 340 out of Committee with individual recommendations and fiscal notes." There was no objection and CS SB 340 (FIN) MOVED from Committee with eight new fiscal notes, two from the Department of Revenue: Permanent Fund Dividend Division, zero, 3/11/02; and Child Support Enforcement Division, ($1,453,900), 3/2/02; and six from the Department of Health and Social Services: Adult Temporary Assistance Program, ($3,235,900), 4/3/02; Tribal Assistance, ($907,800), 4/3/02; Public Assistance, Field Services, zero, 4/3/02; General Relief, ($72,400), 4/3/02; Public Assistance, PFD Hold Harmless, ($6,303,500), 4/3/02; and Medical Assistance, ($200,000), 4/3/02.