Legislature(2001 - 2002)

04/03/2002 09:14 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."                                                                                          
                                                                                                                                
                                                                                                                                
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.                                                                                                             
                                                                                                                                

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