Legislature(2007 - 2008)BUTROVICH 205
03/19/2008 01:45 PM Senate HEALTH, EDUCATION & SOCIAL SERVICES
| Audio | Topic |
|---|---|
| Start | |
| SJR18 | |
| SB107 | |
| SB206 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 206 | TELECONFERENCED | |
| += | SB 210 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | SB 107 | TELECONFERENCED | |
| += | SJR 18 | TELECONFERENCED | |
SB 206-CHILDREN'S TRUST GRANT FOR ENDOWMENT
CHAIR DAVIS announced consideration of SB 206.
2:38:10 PM
TOM OBERMEYER, Staff to Chair Davis, read an overview of the
bill. He said the bill before the committee should be the
committee substitute, CSSB 206, labeled 25-LS1198, Version \E,
an Act repealing the Alaska Children's Trust (ACT), establishing
conditions for a grant of the balance of the Alaska Children's
Trust, designating certain receipts as available for grants to
the Alaska Community Foundation, and providing for an effective
date.
The Alaska Children's Trust is one of 52 trusts in the
United States created by state statute, territorial
District of Columbia, to prevent child abuse and
neglect. The Alaska Children's Trust is the second
largest endowment with about $12 million; over 40 of
the trusts have no endowment at all, but are dependent
upon annual state allocation and dedicated fund
streams, federal monies and private funding. Like many
states, ACT receives funds from special request
Children's Trust license plates; receipts for birth
certificates suitable for display; and heirloom
certificates of marriage. Twenty-eight states also
receive federal community-based child abuse prevention
program funds. These funds are based on child
population and child abuse and neglect reports.
Alaska's annual allotment is about $235,000 and is
matched at 20 percent by the Office of Children's
Services and distributed to the tribes. OCS grantees
in 2007 receiving those funds, served 356 families.
SB 206 was introduced to privatize or have a donor-
advised fund with Alaska Community Foundation in
response to concerns by the Board of Trustees of ACT
that the state had not provided consistent staffing;
that investment policies did not produce the desired
results to increase grant-making; that administration
produced a lack of small grass-root grant applicants;
that the trust would be subject to the vagaries and
whims of changing political leadership; and
realization that the tension between treatment and
prevention is inescapable in a state setting where the
trust was focused on prevention.
As a result, the board commissioned the Giving
Practice, a consulting service of philanthropies
NorthWest of Seattle, to provide an independent report
with various ways to solve persistent problems.
He added that the 69 page report of March 17, 2006 should be in
the committee members' packets. It described a number of
options: 1) eliminate the trust activities and turn the funds
over to the state; 2) stay with the state with negotiated
operational and state changes; 3) donor-advised fund with the
Alaska Community Foundation; 4) use the Foraker Group as fiscal
operational sponsor; 5) merge with Friends of the Alaska
Children's Trust (FACT); or 6) become a new, independent 501C3
public charity.
The board voted to privatize the trust, that is, to have a
donor-advised fund with the Alaska Community Foundation; the
result was SB 206. Although the consultant's report pointed out
that the Alaska Community Foundation and Friends of the Alaska
Community Trust might offer little more than a shell structure
with limited organizational capacity and more administrative and
funds management expenses, the board felt a substantial change
was needed.
MR. OBERMEYER noted that many of the things he had just
described were in the report and were summarized in 1-8 on page
2 of the sponsor statement. It indicated that in addition to
what he had already described, the portion of the interest
income from the Trust released by the Department of Revenue was
relatively small, about $348,000, and limited by statute to a
maximum amount. The board felt this impaired the Trust's ability
to leverage its small annual budget to assist efforts in the
state to prevent child abuse and neglect. The board also felt
that, while current staffing by the Office of Children's
Services (OCS) was useful in the flow of information, it
unavoidably tended to change the goal and priority of the ACT
from prevention to treatment of those children already suffering
from abuse and neglect.
Although Alaska Statute allowed for appropriation of up to
$150,000 from the principal of the Trust annually for operating
expenses, that had not been the practice of the Trust. The ACT
income available for spending in 2004 was $340,689 and in 2005
was $364,000 (per page 14 of the March 17, 2006 consulting
report). Page 15 of the report before the committee was more
telling, it showed the surpluses of unspent grant money
available during those years, $42,000 and $82,000 respectively.
The seeming anomaly of having a surplus could be explained by
the dramatic drop in administrative expenses from $117,000 to
$85,000, to $31,000 in 2005, which tended to indicate that
staffing became part-time during that period while inadequate
disbursements resulted in surpluses. Contrary to the board's
initial contention, the report found actual management expenses
charged by the Department of Revenue remained consistently low
at about $35,000, or .03 of 1 percent of the $12 million corpus.
Management fees for Alaska Community Foundation were estimated
at about .84 of 1 percent, a little more than twice as much. He
felt that the anticipated benefits might outweigh the costs.
MR. OBERMEYER summarized that the board of the Alaska Children's
Trust concluded that something had to be done to improve the
performance of ACT to help accomplish its mission to prevent
abuse and neglect of children. In moving from department to
department, employees of ACT had not had the benefit of
institutional memory in managing this large endowment. The
Department of Revenue, while it charged very little for its
services, might consider the investment of the corpus of the ACT
a very small part of its operation not requiring a great deal of
its attention. Privatizing ACT through SB 206 was a viable and
perhaps preferred option unless, as suggested by the consulting
group in its final recommendations, the state could
satisfactorily address the concerns without changing structure.
CHAIR DAVIS indicated that a number of people had signed up to
testify on this bill and that a representative from Legal and
Research was on line to answer any questions that might arise.
She said she would prefer to take public testimony before
entertaining questions.
2:45:58 PM
DIANE KAPLAN, Trustee, Alaska Children's Trust, Anchorage, AK,
began her service as an appointee of Governor Knowles to The
Friends of the Children's Trust, which was formed at
approximately the same time as The Children's Trust. The purpose
of The Friends of the Children's Trust was to raise money and do
marketing for the Trust, such as license plates, [heirloom]
marriage certificates and the "Mush for Kids" in Fairbanks, as
well as other fundraising activities to build the Trust. After
about 5 years of service, she was appointed to the Trust and was
currently in her second term.
The commission was unanimous in its belief that the Trust would
function better outside of state government. The consultant
report indicated that it would be optimum to stay with the state
if accommodations could be made. They spent 2 years working with
the state to do that, but even with the support of the
commissioners of Education and Health and Social Services, who
were statutory members of the Trust, they were not successful;
the 7 trustees concluded that the relationship was not working
and that the Trust was unable to fulfill its mission.
In terms of raising money, she said it was very difficult to get
donors to write a check to the State of Alaska or to any public
body; therefore many institutions used the Alaska Community
Foundation as a way to build public support for public
activities. She cited the Eagle River clock tower project, the
West High auditorium project, the Jessie Lee home, the Anchorage
Parks Foundation and the Anchorage Library Foundation as
examples of organizations that worked through the Alaska
Community Foundation to combine public and private funds for the
good of Alaska.
2:48:26 PM
SAMMYE POKRYFKI, Vice Chair, board member, Friends of the Alaska
Children's Trust, Anchorage, AK, said that they were in
unanimous support of this legislation and appreciated Chair
Davis' leadership on it.
2:50:32 PM
TLISA NORTHCUTT, Secretary-Treasurer, Friends of the Alaska
Children's Trust, Anchorage, AK, agreed with Ms. Kaplan that one
of challenges for fundraising for this very worthy cause was
asking donors to give money to a state entity. Although the
funds were set up as a 501C3, to raise money on behalf of the
Trust they had to let people know the money raised would go into
the state. As a member of the Association of Fundraising
Professionals, her code of ethics required that she could not
ethically take donor's dollars if she could not follow donor
intent; by putting the money into the state of Alaska, she lost
her ability to guarantee that funds would be used as donors
intended. That made fundraising efforts very difficult and she
firmly believed that placing the money into the Alaska Community
Foundation was the best route.
IRIS MATTHEWS, Program Officer, Alaska Community Foundation,
Anchorage, AK, made herself available to answer any questions
the committee might have for the Alaska Community Foundation.
2:53:51 PM
CARLY LAWRENCE, Chair, Friends of Alaska Children's Trust,
agreed with Tlisa Northcutt's statements.
2:54:30 PM
CANDACE WINKLER, Chief Executive Officer, Child Care Connection,
supported privatizing the Alaska Children's Trust. She said her
organization had been the recipient of a small grant from the
Alaska Children's Trust for 3 years and, as a grantee, they were
extremely appreciative of the resources from the Trust but had
to admit that the process had been very laborious. Child Care
Connection had quite a few other grants from the state, one of
them for over $1 million, and she said this grant for $15,000 to
$50,000 had been the most laborious state grant they'd had to
deal with. The first year they received it, it was supposed to
be effective for July and they didn't hear anything back until
August or September. First they heard they had gotten the grant;
about a month later they heard that the amount had been reduced;
about a month later they heard the amount had been increased to
the original proposal. So they were into October, over a quarter
of the way through the fiscal year for that grant, by the time
they actually got the money. She wasn't sure why the process was
so ponderous, but each year they had to weigh whether the amount
was worth the difficulty of the process. She hoped that
privatizing it would make the process more efficient and allow
them to leverage more resources to accomplish their mission.
2:58:04 PM
PANU LUCIER, Executive Director, Alaska Children's Trust and the
Friends of the Alaska Children's Trust, said she was new to the
position and was still learning about the Trust and the granting
process. She thanked Chair Davis and the committee for the
opportunity to testify and for sponsoring SB 206 and SB 210.
MS. LUCIER said the Friends of the Alaska Children's Trust was a
501C3 non-profit arm of the Alaska Children's Trust, whose
mission was to raise funds for the Trust, to provide outreach
and marketing for the ACT, and to raise awareness of child abuse
and neglect. As a non-profit, FACT accepted contributions from
individuals and from corporations or foundations that were
restricted to non-profit contributions or were seeking a tax
deduction; however, fundraising had become increasingly
difficult under the current structure because the ACT was a
state fund and subject to legislative appropriation. Donors were
reluctant to contribute to a fund which could not guaranty that
the donors' intent would be followed; donors did not want to
give to a "pass-through" organization. Funds raised by the FACT
and contributed to the Alaska Children's Trust went into the
corpus of the Alaska Children's Trust Fund and could not be used
for programming. The Alaska Children's Trust was restricted to
granting from just the net earnings of the Fund. FACT was
restricted from making direct grants by all of its
organizational documents. The FACT board members struggled with
the ethical implications of raising money that might not be used
as donors intended. Safeguarding the funds took energy that
could be better utilized on the mission of related activities.
With the privatization of the Alaska Children's Trust, the FACT
and ACT proposed to merge into one non-profit organization that
would take on the functions of marketing, outreach, grant making
and fund raising. This would allow for ethical fund raising and
insured the long-term stability of the fund; allowed for a more
efficient process for grantees; allowed for fund management and
an endowment model; and insured a more efficient operation.
The Office of Children's Services statistics for March 2008
indicated that over 2,000 children were in out-of-home care and
61 percent of these children were Alaskan Native or American
Indian. As an Alaska Native herself, the numbers hit close to
home for her. She had been a volunteer court-appointed special
advocate for 8 years, working specifically with Alaskan Native
children in state custody. She stressed that no one organization
could fix the problem of child abuse and neglect; it would take
a cooperative effort of state and private entities and, most
importantly, individuals living in communities to take ownership
of the problem. The state had taken the responsibility of
providing services to children already suffering from child
abuse and neglect. ACT was charged through state statute to
conduct activities that would result in the prevention of child
abuse and neglect through the issuance of community-based
grants.
There were several statutory limitations that prohibited the ACT
from maximizing its ability to eliminate child abuse and
neglect. The current board composition was too small to meet the
need of providing expertise to lead a more diverse set of
activities, and restrictions on length and percentage of grant
funding did not allow the flexibility needed to make the most
efficient use of the Trust and other donor dollars. While the
Act was permitted to seek outside funds to add to the Trust, it
did not appear to have the authority to negotiate with those
donors as to how the funds could be used. The current
administrative structure of the trust within the state was too
burdensome given its small operating budget and the small size
of grant awards being offered. Small community-based
organizations that were well poised to offer community-based
solutions were unlikely to apply under the current process
because of the administrative burden relative to the small size
of the grant awards, which were limited to $50,000. A more
streamlined and simplified administrative structure would
enhance the Alaska Children's Trust ability to efficiently and
effectively pursue its mission.
MS. LUCIER continued that privatizing the trust would expand the
role of the trust from just grant-making to include research,
convening, collaborating, outreach and social marketing, and
would enhance the Trust's ability to focus grants in program
areas that had the highest need and showed the greatest promise
for success. It would allow the Trust to share the information
through outreach and social marketing with all Alaskans, not
just those served by funded programs. Privatization would also
allow use of trust funds, including the revenue sources from the
sale of license plates, marriage and birth certificates, federal
earmarks, foundation grants, and corporate donations, to conduct
expanded activities as identified above.
She concluded that most of all, privatization through SB 206 and
SB 210 would help create a more unified voice to focus on the
mission of ending child abuse and neglect in Alaska. The
trustees of the Alaska Children's Trust with the support of the
Friends of Alaska Children's Trust recommended to the Governor
and the Alaska Legislature that the Alaska Children's Trust be
privatized.
CHAIR DAVIS advised that Jean Mischel from legal was on line to
answer questions.
3:05:17 PM
SENATOR ELTON asked if the Department of Revenue would provide
its perspective on how this might work.
3:06:33 pm
JERRY BURNETT, Director, Administrative Services, Legislative
Liaison for the Department of Revenue, Juneau, AK, offered to
answer any questions about how they managed the funds and how
this might change that.
SENATOR ELTON asked if we did this with any other state
receipts.
MR. BURNETT explained that the Department of Revenue invested
the money, approximately $12 million, retained the principle and
paid the income to an income account that could be spent, and
charged about .03 of 1 percent of the amount, or $40,000 per
year. He said there were other accounts in state government that
were set up for specific purposes and were managed in a similar
fashion, such as the hazardous spill response fund.
SENATOR ELTON said he was thinking of the way the Trust dollars
went into a bucket and was trying to figure out what the process
would be. They managed the trust dollars and reported the
receipts; but he wondered who made the decision on the
disposition of those receipts.
MR. BURNETT replied that the Children's Trust Board was doing
that for the income account. What would happen with the passage
of this bill was that the money would be appropriated in another
bill to the non-profit that would be handling it; and that non-
profit would receive receipts that were going into that Trust in
the future. The department had no opinion as to whether it was a
good or a bad idea. It represented approximately .005 of 1
percent of the money they managed in treasury.
SENATOR ELTON asked if the department would report to the
legislature the amount of money available, or if the whole
account would go to [the non-profit].
MR. BURNETT answered that would depend on how the appropriation
bill was written, but they would identify the available balance
on the date of dissolution of the fund and that would be
available for appropriation for whatever purpose the legislature
chose.
SENATOR ELTON ventured that future receipts from license plates
or heirloom marriage certificates would be collected by the
Department of Health and Social Services (DHSS), which would
tell the legislature how much money had been collected and those
receipts could be transferred in a grant to the privatized
Trust.
MR. BURNETT corrected that typically, with a program like that,
there would be a language section in the budget that would
specify the amount available from those sources that was being
appropriated to [the Trust].
CHAIR DAVIS asked if the money [from those sales] was currently
coming in to the Department of Revenue and being transferred to
Department of Health and Social Services.
MR. BURNETT agreed that the money did come in to Revenue, and
$150,000 could be spent each year from the principal to
administer the program. The income, which was averaging 7
percent since inception of the fund, was available for grants.
The unused portion stayed in the Trust. One of the issues, aside
from problems of fundraising which had been identified, was that
the fund was managed so that only realized income was available.
That meant the variation in income year-to-year was quite large.
If they chose to leave the Trust with the state, he strongly
recommended that they change it to an endowment management so
there would be an even amount available for grants each year.
CHAIR DAVIS said she still didn't quite understand how the
grants were handled. She asked if the checks to the grantees
were written by the Department of Revenue.
MR. BURNETT answered no, they were written by the Trust.
3:13:24 PM
JEAN MISCHEL, Attorney at Law, Legislative Legal and Research
Services Division, Legislative Affairs Agency, said she had
concerns about the way the bill was structured. She said she did
the drafting based upon a specific request but there were legal
issues which she thought created unnecessary confusion. One of
those was that they continued to refer, in the license and
heirloom certificate section, to the existence of an Alaska
Children's Trust Fund that was actually repealed on the last
page of Version \E. So there was no Alaska Children's Trust and
that reference should be changed. She was not sure, as a legal
matter, whether they could transfer monies that were donated
under one set of understandings, in this case that the money was
being handled by a state trust board and being collected for
that purpose, to a private organization. She felt there was some
potential to challenge the transfer. The other question was
whether the state could continue to accept license and heirloom
certificate fees and hand them over to a private entity. The
bill authorized the state to do it, but she felt it did raise a
specific question about whether those fees could be construed as
a tax, in which case they were constrained as to what could be
done with that money.
MS. MISCHEL was also concerned about labeling the Alaska
Community Foundation in statute as the named recipient grantee,
because the state lacked control over the existence of that
foundation. She recommended that they refrain from actually
identifying a specified community foundation in the substantive
provisions of the law; she said there would be no problem with
doing that in the appropriations bill.
CHAIR DAVIS supposed that they should have someone from the
Attorney General's Office look at the bill, as there were more
concerns than she was comfortable with. She held SB 206 in
committee.
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