Legislature(2015 - 2016)ANCH LIO AUDITORIUM

12/07/2015 01:30 PM House LEGISLATIVE BUDGET & AUDIT


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01:32:59 PM Start
01:34:15 PM Revised Program - Legislative (rpls)
01:50:55 PM Executive Session
04:06:18 PM Final Audit Reports
04:06:45 PM Performance Review Reports
04:17:08 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Rescheduled from 12/4/15 --
+ Legislative Revised Programs (RPLs): TELECONFERENCED
- Dept. of Education & Early Development
- Child Nutrition Programs - RPL 05-6-0111
+ EXECUTIVE SESSIONS: TELECONFERENCED
Procurement:
- IRIS Audit Authorization
Final Audit Reports:
- Alaska Pioneer Homes
- Big Game Commercial Services Board
Final Performance Review Reports:
- Behavioral Health
- Long Term Care
- Overall Department Organization
-- Testimony <Invitation Only> --
**Streaming available in JNU in TS Bldg Rm 105**
                    ALASKA STATE LEGISLATURE                                                                                  
             LEGISLATIVE BUDGET AND AUDIT COMMITTEE                                                                           
                       ANCHORAGE, ALASKA                                                                                      
                        December 7, 2015                                                                                        
                           1:32 p.m.                                                                                            
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Mike Hawker, Chair                                                                                               
Senator Anna MacKinnon, Vice Chair (via teleconference)                                                                         
Representative Kurt Olson                                                                                                       
Representative Lance Pruitt                                                                                                     
Representative Steve Thompson (via teleconference)                                                                              
Representative Sam Kito                                                                                                         
Senator Lyman Hoffman (via teleconference)                                                                                      
Senator Click Bishop (via teleconference)                                                                                       
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Senator Cathy Giessel                                                                                                           
Senator Bert Stedman                                                                                                            
Representative Mark Neuman (alternate)                                                                                          
Senator Pete Kelly (alternate)                                                                                                  
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
REVISED PROGRAM - LEGISLATIVE (RPLs)                                                                                            
EXECUTIVE SESSION                                                                                                               
IRIS AUDIT PROCUREMENT                                                                                                          
RELEASE OF FINAL AUDIT REPORTS                                                                                                  
RELEASE OF PERFORMANCE REVIEWS                                                                                                  
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
No previous action to record                                                                                                    
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
HEIDI TESHNER, Director                                                                                                         
Administrative Services                                                                                                         
Department of Education and Early Development                                                                                   
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Presented RPL 05-6-0111, Child Nutrition                                                                 
Programs.                                                                                                                       
                                                                                                                                
LACEY SANDERS, Fiscal Analyst                                                                                                   
Legislative Finance Division                                                                                                    
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Testified regarding RPL 05-6-0111.                                                                       
                                                                                                                                
KRIS CURTIS, Legislative Auditor                                                                                                
Legislative Finance Division                                                                                                    
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:   Explained  the process after  releasing the                                                             
final performance review reports from the committee.                                                                            
                                                                                                                                
ROSS ALEXANDER                                                                                                                  
Legislative Audit Division                                                                                                      
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION  STATEMENT:   Answered  a question  regarding the  final                                                             
performance review reports.                                                                                                     
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
1:32:59 PM                                                                                                                    
                                                                                                                                
CHAIR  MIKE  HAWKER  called  the  Legislative  Budget  and  Audit                                                             
Committee meeting  to order  at 1:32  p.m.   Representatives Kito                                                               
Olson, Thompson,  and Hawker, and  Senators Bishop,  Hoffman, and                                                               
MacKinnon  were present  at the  call to  order.   Representative                                                               
Pruitt arrived as the meeting was in progress.                                                                                  
                                                                                                                                
^REVISED PROGRAM - LEGISLATIVE (RPLs)                                                                                           
              REVISED PROGRAM - LEGISLATIVE (RPLs)                                                                          
                                                                                                                                
1:34:15 PM                                                                                                                    
                                                                                                                                
CHAIR HAWKER announced that the  first order of business would be                                                               
RPL  05-6-0111, Department  of Education  and Early  Development,                                                               
Child Nutrition Programs.                                                                                                       
                                                                                                                                
1:34:54 PM                                                                                                                    
                                                                                                                                
HEIDI TESHNER,  Director, Administrative Services,  Department of                                                               
Education  and Early  Development, advised  that the  Division of                                                               
Teaching and Learning Support, Child  Nutrition Programs (CNP) is                                                               
requesting  an  increase  of  $8.7  million  in  federal  receipt                                                               
authority  in  order to  receive  additional  U.S. Department  of                                                               
Agriculture  (USDA) grant  funds.   She noted  that this  request                                                               
would bring  the FY2016 Child  Nutrition Program's  total federal                                                               
receipt authority  to a little  over $61 million.   She explained                                                               
that these programs  are fully federally funded  and the spending                                                               
will  provide  support  for  the  significant  growth  they  have                                                               
experienced,  within its  USDA Federal  Nutrition Services  Block                                                               
Grant.  The grant includes  programs such as, the National School                                                               
Lunch Program, Child and Adult  Care Food Program (CACFP), Summer                                                               
Food Service  Program, and others.   Without full  authority, she                                                               
further explained, the  USDA Meals Program will  be terminated or                                                               
reduced which  will impact school districts,  child care centers,                                                               
Head Start agencies,  and the summer meal program.   She said the                                                               
major  growth within  school meals  is directly  attributed to  a                                                               
community eligibility  program which provides free  breakfast and                                                               
lunch  to all  students of  low-income schools.   The  schools in                                                               
Alaska,  as well  as other  states, have  experienced an  overall                                                               
increased  participation in  meal programs  when meals  are free,                                                               
and [find]  that students  are better  prepared to  receive their                                                               
education "with food in their  bellies."  She expressed that this                                                               
RPL requires  no state funding  as it is fully  federally funded,                                                               
and  is   requested  because  more   students  are   eligible  to                                                               
participate.     She  noted   that  students   do  not   have  to                                                               
participate.                                                                                                                    
                                                                                                                                
1:37:30 PM                                                                                                                    
                                                                                                                                
CHAIR  HAWKER  requested  confirmation that  this  is  additional                                                               
federal money available to the  State of Alaska without requiring                                                               
any    additional   general    fund   investments    or   in-kind                                                               
contributions.                                                                                                                  
                                                                                                                                
MS. TESHNER answered, "That is correct."                                                                                        
                                                                                                                                
1:38:09 PM                                                                                                                    
                                                                                                                                
SENATOR  BISHOP  referred  to  page [3]  of  the  RPL  "Budgetary                                                               
Issues," and  asked for clarification that  this is authorization                                                               
for $8.7 million for billable claims.                                                                                           
                                                                                                                                
MS.  TESHNER responded  that the  [amount] is  based upon  actual                                                               
claims of actual meals served.                                                                                                  
                                                                                                                                
CHAIR  HAWKER noted  this is  the second  time the  RPL has  been                                                               
before the  committee because during  the last meeting  there was                                                               
not sufficient votes to pass it.   He said there was concern that                                                               
this program  would create a  deepening of consideration  of what                                                               
would  be  a welfare  class  and  would  bring more  people  onto                                                               
federally  subsidized   programs,  thereby,   creating  increased                                                               
reliance on them.  He  also noted constituents' concern that they                                                               
do not  want their  children placed  in increasing  reliance upon                                                               
federal  government  handouts.     He  asked  for  Ms.  Teshner's                                                               
response and  why the committee should  create additional further                                                               
reliance upon the federal government  to run this program knowing                                                               
that federal money is "always going  to be challenged" and it may                                                               
not be  available in  the future  after creating  the expectation                                                               
that these programs provide.                                                                                                    
                                                                                                                                
MS. TESHNER  replied that  parents can  determine whether  or not                                                               
their children participate in the program,  and do not have to be                                                               
singled  into the  low income  category.   She  pointed out  that                                                               
students  learn better  when they've  had a  decent meal  and not                                                               
everyone has access  to a decent meal.  This  allows all of those                                                               
students  to take  advantage [of  the program]  that will  assist                                                               
them in learning, she pointed out.                                                                                              
                                                                                                                                
1:41:13 PM                                                                                                                    
                                                                                                                                
CHAIR HAWKER  said he  appreciates the  clarity that  parents are                                                               
not  required to  participate, but  from the  state's perspective                                                               
questioned  whether it  is  a  good thing  for  the committee  to                                                               
create  increased reliance  upon a  federally subsidized  program                                                               
that likely will  not be sustainable in the future.   Thereby, he                                                               
remarked, causing  expectations by the families  that these funds                                                               
would be  made up  by the  State of Alaska.   He  queried whether                                                               
this is a good route to go.                                                                                                     
                                                                                                                                
MS. TESHNER answered  "personally, yes," in that this  is a fully                                                               
federally  funded  program and  if  it  is not  approved,  school                                                               
districts would have  to use state money to  fulfill the backfill                                                               
of not  having the  federal money  to pay  for the  meals already                                                               
served.                                                                                                                         
                                                                                                                                
1:42:12 PM                                                                                                                    
                                                                                                                                
CHAIR HAWKER surmised that the  state is already obligated to pay                                                               
general fund money for this  program should the state not receive                                                               
this money from the federal government.                                                                                         
                                                                                                                                
MS. TESHNER responded,  no.  She offered that  the programs would                                                               
have  to  be  seriously  reduced  or  terminated  because  school                                                               
districts could  not afford to  pay.   In the event  anything had                                                               
already occurred,  beyond the federal  money they  could receive,                                                               
[school districts] would have to backfill with state funding.                                                                   
                                                                                                                                
CHAIR  HAWKER  surmised  that  this  [funding]  would  curtail  a                                                               
proposed increase,  which is a net  zero, and noted that  it does                                                               
not make sense.                                                                                                                 
                                                                                                                                
MS.  TESHNER  advised  that  if   there  is  no  federal  funding                                                               
authority to  pay school  districts for  meals they  have already                                                               
disbursed to students,  there is a chance they  would either have                                                               
to terminate  the program during  the school year, or  would have                                                               
to  substantially  reduce  it  to   the  federal  authority  they                                                               
received, and "they  would not have to subsidize  that with state                                                               
dollars."  She related that  it would affect the programs without                                                               
the funding, but  "we" will not come back for  more state funding                                                               
for the Child Nutrition Program itself.                                                                                         
                                                                                                                                
1:43:43 PM                                                                                                                    
                                                                                                                                
CHAIR  HAWKER referred  to Ms.  Teshner's statement  that "it  is                                                               
your  opinion," and  asked whether  that  is her  opinion or  the                                                               
opinion of the agency and Governor Bill Walker's administration.                                                                
                                                                                                                                
MS. TESHNER replied that it is  the opinion of the agency and the                                                               
administration.                                                                                                                 
                                                                                                                                
1:44:10 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE KITO commented that  the state has federal funding                                                               
opportunities  available   to  help  the   state's  disadvantaged                                                               
students.   He  cautioned  that the  legislature should  consider                                                               
that the  state is  receiving $300-$400 million  a year  from the                                                               
federal    government   for    the   state's    federal   highway                                                               
transportation  program,  and  is  receiving  approximately  $100                                                               
million  from the  Federal  Aviation  Administration for  capital                                                               
construction on  the state's aviation  program.  He  reminded the                                                               
committee  that  the  state  receives  a  significant  amount  of                                                               
federal  money every  year on  the capital  side as  well as  the                                                               
operating side.   The  legislature, he pointed  out, needs  to be                                                               
certain  it  has the  ability  to  capitalize  on the  amount  of                                                               
federal  funding   the  state  can   receive  to   help  Alaska's                                                               
residents.  When  discussing the possible loss  of federal funds,                                                               
it should not be forgotten  that the state receives a significant                                                               
amount of  capital funds it could  lose as well.   He opined that                                                               
legislators  would not  consider decreasing  the state's  federal                                                               
fund receipts for  aviation or highways and to keep  that in mind                                                               
when considering these other programs.                                                                                          
                                                                                                                                
1:45:28 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE OLSON  asked whether  they are giving  the federal                                                               
government artificially inflated numbers  with regard to families                                                               
that do  not participate,  and questioned  whether the  state has                                                               
any liability for over-reporting.                                                                                               
                                                                                                                                
MS. TESHNER advised that the  state is not providing artificially                                                               
inflated numbers  to the  USDA, as  it bases  its numbers  on the                                                               
average of the last two school  years.  While they will receive a                                                               
set  authorization from  the federal  government,  they are  only                                                               
billed for what the state paid for actual claims, she explained.                                                                
                                                                                                                                
1:46:34 PM                                                                                                                    
                                                                                                                                
SENATOR  BISHOP  surmised  that  the   increase  is  due  to  the                                                               
population  growth  of school  aged  children  in Anchorage,  and                                                               
noted it is reimbursable up to  $8.7, but there is nothing to say                                                               
that the state will bill $8.7 million.                                                                                          
                                                                                                                                
MS. TESHNER  responded that  Senator Bishop  is correct,  in that                                                               
they are asking up to $8.7  million, but all of the authority may                                                               
not be used as it is based upon actuals.                                                                                        
                                                                                                                                
1:48:07 PM                                                                                                                    
                                                                                                                                
LACEY  SANDERS,  Fiscal  Analyst, Legislative  Finance  Division,                                                               
Alaska State Legislature, stated that  there are no general funds                                                               
required and  no additional staff  is needed regarding  RPL 05-6-                                                               
0111.    The  Legislative  Finance Division  finds  no  technical                                                               
issues, she advised.                                                                                                            
                                                                                                                                
1:49:07 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE OLSON  made a motion  and asked  unanimous consent                                                               
that  the   committee  approve   RPL  05-6-0111,   Department  of                                                               
Education  and Early  Development, Child  Nutrition Programs  for                                                               
$8,700,000  Federal Receipts,  Fund  Code 1002,  as an  operating                                                               
budget item.                                                                                                                    
                                                                                                                                
A  roll  call  vote  was taken.    Representatives  Kito,  Olson,                                                               
Thompson, Pruitt  and Hawker, and  Senators Bishop,  Hoffman, and                                                               
MacKinnon voted in favor of  RPL 05-6-0111.  Therefore, RPL 05-6-                                                               

0111 was approved by the Legislative Budget & Audit Committee by a vote of 8 to 0. ^EXECUTIVE SESSION EXECUTIVE SESSION 1:50:55 PM CHAIR HAWKER announced the next order of business would be an executive session. 1:51:09 PM REPRESENTATIVE OLSON moved and asked unanimous consent, that the Legislative Budget and Audit Committee enter executive session under Uniform Rule 22(b)(1) and (b)(3), as the meeting will involve a discussion of matters, that the immediate knowledge of, would adversely affect the finances of a government unit and under AS 24.20.301 for the discussion of confidential audit and performance review reports. CHAIR HAWKER announced that seeing no objection, it was so ordered. 1:51:54 PM The committee took an at-ease from 1:51 p.m. to 4:03 p.m. 4:03:28 PM CHAIR HAWKER brought the committee back to order at 4:03 p.m. Representatives Kito, Olson, Thompson, and Hawker, and Senators Bishop, Hoffman and MacKinnon were present at the call to order. IRIS AUDIT PROCUREMENT 4:05:32 PM REPRESENTATIVE OLSON made a motion that the Legislative Budget and Audit Committee authorize the Legislative Auditor to award and enter into a contract for specialized information technology expertise to review the State's Integrated Resource Information System (IRIS) in an amount not to exceed $400,000. There being no objection, it was so ordered. ^FINAL AUDIT REPORTS FINAL AUDIT REPORTS 4:06:18 PM REPRESENTATIVE OLSON made a motion that the following final audits be released to the public: Division of Alaska Pioneer Homes, and Big Game Commercial Services Board, Sunset. There being no objection, it was so ordered. ^PERFORMANCE REVIEW REPORTS PERFORMANCE REVIEW REPORTS 4:06:45 PM REPRESENTATIVE OLSON made a motion that the committee release the following final Department of Health and Social Services performance review reports to the public: Behavioral Health, Long-Term Care, and Administrative Structure. CHAIR HAWKER emphasized, for clarity, that there are three separate physical reports. CHAIR HAWKER objected and commented that these are significant performance reviews of a significant agency that are of a great deal of interest to many people. He noted there are some controversial findings in the report, and "a lot of meat to digest." He asked Kris Curtis, Legislative Auditor, to explain the process as the reports are released to be certain the information is available to legislators, the House and Senate Finance Committees, and the public at-large. 4:07:59 PM KRIS CURTIS, Legislative Auditor, Legislative Finance Division, Alaska State Legislature, stated that subsequent to the committee's release, the full reports and summaries will be posted on the web site. However, she noted, the reports are full of findings and recommendations in that each report is over 200 pages. She encouraged all legislators to have their budget knowledgeable staff review these reports because there can certainly be other information in them of particular interest to specific legislators that may not be included within the summaries. She explained that the summaries will be posted on the web site to help guide people in reviewing the reports, and [the division] will prepare a summary of potential legislation that legislators may be interested in sponsoring that are suggested within the reports. These reports, she emphasized, are the opinion and product of the contractors hired by "us" and are independent, objective reviews by experts in the field. She said her expectation is that within the next day or two, emails with the above information will be directed to every legislator and co-chairs of the House and Senate Finance Committees. MS. CURTIS, in response to Chair Hawker, advised that her office will send out a public press release regarding the availability of the audit. She offered that hard copies will be sent to the chairs of the House and Senate Finance Committees, chairs of the House and Senate Health and Social Services Committees, and chairs of the House and Senate Finance Committees' subcommittees for health and social services. 4:10:37 PM CHAIR HAWKER asked that the very voluminous reports be posted on the web site with a reduced .pdf size. MS. CURTIS advised they would also attempt to include links within the summaries allowing people to drill down into the voluminous reports more efficiently. 4:11:09 PM SENATOR MACKINNON asked Ms. Curtis how in depth documentation was performed with regard to Medicaid waivers for 1915(i) and (k), and whether the reports highlight the state's options or potential risks on the waivers. CHAIR HAWKER advised Senator MacKinnon that Ms. Curtis is not qualified to respond. 4:11:50 PM MS. CURTIS advised that the reports are not public at this point and she must wait until they are released before addressing their content. CHAIR HAWKER asked Senator MacKinnon to withdraw her question until the vote was concluded. SENATOR MACKINNON agreed. 4:12:11 PM CHAIR HAWKER advised that the question before committee is the release of the Department of Health and Social Services performance review reports selectively identified for the Behavioral Health Division, Long-Term Care Activities, and Administrative Structure of the agency. There being no objection, it was so ordered. 4:12:38 PM SENATOR MACKINNON pointed to Ross Alexander, Legislative Audit Division, and the Medicaid waivers 1915(i) and (k), and advised she has knowledge as to what 1915(i) and (k) obligates the state to do. She asked Mr. Alexander whether the report currently released contains any of the negative consequences or accurately reflects a comparison of the state's potential risks for those two waiver programs. 4:13:36 PM ROSS ALEXANDER, Legislative Audit Division, Alaska State Legislature, advised that the reports themselves do not go in depth into risk. They do include a disclaimer; however, that the reports themselves are providing a recommendation on how the state can shift costs to the federal government and collaborate with the federal government on ways to lower state expenditures. He offered that the reports recognize that in order to move forward on any of the recommendations, the state will need to seriously consider the risks. Although, he remarked, they do not go in depth into the risks themselves, they do not make a blanket "this is a good idea" on moving forward on any of the options or waivers without further study. 4:14:23 PM SENATOR MACKINNON inquired whether it is true the Department of Health and Social Services did not comply with the request to show the committee a ten percent reduction anywhere. MR. ALEXANDER responded that she is correct, in that the proposed list of reductions put forth by the department is a list of totally and approximately 4.5 percent of its general fund budget. He explained that it is part of Governor Bill Walker's amended budget put out last year. Therefore, he responded, it is not in full compliance with the requirements of the statute. SENATOR MACKINNON commented to the committee that the committee has gone through two audit cycles, with two different departments, and it has not received the results the committee had hoped for under passage of the bill. She said she wondered whether the committee should have a discussion on the efforts, as it moves forward, and investing "this much money" to understand what the department is doing, and having departments refuse to comply with Alaska State Statute. 4:16:12 PM CHAIR HAWKER noted that Senator MacKinnon echoed his sentiments exactly. He asked whether there were any other committee concerns for the good of the order. Hearing and seeing none he thanked the committee members for their attendance. 4:17:08 PM ADJOURNMENT There being no further business before the committee, the Legislative Budget and Audit Committee meeting was adjourned at 4:17 p.m.

Document Name Date/Time Subjects
Agenda .pdf JBUD 12/7/2015 1:30:00 PM
RPL Packet.pdf JBUD 12/7/2015 1:30:00 PM