Legislature(2015 - 2016)ANCH LIO AUDITORIUM
10/07/2015 09:00 AM House LEGISLATIVE BUDGET & AUDIT
Note: the audio ![]()
and video ![]()
recordings are distinct records and are obtained from different sources. As such there may be key differences between the two. The audio recordings are captured by our records offices as the official record of the meeting and will have more accurate timestamps. Use the icons to switch between them.
| Audio | Topic |
|---|---|
| Start | |
| Revised Program - Legislative (rpls) | |
| Executive Session | |
| Release of Performance Reviews | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
LEGISLATIVE BUDGET AND AUDIT COMMITTEE
Anchorage, Alaska
October 7, 2015
9:05 a.m.
MEMBERS PRESENT
Representative Mike Hawker, Chair
Senator Anna MacKinnon, Vice Chair
Representative Kurt Olson - via teleconference
Representative Lance Pruitt
Representative Steve Thompson
Representative Sam Kito
Senator Lyman Hoffman
Senator Cathy Giessel
MEMBERS ABSENT
Senator Bert Stedman
Senator Click Bishop
Representative Mark Neuman
Senator Pete Kelly
OTHER LEGISLATORS PRESENT
Representative Seaton
Representative Saddler
COMMITTEE CALENDAR
REVISED PROGRAM - LEGISLATIVE (RPLs)
EXECUTIVE SESSION
RELEASE OF PERFORMANCE REVIEWS
PREVIOUS COMMITTEE ACTION
No previous action to record
WITNESS REGISTER
CHRIS MAISCH, Director
Division of Forestry
Department of Natural Resources
Fairbanks, Alaska
POSITION STATEMENT: Presented RPL 10-6-5006.
DAVID TEAL, Director
Legislative Finance Division
Legislative Affairs Agency
Juneau, Alaska
POSITION STATEMENT: Offered a technical opinion on RPL 10-6-
5006.
DUANE MAYES, Director
Division of Senior and Disability Services
Department of Health & Social Services
Juneau, Alaska
POSITION STATEMENT: Presented RPL 06-6-0217.
JACQELLI ZIEGENFUSS, Admin Operations Manager
Division of Senior and Disabilities Services
Department of Health & Social Services
Juneau, Alaska
POSITION STATEMENT: Answered questions regarding RPL 06-6-0217.
MEGAN WALLACE, Attorney
Legislative Legal and Research Services
Legislative Affairs Agency
Juneau, Alaska
POSITION STATEMENT: Answered questions regarding RPL 06-6-0217.
JEFF JESSE, Chief Executive Officer
Alaska Mental Health Trust Authority
Department of Revenue
Anchorage, Alaska
POSITION STATEMENT: Answered questions regarding RPL 06-6-0217.
DAVID TEAL, Director
Legislative Finance Division
Legislative Affairs
Juneau, Alaska
POSITION STATEMENT: Offered a technical opinion on RPL 06-6-
0217.
ACTION NARRATIVE
9:05:49 AM
CHAIR MIKE HAWKER called the Legislative Budget and Audit
Committee meeting to order at 9:05 a.m. Representatives Kito,
Olson, Thompson, and Hawker and Senators Giessel, Hoffman and
MacKinnon were present at the call to order. Representative
Pruitt arrived as the meeting was in progress. Also in
attendance were Representatives Seaton and Sadler.
^REVISED PROGRAM - LEGISLATIVE (RPLs)
REVISED PROGRAM - LEGISLATIVE (RPLs)
9:09:07 AM
CHAIR HAWKER announced that the first order of business would be
RPL 10-6-5006, Department of Natural Resources, Fire
Suppression, Land & Water Resources.
9:09:10 AM
CHRIS MAISCH, Director, Division of Forestry, Department of
Natural Resources, advised that this is a "Challenge Cost Share
Agreement Between The Alaska Division of Forestry and The USDA,
Forest Service Pacific Northwest Region State and Private
Forestry." He explained that the Division of Forestry (ADOF)
has been a participant in the Tongass Advisory Council (TAC) for
the last several years, and this cost share agreement is the
recommendation of TAC to the United States Forestry Service
(USFS) on how best to transition from old growth timber harvest
to young growth timber harvest in the Tongass National Forest
while maintaining a viable timber industry. He stressed that
the state has an interest in maintaining Southeast Alaska's
current industry together with opportunities to re-grow as the
young growth volume in the Tongass National Forest becomes
available. The agreement, he noted, is divided into two major
tasks [referring to the handout within the committee packets]
and pointed to Attachment A of the agreement, page 1, Task 1.
CHAIR HAWKER asked Mr. Maisch to give the committee an
opportunity to locate the documentation within their packets.
9:12:58 AM
MR. MAISCH continued that Task 1A, B, and C, are different parts
of the project that will provide technical assistance to the
Forest Service including: field crew working with their staff;
agreement on protocol to perform the work; and testing new
procedures, particularly on Task 1B which is timber between 40-
55 years of age. He referred to the project as a merger between
two organizations with two different corporate cultures and two
ways of performing technical work, and said they have worked to
come to an agreement regarding how to proceed in the field next
summer. The goal of this, he noted, is to identify the amount
of young growth available for timber sales over the next 15
years, to help support the industry in Southeast Alaska.
9:14:26 AM
CHAIR HAWKER questioned whether the purpose of the RPL is to
accept $4 million of federal U.S. Forest Service funding, and
whether it is a grant or contract with ADOF to perform these
services. He further questioned whether the information gained
is strictly proprietary to the state in that it is federally
funded.
MR. MAISCH responded that the information will be available as
public information and is not proprietary. He then confirmed
that Chair Hawker's description of the project is correct, that
within the $4 million cost share agreement ADOF does have a
match requirement to do this work to help meet the mutual
primary goal of sustaining the timber industry in Southeast
Alaska.
9:15:50 AM
MR. MAISCH referred to Task 2, [page 4] and advised $2.5 million
is allocated to Task 1, and $1.5 million is allocated to Task 2
of the $4 million agreement. He pointed to Task 2A, B, and C,
and said 2A is to provide workforce development and employment
opportunities for residents of rural communities; 2B is to
improve infrastructure across the various land ownerships in
Southeast including, state, private, municipal, or other land.
He advised that 2C is to complete a forest resources assessment
and provide financial assistance for other land owners in
Southeast Alaska. He expressed that $1.5 million is not a lot
of money to perform 2A, B, and C, but ADOF has detailed tasks
associated with each with no individual allocation of money, and
much of the work will be performed by third-party contractors
through an RFP process.
9:17:32 AM
SENATOR MACKINNON referred to Task 2, and noted there was
supposed to be a meeting in July, with a final work product on
August 15th, and asked whether that meeting was held and the
work product produced. In the event it was held, questioned why
the committee did not have specifics.
MR. MAISCH answered that the meeting was held, but due to this
year's fire season, many of the same people on the project were
engaged in dealing with fire situations in Alaska and the lower-
48. He reiterated that this is the merging of two different
corporate cultures with a number of follow-up meetings, and
while they are making good progress, do not have a final
agreement on how it will actually be done.
MR. MAISCH, with regard to the match, referred to page 1,
following Attachment A, which is a series of work-sheets. He
advised that page 1, refers to Forest Service contributions and
cooperator contributions.
MR. MAISCH responded yes, to Chair Hawker's question regarding
the upper right side of page 1, which read: OMB 0596-0217. He
explained the sheet documented what the Forest Service fiscally
is bringing to the table, both in hard dollars and in-kind
contributions. The spreadsheet also depicts the cooperator
(state) contributions, and the state's match is approximately
$1.4 million. The match ratio is 75 percent federal, and 25
percent state. The state matches are in-kind, with some salary
and travel, but the majority of the match is in the "other line
items," and $1.3 million is being matched by infrastructure
improvements the state is making in Southeast Alaska. He
pointed out that in this particular case a CIP project is
constructing the Downer Bay Road on Gravina Island to a section
of state forest and Forest Service owned land. He offered that
both will have timber sales associated with them in the future.
He related that the match is sufficient to meet the required
match for this and, in fact, it slightly exceeded the match. He
commented that this project comes at good time for the division
with the FY2015 budget reductions, as the division will use
long-term non-perms, and short-term non-perms to help conduct
field work and oversee this project.
9:21:26 AM
CHAIR HAWKER surmised the approximately $1.4 million in state
match for this project is a non-cash requirement other than it
is money that is already in the state budget, and Mr. Maisch
will not ask for any additional support at any time to support
this project.
MR. MAISCH responded, that is correct. The money is already
either in-kind, which is the salary and labor, or actually a
cash contribution. He explained it is a CIP appropriation
previously made, and offered that the Downer project is not
under construction yet but is close to being let out for
construction. No additional funding is required, he said.
9:22:10 AM
SENATOR MACKINNON noted that the allocation of $21,000 to this
project from the current travel budget line item indicates that
those funds would not be available to be used for other travel
opportunities.
MR. MAISCH replied, that is correct.
SENATOR MACKINNON inquired as to whether the division or
department will come back and ask for a supplemental request.
MR. MAISCH answered no, because a lot of the travel is to
Southeast Alaska where he can combine his duties on this project
with other state duties; therefore, it is counted as an in-kind
contribution.
9:23:27 AM
DAVID TEAL, Director, Legislative Finance Division, Legislative
Affairs Agency, said the Legislative Finance Division has no
technical issues with the RPL, and noted the department
originally submitted it as a capital project. When asked why
capital as opposed to operating, the division chose to re-submit
it as an operating RPL. He explained it does lean toward
operating and that means the department will have to do some
work in the 2017 budget process, but it is nothing the committee
should be concerned about as it works either way.
CHAIR HAWKER noted that multiple year appropriations have,
historically, been made through the operating budget rather than
a capital budget.
9:24:39 AM
SENATOR MACKINNON moved and asked unanimous consent that the
committee approve the following RPL:
10-6-5006 Department of Natural Resources, Fire
Suppression, Land & Water Resources $4,000,000 Federal
Receipts as a multi-year operating budget item FY16-
FY18.
CHAIR HAWKER stated seeing no objection, [RPL 10-6-5006] was
approved. Chair Hawker noted that the documentation behind the
RPL was one of the most thorough he has seen in a very long time
and congratulated Mr. Maisch's folks in putting it together.
9:25:48 AM
CHAIR HAWKER announced that the next order of business would be
RPL 06-6-0217, Department of Health & Social Services, Senior
and Disabilities Services, General Relief/Temporary Assisted
Living Client Functional Assessment.
9:26:18 AM
DUANE MAYES, Director, Division of Senior and Disability
Services, Department of Health & Social Services, explained the
General Relief Assistance (GRA) Program has been in existence
since 2004-2005, and within the Division of Senior and
Disability Services is the component "Adult Protective Services
(ATS)" that protects the vulnerable senior population throughout
the state. He offered that when the division receives a report
of harm, it is investigated, and the division then confirms the
individual is at risk. Subsequent to the confirmation of risk
and the agreement of the individual, the division will remove
the individual from that location and place them into an
assisted living home under the General Relief Assistance (GRA)
Program. He described it as an emergent need, a safety net, for
vulnerable populations. He explained, the division then
develops an exit strategy to either return the individual where
they came from, or to other locations. Over time, the division
has taken in referrals into the general relief program from the
Alaska Psychiatrist Institute (API), the Department of
Corrections, and the Office of Public Advocacy (OPA). He
described the program as a general relief program with $8.1
million in funding last year, and through the last session and
governor's budget the program took an approximate $800,000
reduction, approximately nine percent. He advised the division
is working with Behavioral Health and the Alaska Housing Finance
Corporation to develop this proposal that was approved through
HUD, the "811" program, to increase exit strategies for
individuals on general relief into permanent supportive housing.
He noted that the program they have is temporary in nature.
There are approximately 600 individuals currently on general
relief and with the "811" project paying subsidies, the division
would remove approximately 60 individuals from general relief
and place them into permanent supportive housing entities
throughout the state within the first year.
9:30:00 AM
MR. MAYES noted that in order to do that, the division must "get
a handle" on the 600 individuals currently in the program. The
process of an individual entering the program includes reviewing
an application and medical documentation, but a comprehensive
functional assessment and housing survey is necessary to clearly
understand their needs in order to develop an appropriate exit
strategy.
9:30:40 AM
CHAIR HAWKER pointed out the Mr. Mayes did not state what he was
asking for.
MR. MAYES replied that the amount requested is Mental Health
Trust Authority Authorized Receipts (MHTAAR) funding through the
Alaska Mental Health Trust in the amount of $175,000. He
explained the purpose of the money is to hire a contractor to be
trained in a Daily Living Activities 20 (DLA) tool that has been
validated, verified, and actualized by the State of Georgia. He
further explained the division would use this tool to perform
the 2-3 hour comprehensive assessment, and the results will give
the division information necessary to make appropriate
referrals. He reiterated it is a one-time only request for
$175,000 through the Alaska Mental Health Trust Authority. Once
the approximate 600 assessment results are accomplished, the
division will have the capacity internally to perform on-going
assessments using that tool. He expressed that the growth of
the vulnerable population continues to rise, and the division is
challenged to accomplish 600 assessments.
9:32:30 AM
SENATOR HOFFMAN requested, of the 600 individuals, where they
are located throughout the State of Alaska.
MR. MAYES opined that 70-80 percent of the individuals are
located in urban areas such as Southcentral Alaska and
Fairbanks, with a smaller percent in rural Alaska. He said the
contract would be to assess all of the individuals throughout
the state.
9:33:03 AM
CHAIR HAWKER surmised that Mr. Mayes is asking for receipt
authority for a new other fund source of $175,000 to complete
this activity. Chair Hawker pointed out that the senior
services disability allocation within the budget is $17.9
million, of which Mr. Mayes has authority to administratively
shuffle money as necessary. He questioned whether $175,000 can
be found anywhere in the $17.9 million budget.
MR. MAYES responded that there are other components, such as the
home community based services waiver, and the personal care
attendant program where every year the individual is assessed to
determine ongoing needs. He described the division as
"challenged" by the growth, and over the years there was a
backlog on its ability to keep up with the assessments, and the
division currently has 17 assessors. He said the division had
to get "lean and mean" and revisit its structures, review
existing tools, and attempt to streamline. He offered that the
division is "hanging on" trying to deal with all of the volume
and different components. He said his response to the question
is that "we have a challenge to be able to keep up with all of
this work."
CHAIR HAWKER advised Mr. Mayes that he did not answer the
question and restated, "you cannot find $175,000 in your almost
$18 million budget to cover this additional cost of a new
contractor."
MR. MAYES deferred to Jacquelli Ziegenfuss.
9:35:27 AM
JACQELLI ZIEGENFUSS, Administrative Operations Manager, Division
of Senior and Disabilities Services, Department of Health &
Social Services, [Available for questions.]
CHAIR HAWKER reiterated that this is a request for $175,000 of
new receipt authority in order to hire a third-party contractor
to conduct certain assessments. He pointed out that the Senior
and Disabilities Services overall budget allocation is
$17,926,800, and asked "do you not have capacity somewhere in
that nearly $18 million to come up with and find a way to shift
$175,000 to this project if it's of sufficient priority?"
MS. ZIEGENFUSS opined that the division does not have sufficient
authorization given the reductions that occurred for FY16, as
this is a GF program. She said the assessments for several of
the waiver components have a federal component; therefore, the
division receives a 50 percent federal match, which the division
would not be able to utilize federal dollars in initiating the
contract for the general relief assessments.
9:37:26 AM
CHAIR HAWKER asked for clarification of her statement that "if
we accept this money from another receipt authority and it's not
general funds, we lose 50 percent federal reimbursement that we
would get if we found some way to reallocate some general funds
for this?"
MS. ZIEGENFUSS answered no, she clarified the other assessments
for the waiver programs are for Medicaid services; therefore, 50
percent federal match is received. She said these assessments
are different in that the division is assessing clients of a
pure GF program; therefore, the division would not receive a
federal match. She explained that were the division to re-
shuffle, in essence, it would be losing the match.
CHAIR HAWKER again restated the question, "do you have within
your $18 million appropriation, or even within Senior and
Disabilities Services, that you have the administrative latitude
to allocate as you choose, do you have $175,000 that you can
find to re-prioritize to this activity?"
MS. ZIEGENFUSS answered that it would require re-prioritizing
within the division.
CHAIR HAWKER said she is correct.
MS. ZIEGENFUSS responded that the division does not have funds
available that have not already been allocated so ...
9:39:24 AM
CHAIR HAWKER interjected that she made two statements of fact,
and asked her to draw a conclusion from those statements.
MS. ZIEGENFUSS answered no.
MR. MAYES added that as a result of where the division is today
compared to last year, the staff was reduced by 24 positions and
consequently all of the functions of the 24 staff are absorbed
within the division. He said the division is doing business
lean and attempting to reconfigure how it will meet workload
demands. He said he would like to respond that the division
could probably find [$175,000], but it is looking at all of the
division's components to determine whether additional funding
can be found to meet needs throughout the division.
9:40:54 AM
SENATOR MACKINNON asked whether the 24 positions he referred to
were all filled positions and asked him to give the committee an
idea of actual workload transition. She acknowledged that his
team works very diligently to accomplish services important to
each Alaskan.
MR. MAYES responded that the 24 positions were filled, and noted
that for a long time he will remember meeting individually with
each of the individuals to give them their pink slip.
9:42:09 AM
SENATOR MACKINNON surmised that individuals were hired to
process applications for Medicaid expansion.
MR. MAYES said the 24 position were throughout the division and
some were "that, yes," and others within the Quality Assurance
unit ... with a variety of components, two positions within the
Child Protective Services unit, and scattered throughout the
division.
9:42:49 AM
SENATOR MACKINNON noted that Mr. Mayes let 24 go, and asked how
many individuals were then hired to implement Medicaid
expansion, because that was a choice. She opined that some
legislators said it was a choice that would impact seniors and
people with disabilities.
MR. MAYES questioned whether Senator MacKinnon was speaking to
bringing on additional positions for Medicaid expansion.
SENATOR MACKINNON asked whether she was correct in stating that
this administration did that.
MR. MAYES said, that's correct.
SENATOR MACKINNON inquired as to whether it was more or less
than 24 positions.
MR. MAYES advised that he could not answer that question.
9:43:32 AM
CHAIR HAWKER pointed out that the roll of the Legislative Budget
and Audit Committee is advisory, and that Mr. Mayes has the
authority after 45 days of submitting notice to the committee of
the RPL to move forward and do with the RPL as [the
administration] will, regardless of the committee's opinion. He
asked whether Mr. Mayes would commit to respecting the opinion
of this committee in not going forward should the committee not
approve it today.
MR. MAYES said he was not aware that after a certain number of
days the division can move forward with the RPL regardless of
the decision made today.
CHAIR HAWKER expressed surprise that Mr. Meyer was not aware of
the process by which Medicaid expansion occurred.
MR. MAYES said he was stating "what I know."
9:44:34 AM
REPRESENTATIVE PRUITT asked if there is someone who can speak to
this. He referred to a memo from Legislative Legal and Research
Services, page 1, paragraph 3, referencing a statute that
provides for an increase of an appropriation item based on
additional federal or other program receipts, and said that in
this case, the discussion does not pertain to federal funds,
which was the Medicaid expansion. He asked whether this RPL,
being from the Mental Health Trust Authority, then falls within
the designation of other program receipts.
CHAIR HAWKER advised Representative Pruitt that the answer to
his question is, yes.
9:45:21 AM
MEGAN WALLACE, Attorney, Legislative Legal and Research
Services, Legislative Affairs Agency, responded that Chair
Hawker is correct, the Mental Health Trust Authority Authorized
Receipts (MHTAAR) funds are considered program receipts and;
therefore, are subject to the RPL process.
REPRESENTATIVE PRUITT surmised that if this were general fund
money that wouldn't be the case.
MS. WALLACE answered, that is correct.
REPRESENTATIVE PRUITT asked whether statutorily designated
receipts of programs such as, DNR forestry with certain
designated receipts ... if it was an expansion of that program
and utilizing those receipts, would the committee have the
ability to say yes or no, and then after 45 days could the
governor approve the utilization of those monies.
MS. WALLACE explained that if the additional program receipts
referred to had not already been appropriated then yes, he would
be able to utilize that program. Although, she noted the
legislature does already appropriate some program receipts in
the budget so it would have to be additional program receipts
received that the legislature did not anticipate or previously
appropriate.
9:47:08 AM
REPRESENTATIVE PRUITT surmised that the only thing the governor
cannot override the legislature on, after 45 days, is
specifically general fund money. He further surmised that
should the governor find it in "some other pocket" he can use
it.
MS. WALLACE stated as long as it is federal or other program
receipts that have not previously been appropriated then, yes,
he can make the request through the RPL process. She offered a
caveat that each RPL must be taken as they come and examine each
one, but generally yes, that is correct.
9:47:52 AM
REPRESENTATIVE KITO referred to the $175,000, and noted that
should the department attempt to receive that money from another
portion of the division, that would mean $175,000 of matched
funding for federal Medicaid receipts would not be available and
thereby turning back another $175,000 of Medicaid receipts. He
said with regard to additional program receipts, the legislature
doesn't always anticipate all of the available program receipts
for various programs. In the event more money is received than
anticipated, he pointed out, that this process provides the
opportunity to consider that money and then allow for that money
to be utilized to provide state services." He noted, that for
clarification should the division take $175,000 out of another
place in the division, it would jeopardize "our" ability to
bring in some federal Medicaid receipts. Representative Kito
asked whether he was correct.
MR. MAYES deferred to Jeff Jesse.
9:49:29 AM
JEFF JESSE, Chief Executive Officer, Alaska Mental Health Trust
Authority, Department of Revenue, in response to Representative
Kito's question, advised it is a question for the fiscal folks.
9:49:46 AM
SENATOR MACKINNON stated her question goes to Medicaid expansion
and asked how the legislature can, in the next round, have
confidence in the numbers Mr. Jessee brings forward for his
receipt authority. She questioned how Medicaid expansion was
funded and the administrative costs, without coming to this
committee to ask for that transfer, and also making $175,000
available for something else. She further asked what is
remaining, are more funds available to do other things that the
legislature may have wanted to weigh in on as far as utilizing
those for other benefits the Trust's beneficiaries may need.
MR. JESSE referred to Medicaid expansion and explained that the
trustees recognized the challenges that the state would face in
implementing Medicaid expansion. He offered their belief that
on the whole there would be a net financial benefit not only to
the state, but to "literally" thousands of the Trust's
beneficiaries who would become eligible under Medicaid
expansion. He pointed out that in an effort to assist, the
trustees authorized the first year administrative expenses as a
way of making the first year a no-cost effort with the idea that
the savings that would come from expansion would then offset
ongoing administrative expenses. For example, within the
Department of Corrections, he personally reviewed the number of
eligible inmates, under expansion, that should an inmate go into
a hospital for 24-hours or more, would the cost be paid by the
Medicaid program, as opposed to currently being paid 100 percent
by GF. He expressed confidence that after looking at the data
there would be a hard savings of at least $5 million, so the
trustees made the administrative expenses funds available, which
was discussed during the session as various bills moved through
the process. During the special session the board's view was
that the trustees made that money available if the state chose
to move forward with expansion and pursue making these folks
eligible and trying to improve services and save money over the
long run. He pointed out that how the state made that decision
was a political decision, in the board's view, involving the
legislature and administration with many discussions and
disagreements. He related that it was not the board's job to
weigh in on one side or the other on that larger political
debate. He remarked that if the court had told the state it
couldn't move forward with expansion, the Trust's money would
not have been available ...
9:53:53 AM
SENATOR MACKINNON related that the question she had asked was,
where the board found new money to make available after the
legislature did not act on Medicaid. She asked how many more
receipts are still available to be distributed based on what Mr.
Jessee presented to the legislature, which was a very different
picture on his allocation of receipts.
CHAIR HAWKER additionally requested the Mr. Jessee include a
brief summation of how the Mental Health Trust Authority
operates, and the legislature's jurisdiction over the funds.
MR. JESSEE advised that the board operates with an asset
management policy that is a percentage of market value entity,
as to its cash assets that are primarily in the permanent fund
with a small portion of reserve income ...
CHAIR HAWKER interjected that those funds are managed by the
permanent fund, and that Mr. Jessee must be careful in his
description of the permanent fund.
MR. JESSEE clarified that the Trust's cash funds, the corpus,
are managed by the Alaska Permanent Fund Corporation as it is
similar to a mutual fund in that it pays its share of expenses
and it receives its share of their profits or loss. The Trust
distributes money from that corpus on a percentage of market
value basis, 4.25 percent per year, which goes into a pool
available in the following year for administrative expense and
the programmatic expenses of the mental health program. In
addition, he advised, the Trust land office generates income
from its natural resources and lands which is added to the
payout from the permanent fund, additionally there are smaller
sources of funds coming in each year. The trustees have the
ability to spend that money without a legislative appropriation
directly making grants to entities in the state, he explained.
However, he noted, should the board work through a state agency,
it must have receipt authority in order to receive and expend
those funds, which are Mental Health Trust Authority Authorized
Receipts (MHTAAR). He explained that the legislature is not
appropriating trust funds, they are authorizing the receipt of
those funds, such as federal funds. Each year the trustees make
budget recommendations based upon its focus areas,
collaborations with other state agencies, or legislative
initiatives. He offered that during their September meeting,
where the budget is set out, the trustees generally do not
allocate 100 percent of the projected available income. He said
the board usually holds back anywhere from $600,000 to $1
million out of approximately $24 million for a variety of
reasons. For example, he said, it may be during conversations
with the Office of Management & Budget that an administration
would like to pursue an initiative and would like help from the
Trust, and due to the unallocated funds the trustees are able
upon occasion to assist. Similarly within the legislative
process last session, within the discussions of reducing
recidivism the board offered $125,000 of MHTAAR, with $125,000
of GF, to fund the Alaska Criminal Justice Information Center.
Normally, he noted, because it is a state function the trustees
can only fund it for a certain period of time, but the trustees
did not make that condition for the Alaska Criminal Justice
Information Center due to the state's fiscal crisis and the fact
that this function must continue for some length of time. He
said that general relief is a good example of a well-intentioned
program funded exclusively with general funds. In the board's
view, it has become a default program to put people in to get
them housing. He questioned when general funds are reduced in
what manner will those people be served, and advised that the
board spoke with the department regarding the reduction of
services ...
10:02:33 AM
SENATOR MACKINNON interjected that Mr. Jessee advised the
committee that the board sets aside $600,000 to $1 million in
unallocated money. She then requested the specific amount the
board allocated for administrative costs [for Medicaid
expansion] that she believed was $1.4 million, which is in
excess of the money he told the committee was available. She
again asked where the funds came from, and how much more
unallocated money is available.
MR. JESSEE advised that in addition to the payout the trustees
make each year, the trustees also have an obligation to
inflation proof and in any given year the trustees consider the
earnings from the permanent fund and how those funds compare to
the 4.25 [percent] payout. He commented that a challenge is
that it is a perpetual trust; therefore, they cannot go into the
principal of the fund. As a result, an income reserve was set
up of four times that payout for the years the permanent fund
returns are less than the 4.25 percent payout. In years the
permanent fund is greater than 4.25 percent, the first step is
filling the reserve to 400 percent, and the second step is
inflation proofing. Over time the board tracks inflation
proofing and when the reserve is fully funded, and the principal
fully inflation proofed, the trustees can review the payout for
a potential increase. For example, he said, when the Trust
started in 1995 the payout was 3 percent, and after funding the
reserve, inflation proofing the original $200 million, over the
years increased the payout to 4.25 percent. He explained that
last year, the excess above the payout and reserve was roughly
$30 million, yet approximately $38 million is needed to catch up
with inflation proofing.
10:07:08 AM
MR. JESSEE advised that the trustees determined that the purpose
of inflation proofing is to protect future beneficiaries by
ensuring that the principal continues to provide resources for
the mental health program then, and not overcommit to the
current year's beneficiaries. He stated that when the trustees
discussed Medicaid expansion they determined that $30 million
was available for inflation proofing, so the $1.4 million is
coming out of the additional income above the payout and above
filling the reserve that would be available for inflation
proofing. He commented that the board's argument is that
getting "literally" thousands of beneficiaries covered by health
insurance now is more valuable to future beneficiaries than what
$1.4 million put into the permanent fund for inflation proofing
would generate over that future timeframe. He conveyed that it
is an "unusual" action on the part of the trustees, based upon a
unique opportunity to protect thousands of beneficiaries for a
long time to come. He reiterated that the $1.4 million is
coming out of that additional funds available for inflation
proofing, and it leaves the Trust with, instead of approximately
$8 million short of fully inflation proofing the fund it is
approximately $9.4 short. He pointed out that when reviewing
the macro level, as the fund revenue and expenses change over
time, is a very small percentage of the overall fund. Another
reason the trustees took money from that fund was to preserve
the unallocated funding and assist such projects as the Alaska
Criminal Justice Information Center and this particular RPL, he
explained.
10:10:03 AM
SENATOR MACKINNON stated that Medicaid expansion was a policy
choice and not a political choice, in that this administration
chose from a policy perspective to expand Medicaid and it had
nothing to do with politics. She said, "It is a policy decision
and it is not political."
MR. JESSEE apologized and advised he meant "political" in the
sense of a separation of powers decision, not that it was
partisan. There are two branches of government that had to
figure out whether the state would move forward, and the board
is just trying to protect the beneficiaries.
10:11:39 AM
SENATOR HOFFMAN surmised the $1.4 million was taken out of
inflation proofing and not out of a combination of the
unallocated $600,000 to $1 million.
MR. JESSEE answered yes, it was taken out of what was available
for inflation proofing.
SENATOR HOFFMAN asked whether Mr. Jessee is asking this
committee to spend $175,000 out of the unallocated portion of
$600,000 to $1 million.
MR. JESSEE said yes that's correct, in order to avoid a short
term reduction in service. He said the board noted that if the
division had to get this one-time funding out of the rest of the
program it would reduce direct services, and since it is an
administrative function the board would rather supply those
funds than have the services to the beneficiaries reduced.
SENATOR HOFFMAN surmised that the decision to spend $1.4 million
was the board's decision, and the [$175,000] must be allocated
by this committee.
10:13:15 AM
REPRESENTATIVE PRUITT referred to the prior inflation proofing
testimony, and said it appears to be over several years that the
$30 million has been built up.
MR. JESSEE responded no, actually that's in the last year.
REPRESENTATIVE PRUITT asked whether that becomes part of the
principal.
MR. JESSEE answered that it has in the past, but the trustees
have started to put that into a "nominal designation," and for
accounting purposes it is considered part of the principal, "but
it's not," it is in a category where the trustees could access
it if necessary. He described it as a hybrid between income and
principal, because once it's in the principal the trustees
"can't get at it."
10:14:30 AM
REPRESENTATIVE PRUITT surmised that the [trustees] have been
given the leeway to manage that, in terms of whether they have
the ability to touch it at a future timeframe. Or, he
questioned, is it like the permanent fund where the legislature
places the inflation proofing and it goes into the principal and
is not available for appropriation to the legislature. He posed
the question, for money from the Mental Health Trust Authority
to be expended does it have to have the approval of the board or
can the administration utilize that money without going through
the board.
MR. JESSEE replied, "Absolutely not," the governor and/or the
legislature cannot expend Trust funds without the approval of
the board of trustees.
10:15:44 AM
REPRESENTATIVE PRUITT opined that as the state moves forward in
the next couple of years every department, including the
Department of Health & Social Services, will feel a pinch. He
expressed concern that, with the legislature being the board of
directors of the state reviewing the finances of the state,
potentially there will be money available out there to be
expended and [yet] the legislature does not have the ability to
say whether it is an appropriate utilization for the state. He
reiterated that because things are changing as a state, it
appears there is potentially a lot of money out there available
to utilize in manners that the legislature may feel is different
from the direction it wants to go.
MR. JESSEE offered that Representative Pruitt's point is "right
on," and the flip side is the opportunity the state,
legislature, and administration have to work with the trustees
to further what the legislature would like to see accomplished.
Frankly, he pointed out, this RPL is part of that as the
legislature wants to reduce the cost for this general relief
program. Therefore, he related, the board is offering to assist
by paying for an assessment of the 600 people in the program to
determine what they need, whether there is a cheaper alternative
to serve them, whether other funding sources can be accessed,
and whether there is a manner in which to reform this program so
not only will the current reductions not harm beneficiaries, but
future reductions can be achieved. It's a two-edged sword, he
described, in that there is an opportunity for the legislature
to work with the board as well, which is why under the
settlement the trustees make recommendations to the legislature.
In the event the legislature does not agree, the legislature
writes a letter to the Trust every year to explain why the
legislature did not follow the proposals of the trustees, and
what the legislature would like to see done differently. He
explained that direct feedback from the legislature and/or
governor is an important part of the settlement and offered that
the board welcomes the opportunity to be full partners in the
reform and budget reduction future Alaska faces. For example,
he pointed out, the trustees funded the contract for the
Department of Health & Social Services to review reform in the
Medicaid program because if that program is not reformed it will
not be sustainable. He stated that when it collapses of its own
weight, if something is not done collectively the beneficiaries
are harmed. He said, "We're very wanting to work
collaboratively with the legislature because that's the only way
our beneficiaries are going to be successful in the coming
challenges that we all face."
10:19:30 AM
REPRESENTATIVE PRUITT said he appreciates that but it still gets
to the point of, there's always a reason to spend money, there's
always a good program, and almost everything in the Department
of Health & Social Services is a good reason. He highlighted
that the issue is that there is a growing amount of money, and
if the legislature feels it is not the direction to go forward,
the trustees have the ability to disagree with the legislature.
The trustees can continue in their direction with a growing pot
of money based on the fact that the trustees chose to not put it
in the principal of the fund, he stated. He expressed
hesitation in that it is still the legislature's ability to make
policy related to health and social services but, "I wouldn't
say that it's been ... there's the ability to go around it or
that it is being done, but I think there's the potential there."
10:20:58 AM
SENATOR HOFFMAN commented that there are many entities in Alaska
that do not fall under the Executive Budget Act that the
legislature does not have control over funds. He noted that
this fund is even further ... the legislature decides which ones
they are and are not under, but the Mental Health Trust
Authority Fund is even further protected because it is a
settlement under a lawsuit against the state.
MR. JESSEE agreed with Senator Hoffman, and said he understands
the Medicaid expansion is very controversial, and described
various prior opportunities wherein the partnership between the
Trust and the State had been mutually beneficial for many, many
years. Notwithstanding the issues around Medicaid expansion, he
opined that this system has worked well to everyone's mutual
benefit and would like to continue to in the future.
10:23:10 AM
CHAIR HAWKER stressed he would like to make clear that the
Mental Health Trust Authority and the money, land, and resources
the Trust possesses was established as a result of the finality
of a lengthy lawsuit decided by the Alaska Supreme Court.
MR. JESSEE answered that is correct.
CHAIR HAWKER surmised that the money and those assets were in
fact, although the Trust is a government entity, specifically by
the results of that settlement completely removed from the
control of the legislature.
MR. JESSEE responded yes, with the exception that the trust's
administrative budget, salaries, must be approved by the
legislature to prevent empire building its administrative
structure.
CHAIR HAWKER commented that it is only by choice that the Trust
provides program funds on behalf of its beneficiaries through
the legislature's budget.
MR. JESSEE said that is correct, and pointed out that even
though the Trust makes grants outside of the budget process, it
has a priority to work in conjunction with the legislature and
administration because it does not want to create a separate
mental health program when it is trying to integrate a
comprehensive mental health program. He noted that in this
case, the Trust could have probably assessed these people, but
this is a departmental function because it manages the program.
He explained the Trust is trying to transition from a GF
dependent system of care to a system of care that is more
efficient, effective, and cost less GF.
10:26:26 AM
CHAIR HAWKER expressed the importance of the legislature
confirming members of the Mental Health Trust Authority Board of
Trustees as it is the authority the legislature has over this
agency and once a member is confirmed, they are in the decision-
making role. He noted that occasionally the legislature
overlooks the people appointed to this agency in how truly
important the role is that they play in the State of Alaska.
REPRESENTATIVE PRUITT expanded that while he understands the
Mental Health Trust Authority's separation, its independence,
and what it was made for, the [concern] is that there is an
entity with the potential to move the legislature and move the
direction of policy. As Chair Hawker highlighted, he said, the
department is the one that will move forward and do it. In the
event there is approval by the trustees and acceptance by the
administration, outside of the legislative process, it
essentially has the ability to make a state agency accept and
move forward on a program the legislature did not initially feel
was the direction it wanted to go - for example, Medicaid
expansion. He described it as an interesting dynamic with what
the institution has and why it is important to not overlook
appointees to the various boards.
10:28:40 AM
REPRESENTATIVE SADDLER referred to Mr. Jessee's statement that
the $1.4 million expenditure was "unusual," and asked whether
there has been precedent in which the trustees have decided to
use money instead of inflation proofing and restoring the short
fall for any other policy priorities. He questioned whether the
Trust expects to do this type of transaction more often, what
criteria is used, or is this the first time it has happened.
MR. JESSEE opined it may have happened in the past and couldn't
recall the circumstances, but the description is accurate that
it would be an extraordinary situation where the trustees would
look at doing that. The reason being that the system is set up
in its normal course to run differently and, he added, under the
settlement inflation proofing is discretionary on the part of
the board such that, income from the Trust may be used to
inflation proof. He said the trustees have taken the position
that in the long run their fiduciary duty to future
beneficiaries does require them to prioritize using income for
inflation proofing. He said he believed the same is true with
the permanent fund but was unsure.
CHAIR HAWKER stated that Mr. Jessee is correct, which is why the
legislature separately appropriates inflation proofing into the
permanent fund each year from the available permanent fund
receipts.
10:30:45 AM
DAVID TEAL, Director, Legislative Finance Division, Legislative
Affairs, said the department referred to options in the RPL
under Home and Community Based Services Medicaid Reform
(1915(i)(k)) of the federal code. He stated the options appear
to be irrelevant to this RPL because they are not effective
until FY18. He advised that the point does no harm to this RPL
which is for immediate money to perform assessments to determine
eligibility for housing assistance under AHFC 811 grants and
that program may start as early as November with the assessments
and housing some time later. He noted the real question was
something that wouldn't have come up until recently when there
are decrements in the budget. In the event there had been no
decrements this RPL probably would have not raised technical
questions. However, the governor and legislature did cut this
program from the general fund of approximately $800,000, which
lead the division to question whether adding money back to the
program would make it appear that this committee was overriding
the will of the legislature. He referred to a 10/1/15 memo from
Legislative Legal and Research Services wherein it concluded the
RPL was a valid request because the request for funding was
MHTAAR receipts, and the cut was general funds. Although, the
legislature indicated it wanted to cut the program, there was no
clear indication the cut was a desire to cut the services as
opposed to simply a pressure to reduce the budget. Due to the
fact these are a different source of funds not available to the
legislature at the time the budget was reviewed, they then
appear as additional program receipts making it a valid RPL.
Given that, he pointed out, the technical issues go away but
clearly there are [two sides of the coin here], and it is purely
a decision by the committee.
10:34:30 AM
CHAIR HAWKER offered that the issue the committee is facing is
that there is clearly a legally valid RPL from the
administration, and the concerns raised by Legislative Finance
are also quite legitimate. He said, "If we approve this RPL are
we contradicting the intent the finance committees." He asked
what the committee wants to do, and is the action it takes
something that would be condoned, or not condoned, by the larger
legislature that the committee represents.
MR. JESSEE disagreed with the statement that 1915(i)(k) is not
relevant to the RPL because the issue is reform moving forward
and the necessity of assessing 600 people to determine how to
shape reform to get them served while minimizing the draw on
general funds. He explained that in the short run he would
agree, but it is part of a longer term reform strategy to
understand more of what these people need and what they might be
eligible for that would reduce general funds.
10:36:32 AM
MR. TEAL agreed with Mr. Jessee, and said he did not mean to
imply that they were irrelevant to this RPL because the RPL
process is typically seen as a short-term [issue] that the
legislature did not have a chance to address. He added that the
1915 options, because they are available beginning FY18, one
would expect the full legislature to deal with the issue and the
long-term reform aspects. The RPL itself deals only with the
AHFC program, he explained.
10:37:17 AM
SENATOR HOFFMAN added that the $800,000 cut is still in effect
and the additional funds [$175,000] are one-time funds, and he
could not see how this effects the adopted legislative budget.
10:37:40 AM
The committee took an at-ease from 10:37 to 10:47 a.m.
10:47:45 AM
CHAIR HAWKER offered appreciation for the committee's
participation in the discussions that flushed out a solid
grounding for a decision and asked Senator MacKinnon for a
motion.
10:48:11 AM
SENATOR MACKINNON moved and asked unanimous consent that the
committee approve the following RPL:
06-6-0217 Department of Health & Social Services,
Senior and Disabilities Services, General
Relief/Temporary Assisted Living Client Functional
Assessment $175,000 Mental Health Trust Authority
Authorized Receipts as an operating budget item.
CHAIR HAWKER announced that seeing no objection, RPL 06-6-0217
was approved.
^EXECUTIVE SESSION
EXECUTIVE SESSION
10:48:57 AM
CHAIR HAWKER announced the next order of business would be an
executive session.
10:49:09 AM
SENATOR MACKINNON moved and asked unanimous consent, that the
Legislative Budget and Audit Committee enter into executive
session under AS 24.20.301 to discuss confidential performance
review reports.
CHAIR HAWKER announced that seeing no objection, so ordered.
10:49:34 AM
The committee took an at-ease from 10:49 a.m. to 4:05 p.m.
4:05:31 PM
CHAIR HAWKER brought the committee back to order at 4:05 p.m.
Representatives Kito, Olson, and Hawker and Senators Giessel,
Hoffman, and MacKinnon were present at the call to order.
^RELEASE OF PERFORMANCE REVIEWS
RELEASE OF PERFORMANCE REVIEWS
4:06:43 PM
SENATOR MACKINNON moved the committee to release the Department
of Health & Social Services preliminary performance review
reports to the agency for response: behavioral health, long-
term care, and administrative structure.
4:07:12 PM
CHAIR HAWKER advised the question before the committee is moving
the three preliminary reports: behavioral health, long-term
care, and administrative structure to the agency for its
comment. There being no objection, it was so ordered.
4:07:38 PM
CHAIR HAWKER ascertained there was no additional business before
the committee.
4:07:51 PM
ADJOURNMENT
There being no further business before the committee, the
Legislative Budget and Audit Committee meeting was adjourned at
4:07 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| Agenda_LBA_7Oct15.pdf |
JBUD 10/7/2015 9:00:00 AM |
|
| 2015-10-07_RPLCompletedPacket.pdf |
JBUD 10/7/2015 9:00:00 AM |