Legislature(2003 - 2004)

03/17/2003 01:50 PM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                  HOUSE FINANCE COMMITTEE                                                                                       
                       March 17, 2003                                                                                           
                          1:50 PM                                                                                               
                                                                                                                                
TAPE HFC 03 - 34, Side A                                                                                                        
TAPE HFC 03 - 34, Side B                                                                                                        
                                                                                                                                
CALL TO ORDER                                                                                                                 
                                                                                                                                
Co-Chair Williams called the House  Finance Committee meeting                                                                   
to order at 1:50 PM.                                                                                                            
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative John Harris, Co-Chair                                                                                            
Representative Bill Williams, Co-Chair                                                                                          
Representative Kevin Meyer, Vice-Chair                                                                                          
Representative Mike Chenault                                                                                                    
Representative Eric Croft                                                                                                       
Representative Mike Hawker                                                                                                      
Representative Bill Stoltze                                                                                                     
Representative Richard Foster                                                                                                   
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Representative Reggie Joule                                                                                                     
Representative Carl Moses                                                                                                       
Representative Jim Whitaker                                                                                                     
                                                                                                                                
ALSO PRESENT                                                                                                                  
                                                                                                                                
Former Senator  Sean Parnell, Director, State  and Government                                                                   
Relations,  ConocoPhillips  Alaska,  Inc.,  Jaqueline  Tupou,                                                                   
Staff,  Senator   Lyda  Green,   Devon  Mitchell,   Executive                                                                   
Director,  Alaska Municipal Bond  Bank Authority,  Department                                                                   
of Revenue,  Elmer Lindstrom,  Special Assistant,  Department                                                                   
of Health and Social Services.                                                                                                  
                                                                                                                                
PRESENT VIA TELECONFERENCE                                                                                                    
                                                                                                                                
None                                                                                                                            
                                                                                                                                
SUMMARY                                                                                                                       
                                                                                                                                
HB 16     "An Act amending the standards applicable to                                                                          
          determining whether, for purposes of the Alaska                                                                       
          Stranded Gas Development Act, a proposed new                                                                          
          investment constitutes a qualified project, and -                                                                     
          repealing  the deadline  for applications  relating                                                                   
          to  the development  of contracts  for payments  in                                                                   
          lieu of taxes and for  royalty adjustments that may                                                                   
          be submitted for consideration  under that Act; and                                                                   
          providing for an effective date."                                                                                     
          CS HB 16 (FIN) was REPORTED out of Committee with                                                                     
          a  "do  pass" recommendation  and  with  previously                                                                   
          published  fiscal impact note  (CED #1), and  a new                                                                   
          fiscal impact note by the Department of Revenue.                                                                      
                                                                                                                                
SB 51     "An Act relating to revenue bonds issued by the                                                                       
          Alaska Municipal Bond  Bank Authority and the total                                                                   
          amount  of  bonds  and notes  outstanding  of  that                                                                   
          authority; and providing for an effective date."                                                                      
                                                                                                                                
          SB 51 was REPORTED out of Committee with a "do                                                                        
          pass"  recommendation   and  with   two  previously                                                                   
          published zero fiscal notes:  REV #1 and DCED #2.                                                                     
                                                                                                                                
SB 78     "An Act relating to an optional group of persons                                                                      
          eligible   for  medical   assistance  who   require                                                                   
          treatment for breast  and cervical cancer; relating                                                                   
          to  cost  sharing  by those  recipients  under  the                                                                   
          medical  assistance program;  and providing  for an                                                                   
          effective date."                                                                                                      
                                                                                                                                
          SB  78  was  REPORTED  out of  Committee  with  "no                                                                   
          recommendation"  and  with a  previously  published                                                                   
          fiscal impact note:  HSS #1.                                                                                          
                                                                                                                                
HOUSE BILL NO. 16                                                                                                             
                                                                                                                                
     "An   Act   amending   the   standards   applicable   to                                                                   
     determining   whether,  for   purposes  of  the   Alaska                                                                   
     Stranded Gas Development  Act, a proposed new investment                                                                   
     constitutes  a  qualified  project,  and  repealing  the                                                                   
     deadline  for applications  relating to the  development                                                                   
     of  contracts for  payments  in lieu  of  taxes and  for                                                                   
     royalty   adjustments   that   may  be   submitted   for                                                                   
     consideration  under  that  Act; and  providing  for  an                                                                   
     effective date."                                                                                                           
                                                                                                                                
Co-Chair Williams   began   discussion  on   the  bill,   and                                                                   
introduced  the Sponsor.   He indicated  that discussion  had                                                                   
previously occurred on Amendment  #2, 23LS0101/Q3, introduced                                                                   
by Representative Whitaker on 10/10/03.                                                                                         
                                                                                                                                
REPRESENTATIVE  HUGH  FATE,  SPONSOR,   indicated  that,  per                                                                   
discussions   through   Representative    Whitaker's   staff,                                                                   
Representative   Whitaker  had  conveyed   that  he   had  no                                                                   
objection to  withdrawing Amendment #2.   Representative Fate                                                                   
referred  to  changes  proposed  in  a  subsequent  amendment                                                                   
(Amendment #3 -- 23 LS0101/Q.6).                                                                                                
                                                                                                                                
Co-Chair Harris noted  that the MOTION to adopt  Amendment #2                                                                   
was still pending.                                                                                                              
                                                                                                                                
A roll call vote was taken on the motion to adopt Amendment                                                                     
#2.                                                                                                                             
                                                                                                                                
IN FAVOR: Croft                                                                                                                 
OPPOSED: Chenault, Hawker, Meyer, Stoltze, Harris, Williams                                                                     
                                                                                                                                
Representatives Foster, Moses, Joule and Whitaker were not                                                                      
present for the vote.                                                                                                           
                                                                                                                                
The motion FAILED on a vote of 6-1                                                                                              
                                                                                                                                
Co-Chair Harris MOVED to ADOPT Amendment #3:                                                                                    
                                                                                                                                
                                                23-LS0101\Q.6                                                                   
                                                    Chenoweth                                                                   
                                                                                                                                
                     A M E N D M E N T                                                                                      
                                                                                                                                
OFFERED IN THE HOUSE                                                                                                            
     TO:  CSHB 16(RES)                                                                                                          
Page 1, line 8, following "terms;":                                                                                           
    Insert "providing a statement of intent for the Act                                                                       
     relating to reopening of contracts;"                                                                                     
                                                                                                                                
Page 1, following line 9:                                                                                                       
     Insert a new bill section to read:                                                                                         
     "* Section 1.  The uncodified law of the State of                                                                        
     Alaska is amended by adding a new section to read:                                                                         
          LEGISLATIVE INTENT.  It is the intent of the                                                                          
          legislature that each contract for payments in                                                                        
          lieu of taxes and for royalty adjustments entered                                                                     
          into under the Alaska Stranded Gas Development Act                                                                    
          contain a provision by which the contract may be                                                                      
          reopened by any party to the contract.  The                                                                           
          subject matter of the reopening may be dealt with                                                                     
          through the use of arbitration proceedings agreed                                                                     
          on by the parties."                                                                                                   
                                                                                                                                
Page 1, line 10:                                                                                                                
     Delete  "Section 1"                                                                                                      
     Insert "Sec. 2"                                                                                                          
                                                                                                                                
Renumber the following bill sections accordingly.                                                                               
                                                                                                                                
Page 2, line 29:                                                                                                                
     Delete "15"                                                                                                            
     Insert "10"                                                                                                            
                                                                                                                                
Page 2, line 31:                                                                                                                
     Delete "25"                                                                                                                
     Insert "15 [25]"                                                                                                       
                                                                                                                                
                                                                                                                                
Representative Croft OBJECTED.                                                                                                  
                                                                                                                                
Representative Fate  addressed the amendment.   He summarized                                                                   
that it intended to accomplish  three things:  change the net                                                                   
worth requirement for qualified  sponsors from fifteen to ten                                                                   
percent [of  the project cost],  change the available  credit                                                                   
requirement  from  twenty-five  to fifteen  percent  [of  the                                                                   
project  cost], and  add intent  language allowing  reopening                                                                   
provisions for payment contracts.                                                                                               
                                                                                                                                
Responding   to  a   question   from  Representative   Croft,                                                                   
Representative  Fate stated  that the  current cost  estimate                                                                   
for  the project  cost  was $9  billion,  and explained  that                                                                   
changing   the  net   worth  requirement   would  allow   the                                                                   
commissioner to  qualify more sponsors to participate  in the                                                                   
project.                                                                                                                        
                                                                                                                                
Representative  Croft  clarified   that  sponsors  previously                                                                   
needed $1.5  billion to  participate.   With the amendment  a                                                                   
sponsor    would   need    slightly    under   $1    billion.                                                                   
Representative  Fate confirmed  that  this  was true,  adding                                                                   
that the  figure might  vary depending  on how many  sponsors                                                                   
the commissioner qualified.                                                                                                     
                                                                                                                                
There being no Objection, Amendment #3 was ADOPTED.                                                                             
                                                                                                                                
Representative Croft MOVED to ADOPT Amendment #4:                                                                               
                                                                                                                                
                         AMENDMENT                                                                                            
     OFFERED IN THE HOUSE FINANCE COMMITTEE                                                                                     
     BY REPRESENTATIVE CROFT                                                                                                    
                                                                                                                                
     TO: CS HB 16 (RES)                                                                                                         
                                                                                                                                
     Page 3, line 7, insert:                                                                                                    
     "Sec. 4. AS 43.82.210 is amended to read:                                                                                
    AS 43.82.210. Contract Terms Relating to Payment in                                                                       
     Lieu of One or More Taxes.                                                                                               
    (a) If the commissioner approves an application and                                                                         
     proposed project plan under AS 43.82.140 , the                                                                             
     commissioner may develop proposed terms for inclusion                                                                      
     in a contract under AS 43.82.020 for periodic payment                                                                      
     in lieu of one or more of the following taxes that                                                                         
     otherwise would be imposed by the state or a                                                                               
     municipality on the qualified sponsor or member of a                                                                       
     qualified sponsor group as a consequence of                                                                                
     participating in an approved qualified project:                                                                            
    (1) oil and gas production taxes and oil surcharges                                                                         
     under AS 43.55;                                                                                                            
     (2) oil and gas exploration, production, and pipeline                                                                      
     transportation property taxes under AS 43.56;                                                                              
     (3) [Repealed, Sec. 6 ch 34 SLA 1999].                                                                                     
     (4) Alaska net income tax under AS 43.20;                                                                                  
     (5) municipal sales and use tax under AS 29.45.650 -                                                                       
     29.45.710;                                                                                                                 
     (6) municipal property tax under AS 29.45.010 -                                                                            
     29.45.250 or 29.45.550 - 29.45.600;                                                                                        
     (7) municipal special assessments under AS 29.46;                                                                          
     (8) a comparable tax or levy imposed by the state or a                                                                     
     municipality after June 18, 1998;                                                                                          
     (9) other state or municipal  taxes or categories of                                                                       
     taxes identified by the commissioner.                                                                                      
     (b) If the commissioner chooses  to develop proposed                                                                       
     terms under (a) of this section, the commissioner                                                                          
     shall, if practicable and consistent with the long-term                                                                    
     fiscal interests of the state, develop the terms in a                                                                      
     manner that attempts to balance the following                                                                              
     principles:                                                                                                                
     (1) the terms should, in conjunction with other factors                                                                    
     such as cost reduction of  the project, cost overrun                                                                       
     risk reduction of the project, increased fiscal                                                                            
     certainty, and successful marketing, improve the                                                                           
     competitiveness of the approved qualified project in                                                                       
     relation to other development efforts aimed at                                                                             
     supplying the same market;                                                                                                 
     (2) the terms should accommodate the interests of the                                                                      
     state, affected municipalities, and the project                                                                            
     sponsors under a wide range  of economic conditions,                                                                       
     potential project structures, and marketing                                                                                
     arrangements;                                                                                                              
     (3) the state's and affected municipalities' combined                                                                      
     share of the economic rent of the approved qualified                                                                       
     project under the contract should be relatively                                                                            
     progressive; that is, the state's and affected                                                                             
     municipalities' combined annual share of the economic                                                                      
     rent of the approved qualified project generally should                                                                    
     not increase when there are decreases in project                                                                           
     profitability, or decrease when there are increases in                                                                     
     project profitability;                                                                                                     
     (4) the state's and affected municipalities' combined                                                                      
     share of the economic rent of the approved qualified                                                                       
     project under the contract should be relatively lower                                                                      
     in the earlier years than  in the later years of the                                                                       
     approved qualified project;                                                                                                
     (5) the terms should allow the project sponsors to                                                                         
     retain a share of the economic  rent of the approved                                                                       
     qualified project that is sufficient to compensate the                                                                     
     sponsors for risks under a range of economic                                                                               
     circumstances;                                                                                                             
     (6) the terms should provide  the state and affected                                                                       
     municipalities with a significant share of the economic                                                                    
     rent of the approved qualified project, when discounted                                                                    
     to present value, under favorable price and cost                                                                           
     conditions;                                                                                                                
     (7) the method for calculating the periodic payment in                                                                     
     lieu of certain taxes under the contract should be                                                                         
     clear and unambiguous; and                                                                                                 
     (8) while cost calculations for the approved qualified                                                                     
     project under the contract should be based on amounts                                                                      
     that closely approximate actual costs, agreed-upon                                                                         
    formulas reflecting reasonable economic assumptions                                                                         
     should be used if possible to promote administrative                                                                       
     certainty and efficiency.                                                                                                  
     (c) Except as provided in (b) of this section, the                                                                         
     commissioner's discretion under this section in                                                                            
     developing proposed terms for a contract under AS                                                                          
     43.82.020 is not limited to consideration of the                                                                           
     economic rent of the approved qualified project.                                                                           
                                                                                                                                
        (d) Nothing in this chapter shall be construed to                                                                   
     permit the state to suspend or contract away the power                                                                 
     of taxation.                                                                                                           
                                                                                                                                
     Renumber accordingly.                                                                                                      
                                                                                                                                
                                                                                                                                
     The amendment is designed to increase certainty by                                                                       
     forestalling any argument or court challenges based on                                                                   
     the claim that there is some hidden escape hatch to the                                                                  
     sovereignty provision of the Alaska Constitution. If                                                                     
     the supporters of this legislation believe it really                                                                     
     requires a constitutional amendment, then they should                                                                    
     go that route, rather than creating all sorts of                                                                         
     uncertainty for future legislatures                                                                                      
                                                                                                                                
                                                                                                                                
Co-Chair Williams OBJECTED.                                                                                                     
                                                                                                                                
Representative  Croft   explained  that  the   amendment  was                                                                   
intended to support a clear prohibition  against signing away                                                                   
the State's  power of  taxation.  He  maintained the  need to                                                                   
clarify this constitutional mandate.                                                                                            
                                                                                                                                
Co-Chair Williams  asked if the  intent of the  amendment was                                                                   
to restate constitutional mandates.   He speculated that this                                                                   
might  be cumbersome  with other  legislation, and  disagreed                                                                   
with the need for the amendment.                                                                                                
                                                                                                                                
Representative Croft  maintained that rarely  did legislation                                                                   
play so close to the constitutional line.                                                                                       
                                                                                                                                
Co-Chair Harris concurred  with  Co-Chair Williams'  question                                                                   
of  the need  for the  amendment.   He  asked former  Senator                                                                   
Parnell to address the question.                                                                                                
                                                                                                                                
SEAN  PARNELL,  DIRECTOR,  STATE  AND  GOVERNMENT  RELATIONS,                                                                   
CONOCOPHILLIPS  ALASKA,  INC.,  spoke in  opposition  to  the                                                                   
amendment.   He expressed  his company's  desire for  a clean                                                                   
bill.    He   also  noted  the  need  for   legislation  that                                                                   
contributed  to certainty  in  the negotiation  process.   He                                                                   
contended  that  nothing  appeared in  the  legislation  that                                                                   
would surrender the  powers of taxation.  He  argued that the                                                                   
legislation merely  determines the amount of  taxation at the                                                                   
project's inception.                                                                                                            
                                                                                                                                
Co-Chair  Williams requested  that the  Department of  Law be                                                                   
consulted to address the issue.                                                                                                 
                                                                                                                                
RANDY RUARO, STAFF, REPRESENTATIVE  WILLIAMS, responding to a                                                                   
question  by  Co-Chair  Williams,   observed  the  difference                                                                   
between designating  the amount of  tax and the  actual power                                                                   
to tax.  He maintained  that no authority  was given  away by                                                                   
the legislation.                                                                                                                
                                                                                                                                
Representative  Croft noted the  importance of discussion  on                                                                   
this matter, and  suggested that industry's objection  to the                                                                   
amendment  indicated   the  need  for  the   amendment.    He                                                                   
suggested that  the goal of  fiscal certainty  approximated a                                                                   
state agreement never to change  tax policy.   He cited vague                                                                   
commitments  on   the  part  of   industry  such   as  "moral                                                                   
obligation".   He maintained the imperative not  to negotiate                                                                   
away the power of future legislatures to change tax policy.                                                                     
                                                                                                                                
Co-Chair   Williams  agreed  that   clarity  was   necessary.                                                                   
However, he  expressed the desire  to show support  for those                                                                   
negotiating  the project  contracts, and  to trust that  they                                                                   
would adhere to the constitution at all times.                                                                                  
                                                                                                                                
Representative Croft  WITHDREW the amendment.   He noted that                                                                   
he  would submit  the  amendment  to the  Attorney  General's                                                                   
office to receive further feedback.                                                                                             
                                                                                                                                
Representative Foster MOVED to  report HB 16 out of Committee                                                                   
with the accompanying fiscal notes.                                                                                             
                                                                                                                                
There being no OBJECTION, it was so ordered.                                                                                    
                                                                                                                                
CS  HB 16  (FIN) was  REPORTED out  of Committee  with a  "do                                                                   
pass"  recommendation and  with  previously published  fiscal                                                                   
impact note  (CED #1), and  a new fiscal  impact note  by the                                                                   
Department of Revenue.                                                                                                          
SENATE BILL NO. 51                                                                                                            
                                                                                                                                
     "An Act relating  to revenue bonds issued  by the Alaska                                                                   
     Municipal  Bond Bank Authority  and the total  amount of                                                                   
     bonds  and  notes  outstanding of  that  authority;  and                                                                   
     providing for an effective date."                                                                                          
                                                                                                                                
DEVON  MITCHELL, EXECUTIVE  DIRECTOR,  ALASKA MUNICIPAL  BOND                                                                   
BANK AUTHORITY,  DEPARTMENT OF  REVENUE, spoke in  support of                                                                   
the  bill.   He summarized  that  the bill  accomplished  two                                                                   
things:   First, increasing  the total  borrowing cap  of the                                                                   
Alaska Municipal  Bond Bank (Bond Bank) from  $300 million to                                                                   
$500  million.   He  noted  that the  cap  had  been at  $300                                                                   
million since 1984, when it was  increased from $150 million.                                                                   
The second intension  of the bill is to increase  the ability                                                                   
to issue  revenue bonds in any  fiscal year from  $50 million                                                                   
to $75 million.                                                                                                                 
                                                                                                                                
Mr. Mitchell discussed the history  of the Bond Bank, created                                                                   
in 1975  and funded  by the  legislature with  appropriations                                                                   
over  the  next  ten  years  totaling   $18.6  million.    He                                                                   
explained  that the  Bond Bank  is a  conduit borrower,  only                                                                   
borrowing funds when a community project is at hand.                                                                            
                                                                                                                                
Mr. Mitchell stated that currently  $240 million in bonds are                                                                   
outstanding  for   projects  in  a  variety   of  communities                                                                   
throughout the  state. He noted that the  current application                                                                   
load is  expected to exceed  the $300  million cap in  FY 04,                                                                   
which he explained was the reason for the bill.                                                                                 
                                                                                                                                
Mr.  Mitchell  also  stated  that   additional  revenue  bond                                                                   
applications  had been received  in FY  03 exceeding  the $50                                                                   
million cap.   He noted that  Valdez, last community  to come                                                                   
to the Bond Bank,  would be required to either  wait until FY                                                                   
04 or  pursue the more costly  process of issuing  two series                                                                   
of bonds.                                                                                                                       
                                                                                                                                
Mr. Mitchell pointed out that  the Bond Bank provided savings                                                                   
on  financing  costs  to  communities  of  financing  capital                                                                   
projects over the  past three fiscal years of  between $3 and                                                                   
$4 million.   He also  noted that the  Bond Bank  provides an                                                                   
annual dividend to  the state of Alaska. In FY  2002, a $1.67                                                                   
million  transfer occurred,  which he  maintained was  a good                                                                   
return on the initial investment.                                                                                               
                                                                                                                                
Representative   Croft  noted   the  need   to  ensure   that                                                                   
municipalities  were not  overburdened with  debt.   He asked                                                                   
how it was determined if an amount was excessive.                                                                               
                                                                                                                                
Mr.  Mitchell   explained  that   an  independent   board  of                                                                   
directors  reviewed  municipal  applications,  as well  as  a                                                                   
financial advisor  who reviewed  the financial statements  of                                                                   
borrowing  municipalities.   He  noted  that  recommendations                                                                   
were then  made to the Bond  Bank who ultimately  approved or                                                                   
denied  the loan.    He pointed  out  that  a borrower  could                                                                   
increase the likelihood of approval  by getting local support                                                                   
through additional public processes.                                                                                            
                                                                                                                                
In  response  to  a question  by  Representative  Croft,  Mr.                                                                   
Mitchell noted  that applications  were rarely rejected.   He                                                                   
explained that  the Bond  Bank suggested grant  opportunities                                                                   
or other  loan programs  if a  community did not  demonstrate                                                                   
sufficient  planning   on  a  project,  or   if  they  showed                                                                   
insufficient funding  to repay the loan.  He  summarized that                                                                   
this was a collaborative process  with municipalities to help                                                                   
them achieve project success.                                                                                                   
                                                                                                                                
Responding  to  a  follow up  by  Representative  Croft,  Mr.                                                                   
Mitchell stated that no municipalities have defaulted.                                                                          
                                                                                                                                
Co-Chair  Harris  asked  if  the  amount  [of  the  cap]  was                                                                   
adequate to meet anticipated needs.   He pointed out this was                                                                   
the first request for an increase since the 1980's.                                                                             
                                                                                                                                
Mr. Mitchell  confirmed that the  cap was adequate  since the                                                                   
Bond Bank was a  mature program, with a good  portion of debt                                                                   
being repaid  each fiscal year.   He gave the example  of the                                                                   
school  debt   reimbursement   program,  whereby  the   State                                                                   
required communities  to issue at least ten-year  notes, upon                                                                   
which they received  state reimbursement of  some percentage.                                                                   
He noted  that much of  the debt was  over ten year  periods,                                                                   
yielding a gradual financial curve.                                                                                             
                                                                                                                                
Mr. Mitchell suggested  that the legislature  maintain a good                                                                   
understanding of  the moral obligation  debt of the  state of                                                                   
Alaska.  He explained that "moral  obligation debt" signified                                                                   
the  obligation of  the legislature  to  replenish a  reserve                                                                   
fund  within the  Bond  Bank if  there were  a  default.   He                                                                   
proposed that the  bill was a good step to  allow for current                                                                   
borrowing   needs,  while   maintaining   control  over   the                                                                   
Authority.                                                                                                                      
                                                                                                                                
Representative Foster MOVED to  report SB 51 out of Committee                                                                   
with the accompanying fiscal notes.                                                                                             
                                                                                                                                
There being no OBJECTION, it was so ordered.                                                                                    
                                                                                                                                
SB  51  was  REPORTED  out of  Committee  with  a  "do  pass"                                                                   
recommendation  and  with  two  previously  published  fiscal                                                                   
notes:  REV #1 and DCED #2.                                                                                                     
SENATE BILL NO. 78                                                                                                            
                                                                                                                                
     "An  Act  relating  to  an  optional  group  of  persons                                                                   
     eligible  for medical assistance  who require  treatment                                                                   
     for  breast  and  cervical   cancer;  relating  to  cost                                                                   
     sharing   by   those  recipients   under   the   medical                                                                   
     assistance  program;  and  providing  for  an  effective                                                                   
     date."                                                                                                                     
                                                                                                                                
JAQUELINE TUPOU,  STAFF, SENATOR  LYDA GREEN, SPONSOR,  spoke                                                                   
in support of the bill.  She explained  that the bill removes                                                                   
the  sunset provision  of the  2001  legislation and  ensures                                                                   
continued treatment for women  who have been participating in                                                                   
the Breast and Cervical Cancer  Care program.  She also noted                                                                   
that the bill  creates future certainty to those  persons who                                                                   
may be diagnosed with these ailments in the future.                                                                             
                                                                                                                                
Ms.  Tupou  continued  to  summarize   that  the  bill  gives                                                                   
authority  to the Department  of Health  and Social  Services                                                                   
(DHSS) to allow maximum cost sharing  as per the federal law.                                                                   
She  noted that  currently Alaska  was  imposing the  maximum                                                                   
cost  sharing.   She pointed  out that  statute contains  the                                                                   
word  "lesser", and  the  current legislation  states  future                                                                   
authority, allowing  submission of  an amended state  program                                                                   
should  the  federal  government  raise  the  level  of  cost                                                                   
sharing.                                                                                                                        
                                                                                                                                
Ms.  Tupou referred  to a  handout (copy  on file)  regarding                                                                   
poverty guidelines  pertaining to a specific  category of the                                                                   
Medicaid  program, allowing  for 250  percent of the  poverty                                                                   
level.  The guideline  for a family of three  is $46,950, and                                                                   
for a family of four, $56,575.                                                                                                  
                                                                                                                                
Co-Chair Harris referred to the  HESS fiscal note with a cost                                                                   
of $282 thousand  of general funds, to match  $680 of federal                                                                   
funds.  He also  pointed out that in FY 2009,  the cost would                                                                   
be nearly  double, projected at  $544 thousand.  He  asked if                                                                   
the program was optional under Medicaid.                                                                                        
                                                                                                                                
Ms. Tupou  contended that the  program was not  optional. She                                                                   
added that  the program  was initially  a screening  program,                                                                   
but that when women were diagnosed,  the program was extended                                                                   
to  close the  loop  between diagnosis  and  treatment.   She                                                                   
concluded  that the  program  is currently  required  through                                                                   
that legislation.  She read from  Public Law 106-354, enacted                                                                   
           th                                                                                                                   
by  the 106   Congress, speculating  that  it was  predicated                                                                   
upon participation in the diagnosis  program.  She maintained                                                                   
that because the State participates  in the diagnosis portion                                                                   
of the program, the treatment portion is also required.                                                                         
                                                                                                                                
Co-Chair Harris asked   whether    the   federal   government                                                                   
required  participation  in  the  diagnosis  portion  of  the                                                                   
program.                                                                                                                        
                                                                                                                                
ELMER LINDSTROM, SPECIAL ASSISTANT,  DEPARTMENT OF HEALTH AND                                                                   
SOCIAL SERVICES spoke  in support of the bill.   He clarified                                                                   
that the state's participation in the program was optional.                                                                     
                                                                                                                                
Co-Chair Harris referred  to the fiscal  note in  relation to                                                                   
the DHSS  budget and  the matching  of federal  dollars.   He                                                                   
asked  if the  estimate  for FY  09 of  $544  thousand was  a                                                                   
realistic figure, and what was driving the increase.                                                                            
                                                                                                                                
Mr. Lindstrom  stated  that the fiscal  note was  well within                                                                   
initial projections.   He  referred to page  2 of  the fiscal                                                                   
note, which indicated two reasons  for the increase in costs:                                                                   
1) a five percent annual increase  in total recipients and 2)                                                                   
an assumption  that expenditures in this category  would grow                                                                   
at a  rate of 10  percent per year,  similar to  the national                                                                   
average growth for Medicaid spending.                                                                                           
                                                                                                                                
Responding  to a comment  by Co-Chair  Harris, Mr.  Lindstrom                                                                   
referred to the package of bills  introduced last week at the                                                                   
request   of  the   Governor   directed   at  Medicaid   cost                                                                   
containment.   He also expressed the Governor's  enthusiastic                                                                   
support of SB 78.                                                                                                               
                                                                                                                                
Representative Croft MOVED to ADOPT Amendment #1:                                                                               
                                                                                                                                
                                                23-LS0592\A.1                                                                   
                                                   Lauterbach                                                                   
                                                                                                                                
                     A M E N D M E N T                                                                                      
                                                                                                                                
     OFFERED IN THE SENATE                                                                                                      
          TO:  SB 78                                                                                                            
                                                                                                                                
     Page 1, lines 2 - 3:                                                                                                       
         Delete "relating to cost sharing by those                                                                            
          recipients under the medical assistance program;"                                                                   
                                                                                                                                
     Page 1, line 8, through page 2, line 3:                                                                                    
          Delete all material.                                                                                                  
                                                                                                                                
     Renumber the following bill sections accordingly.                                                                          
                                                                                                                                
     Page 2, lines 22 - 28:                                                                                                     
          Delete all material.                                                                                                  
                                                                                                                                
     Renumber the following bill section accordingly.                                                                           
                                                                                                                                
Co-Chair Harris OBJECTED.                                                                                                       
                                                                                                                                
Representative Croft explained  that  the  amendment  deleted                                                                   
cost  sharing  language.    He   noted  his  discomfort  with                                                                   
specific cost  sharing language,  suggesting that it  was not                                                                   
appropriate,  and   possibly  not  legally  allowable.     He                                                                   
maintained that  the language sent  a "mixed message",  as it                                                                   
pertained to only a portion of the population.                                                                                  
                                                                                                                                
Ms. Tupou reiterated that the  category was at 250 percent of                                                                   
poverty  level,  and added  that  the category  contained  no                                                                   
asset test.   She maintained that the category  was therefore                                                                   
a special category.                                                                                                             
                                                                                                                                
Representative Stoltze  asked about the fiscal  impact of the                                                                   
amendment.   Mr. Lindstrom  stated that  the amendment  would                                                                   
not impact the current fiscal note.                                                                                             
                                                                                                                                
Ms.  Tupou  suggested  that  if in  the  future  the  federal                                                                   
government  allowed more  cost sharing,  the amendment  might                                                                   
have an impact.                                                                                                                 
                                                                                                                                
Responding  to a  question by  Co-Chair  Williams, Ms.  Tupou                                                                   
maintained that the amount of  the co-payment was minimal: $2                                                                   
for  prescription  drugs, and  a  maximum $200  for  hospital                                                                   
stay.                                                                                                                           
                                                                                                                                
Representative  Croft  asked  if  the  fiscal  note  was  not                                                                   
impacted by the  amendment since it could not  be implemented                                                                   
currently.                                                                                                                      
                                                                                                                                
Mr. Lindstrom  observed  that  the  language  in  SB  78  was                                                                   
similar to that authorizing the  Denali Kid Care Program.  He                                                                   
pointed  out the similarity  in that,  under current  federal                                                                   
law, additional  cost sharing  provisions were not  possible.                                                                   
He noted  that, in  the case  of Denali  Kid Care, the  state                                                                   
submitted  a failed petition  to the  federal government  for                                                                   
the authority  to add  cost sharing.   He confirmed  that, in                                                                   
this  program,   the  income  eligibility   is  significantly                                                                   
greater than in typical Medicaid programs.                                                                                      
                                                                                                                                
Mr. Lindstrom also indicated that  the legislature might want                                                                   
to  reiterate  the   idea  that  in  the  case   when  income                                                                   
eligibility  was relatively  high,  with federal  permission,                                                                   
the State policy might be to increase co-payments.                                                                              
                                                                                                                                
Co-Chair Williams asked if federal  changes were anticipated.                                                                   
Mr.  Lindstrom stated  that  he was  unaware  of any  pending                                                                   
changes, but noted that changes could occur quickly.                                                                            
                                                                                                                                
Ms.  Tupou noted  that the  bill  did give  authority to  the                                                                   
Department to increase amounts if federal law changes.                                                                          
                                                                                                                                
Representative  Stoltze  asked   about  the  Administration's                                                                   
position on the issue.                                                                                                          
                                                                                                                                
Mr. Lindstrom stated that they deferred to the legislature.                                                                     
                                                                                                                                
TAPE HFC 03 - 34, Side B                                                                                                      
                                                                                                                                
Representative  Croft suggested  that the federal  government                                                                   
rejected the  Denali Kid  Care waiver  because it targeted  a                                                                   
particular  population.   He maintained  that a  cost-sharing                                                                   
request for the  proposed program would also  be rejected for                                                                   
the same reason.   He also summarized that the  bill gave the                                                                   
Department  of  Health  and  Social  Services  permission  to                                                                   
charge an uncertain  amount at an uncertain  time to affected                                                                   
persons.   He suggested  that cost  sharing be examined  when                                                                   
and if  federal guidelines in  fact changed.  He  expressed a                                                                   
preference to send a clear message with the legislation.                                                                        
                                                                                                                                
A roll call vote was taken on the motion to adopt Amendment                                                                     
#1.                                                                                                                             
                                                                                                                                
IN FAVOR: Croft, Foster, Williams                                                                                               
OPPOSED: Hawker, Meyer, Stoltze, Chenault, Harris                                                                               
                                                                                                                                
Representatives Joule, Moses, and Whitaker were not present                                                                     
for the vote.                                                                                                                   
                                                                                                                                
The motion FAILED on a vote of 3 to 5.                                                                                          
                                                                                                                                
Representative Foster MOVED to report SB 78 out of Committee                                                                    
with the accompanying fiscal note.  There being no OBJECTION                                                                    
it was so ordered.                                                                                                              
                                                                                                                                
SB 78 was REPORTED out of Committee with "no recommendation"                                                                    
and with a previously published fiscal impact note:  HSS #1.                                                                    
ADJOURNMENT                                                                                                                   
                                                                                                                                
The meeting was adjourned at 2:42 PM                                                                                            
                                                                                                                                
                                                                                                                                

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