Legislature(2003 - 2004)

02/04/2004 01:38 PM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                   HOUSE FINANCE COMMITTEE                                                                                      
                      February 04, 2004                                                                                         
                          1:38 P.M.                                                                                             
 TAPE HFC 04 - 18, Side A                                                                                                       
 TAPE HFC 04 - 18, Side B                                                                                                       
 CALL TO ORDER                                                                                                                
 Co-Chair Harris called the House Finance Committee meeting                                                                     
 to order at 1:38 P.M.                                                                                                          
 MEMBERS PRESENT                                                                                                              
 Representative John Harris, Co-Chair                                                                                           
 Representative Bill Williams, Co-Chair                                                                                         
 Representative Kevin Meyer, Vice-Chair                                                                                         
 Representative Mike Chenault                                                                                                   
 Representative Eric Croft                                                                                                      
 Representative Hugh Fate                                                                                                       
 Representative Richard Foster                                                                                                  
 Representative Mike Hawker                                                                                                     
 Representative Reggie Joule                                                                                                    
 Representative Carl Moses                                                                                                      
 Representative Bill Stoltze                                                                                                    
 MEMBERS ABSENT                                                                                                               
 ALSO PRESENT                                                                                                                 
 Representative Mary Kapsner; Jeff Jesse, Executive Director,                                                                   
 Alaska Mental  Health Trust  Authority; Phil  Younker, Sr.,                                                                    
 Chair, Alaska Mental Health Trust Authority; Steve Planchon,                                                                   
 Executive Director, Trust Land Office, Department of Revenue                                                                   
 GENERAL SUBJECT(S):                                                                                                          
        OVERVIEW: ALASKA MENTAL HEALTH TRUST AUTHORITY                                                                        
                     HOUSE BILL NO. 377                                                                                     
  An Act making appropriations for the operating and capital                                                                  
   expenses of the state's integrated comprehensive mental                                                                    
     health program; and providing for an effective date.                                                                     
The following overview was taken in log note format.  Tapes                                                                     
and handouts will be on file with the House Finance                                                                             
Committee through the 23rd Legislative Session, contact 465-                                                                    
2156. After the 23rd Legislative Session they will be                                                                           
available through the Legislative Library at 465-3808.                                                                          
LOG SPEAKER                DISCUSSION                                                                                       
                           TAPE HFC 04 - 18, SIDE A                                                                        
000 Co-Chair Harris        Convened the House Finance Committee                                                                 
                           meeting at 1:38 p.m.  He noted that the                                                              
                           Alaska Mental Health Trust Authority                                                                 
                           (AMHTA) would provide a presentation &                                                               
                           overview to the Committee.                                                                         
                           ALASKA MENTAL HEALTH TRUST AUTHORITY                                                            
154 PHIL YOUNKER, SR.,     Introduced members Mr. Planchon and Mr.                                                              
      CHAIR, ALASKA MENTAL Jesse.  He provided Committee members                                                                
      HEALTH TRUST         copies of the handouts.  (Copies on File)                                                            
      AUTHORITY            and outlined the intent of the                                                                       
300 Mr. Younker            Provided a history of the Trust                                                                      
                              · Litigation (related to breach of                                                                
                                Mental Health Enabling Act trust                                                                
                                established by Congress in 1956)                                                                
                                ongoing for 13 years                                                                            
                              · State would have been required to                                                               
                                reconstitute the old Trust                                                                      
                              · Millions of dollars in litigation                                                               
                              · Millions in lost resource                                                                       
                                development opportunities                                                                       
                              · Paralyzed and fractured mental                                                                  
                                health community                                                                              
403 Mr. Younker            Listed the key terms of the settlement:                                                              
                              · Trust Authority free to use Trust                                                               
                                resources to act as a catalyst for                                                              
                              · Trust Authority funding                                                                         
                                recommendations considered in a                                                                 
                                single appropriation bill                                                                       
                              · Trust Authority to aid in                                                                       
                                comprehensive planning for mental                                                               
                                health program                                                                                  
                              · Mental Health Trust Lands and                                                                   
                                associated state lands released for                                                             
527 Mr. Younker            Commented on the Trust's beneficiaries:                                                              
                              · People with mental illness                                                                      
                              · People with developmental                                                                       
                              · People with alcoholism/other                                                                    
                              · People with Alzheimer's disease &                                                             
                                 other dementia                                                                               
 702 Mr. Younker            Listed the four boards that advise the                                                              
                              · Alaska Mental Health Board                                                                      
                              · Advisory Board on Alcoholism & Drug                                                             
                              · Governor's Council on Disabilities &                                                            
                                 Special Education                                                                              
                              · Alaska Commission on Aging                                                                    
 750 Mr. Younker            Continued, noting that the 4 Advisory                                                               
                            Boards have been engaged in a                                                                       
                            collaborative effort with the Division of                                                           
                            Behavioral Health to oversee a federal                                                              
                            grant for planning and implementation of                                                            
                            a service delivery.  Alaska has the                                                                 
                            highest incidence of brain injuries than                                                            
                            any other state.                                                                                  
 802 STEVE PLANCHON,        Pointed out the land and resources used                                                             
      EXECUTIVE DIRECTOR, by the Board for profit totaling 994,000                                                              
      TRUST LAND OFFICE,    acres:                                                                                              
      DEPARTMENT OF                                                                                                             
                              · Fee Estate - 547,000 acres                                                                      
                              · Mineral Estate - 341,000 acres                                                                  
                              · Coal, Oil & Gas - 106,000 acres                                                               
 841 Mr. Planchon           Noted that the key role of the Trust is                                                             
                            to prudently operate trust lands.  He                                                               
                            listed the regulations and assets of                                                                
                            management strategy.  Initially, 85% of                                                             
                            the work was self-directed.  He pointed                                                             
                            out the charts that highlight the cost                                                              
 942 Mr. Planchon           Mr. Planchon referenced the chart showing                                                           
                            the spendable income from the Trust Land.                                                           
                            Lease rents are included, purchase                                                                  
                            contract interest and money of that                                                                 
                            nature.  Over the past three years, that                                                            
                            money has increased about 24%.  Since the                                                           
                            beginning of operations in 1994, it has                                                             
                            increased about 800%.                                                                             
 1026 Co-Chair Harris       Questioned why the projected income was                                                             
                            such a conservative number given the                                                                
                            actual income.                                                                                    
 1043 Mr. Planchon          Responded that the projections were done                                                            
                            in the land office to actually be able to                                                           
                           commit money.                                                                                      
 1059 Mr. Planchon          Referenced the handout indicating the                                                               
                            operating and capital expenditures versus                                                           
                            the revenue earned.  There are two types                                                            
                            of costs incurred.  The core operating                                                              
                            costs and the supplemental operating                                                                
                            costs that comes from the capital budget.                                                           
                            That is used to pay for short-term                                                                
                           projects and are not costs incurring on                                                              
                           an on-going basis.  The costs are                                                                    
                           reasonable when compared to the gross                                                                
                           revenue, which averages about 14% of                                                                 
                           gross revenues.                                                                                    
1201 Mr. Planchon          Referenced the gross revenue slide.  The                                                             
                           spikes are not projectable and result                                                                
                           from long-term negotiations and                                                                      
                           complicated transactions.  Only the                                                                  
                           things that they feel relatively                                                                     
                           confident about are used.  He emphasized                                                             
                           that they do not plan based upon the                                                                 
1256 Co-Chair Harris       What happened with the big spike in FY03.                                                          
1320 Mr. Planchon          Responded that spike resulted from timber                                                            
                           sales, a couple large real estate                                                                    
                           transactions and an oil and gas lease                                                                
1317 Representative Croft  Clarified that those are not repeatable                                                              
                           events and would be in the 1x category.                                                            
1334 Mr. Planchon          Stated that the spendable is something                                                               
                           that can be predicted.  The principle                                                                
                           depends on the deals crafted and brought                                                             
                           to closure.                                                                                        
1359 Representative Croft Commented that once there is a timber                                                                 
                           sale, then the Trust cannot sell that                                                                
                           timber for another 100 years.                                                                      
1413 Mr. Planchon          Stated that the next step is to go to the                                                            
                           next level of income.                                                                              
1426 JEFF JESSE,           Clarified that the one-time land sale                                                                
      EXECUTIVE DIRECTOR, revenues go into the Permanent Fund and                                                               
      ALASKA MENTAL HEALTH generate income over time.                                                                         
      TRUST AUTHORITY                                                                                                           
1443 Representative Croft The gross revenue spike does not indicate                                                             
                           the distribution between how much is                                                                 
                           spendable and how much goes into the                                                                 
1454 Mr. Planchon          Referenced the spendable income slide and                                                            
                           the copy of the annual report.                                                                     
1518 Mr. Younker           Noted the Trust FY05 slide in the                                                                    
                           handout.  It highlights the income from                                                              
                           this past year.  The other income is                                                                 
                           generated would go back to principle.                                                                
                           The Permanent Fund payout was 3.5%                                                                   
                           payout.  $2.3 million dollars was lapsed.                                                          
1575 Representative Croft Asked if the 3.5% was the percent of                                                                  
                           market value.                                                                                      
1614 Mr. Younker           Responded that they do 3.5% of the                                                                   
                           present market value.  The 5% would not                                                              
                           sustain itself.  He added that they had                                                              
                           started out at 3%, moving to 3.25% and                                                               
                           then to 3.5%.  Nothing is ever added back                                                          
                            in for inflation.  The payout considers                                                             
                            the inflation.  The Trust uses about a                                                              
                            60-year market period to determine the                                                              
                            3.5% number.  Last year, there was                                                                  
                            concern that the payout would stay level.                                                           
                            The payout is based on a principle                                                                  
                            reserve account, which is equal to 4-                                                               
                            years of the payout.  That number was                                                               
                            down to less than 2-years resulting from                                                            
                            the market conditions.  The Trustees                                                                
                            inserted a provision that when the fund                                                             
                            was less than 2%, the number would be                                                               
                            increased to 5%.                                                                                  
 1722 Mr. Younker           Continued, the Trustees look for very                                                               
                            level sources of income.  The budget is                                                             
                            based on a 2-year basis.  Most of the                                                               
                            expenditures are on projects that are                                                               
                            from three to five years.  When the Trust                                                           
                            commits to a beneficiary a project or a                                                             
                            program, the Trust must know that source                                                            
                            of income will be there for a period of                                                             
                            time.  In order to do that, they have                                                               
                            developed a system of level payout using                                                            
                            the principle reserve to guarantee that.                                                            
                            The Trust has also taken 50% of the                                                                 
                            principle reserve and moved it from the                                                             
                            Permanent Fund to the Department of                                                                 
                            Revenue and placed it in an intermediate                                                            
                            account to stabilize what is needed in                                                              
                            the next 24-months.  That will guarantee                                                            
                            that the 3.5% will continue to sustain                                                              
 1849 Representative Croft  Inquired why the Mental Health base                                                                 
                            budget was declining so much.                                                                     
 1915 Mr. Younker           The Governor and the Legislature created                                                            
                            the budget.                                                                                       
 1929 Representative Croft  Asked if it could be set at zero.                                                                 
 1940 Mr. Jesse             Explained that it could not happen as it                                                            
                            would be illegal and an "act of bad                                                                 
                            faith" on the part of the State.                                                                  
 2005 Representative Croft  Asked at what point would the State be                                                              
                            "running up against the Settlement".  He                                                            
                            asked what needed to exist before being                                                             
                            in breech of the Settlement.                                                                      
 2020 Mr. Jesse             Stated that the Trust attempts to be very                                                           
                            honest and upfront with information.  The                                                           
                            settlement did not delineate any                                                                    
                            particular level of funding from the                                                                
                            State.  He stressed that -0- would be                                                               
                            beneath the floor legally sanctioned.  He                                                           
                            did not know the floor.  The Courts would                                                           
                            step in to direct the State regarding the                                                           
                            needs of this population.                                                                         
2122 Representative Croft Asked the impact of the proposed budget                                                               
2132 Mr. Jesse             Replied that would be addressed shortly.                                                           
2142 Co-Chair Williams     Noted the "other endowments" and asked                                                               
                           the difference in the Permanent Fund plan                                                            
                           and the Sitka plan with a payout of 6%.                                                            
2237 Mr. Younker           Stated that when the model was built, the                                                            
                           Trust knew it needed a sustainable source                                                            
                           of income that would inflation proof the                                                             
                           principle on an on-going basis with a                                                                
                           level payout.  The principle reserve was                                                             
                           used to get the level payout.  The market                                                            
                           was analyzed for a 60-year period using                                                              
                           different levels of payout.  Using a                                                                 
                           lower payout allows the programs to                                                                  
                           sustain.  He pointed out that the Sitka                                                              
                           Plan does not have a level payout.  The                                                              
                           Permanent Fund makes it difficult to                                                                 
                           manage with the up and down market.  By                                                              
                           using a lower pay out and guaranteeing                                                               
                           that it goes straight through keeps the                                                              
                          program alive.                                                                                      
2420 Mr. Younker           Continued, the actual cash and applied                                                               
                           inflation should be almost equal.  If the                                                            
                           plan grew faster, then the Board would                                                               
                           not be spending enough.  At this time,                                                               
                           they are on track.                                                                                 
2455 Mr. Jesse             The big difference between the mental                                                                
                           health trust and other funds is that the                                                             
                           Trust cannot spend the principle.                                                                  
2521 Mr. Jesse             Commented that if the Permanent Fund went                                                            
                           to a Percent of Market Value (PMV)                                                                   
                           system, the principle could be spent.                                                              
2530 Co-Chair Williams     Commented that inflation proofing is 3%                                                              
                           and that this year inflation totals only                                                             
                           about 1%.                                                                                          
2545 Mr. Younker           Questioned if it was replaced before the                                                             
2607 Co-Chair Williams     Commented that the fund is taking out 5%                                                             
                           on earning of 8% per year.                                                                         
2624 Mr. Jesse             Advised that because the Trust cannot dip                                                            
                           into the principle, they are forced to                                                               
                           either have greatly fluctuating income                                                               
                           every year or to have a level payout.                                                                
                           The Trustees decided on the 3% payout                                                                
                           because it guaranteed a reserve.  Without                                                            
                           a reserve, the 1 year that the fund lost                                                             
                           money, there would be zero income.  The                                                              
                           size needed for a reserve was determined                                                             
                           and it was decided that it should be 4x                                                              
                           the annual payout.                                                                                 
2702 Mr. Jesse             The payout was started at 3%.  In the                                                              
                            first few years, the returns were very                                                              
                            high and the reserve filled quickly.                                                                
                            When the payout is raised a quarter                                                                 
                            percent, then 1% had to be added to the                                                             
                            reserve to build it back up to 400% of                                                              
                            the amount.  When the market "tanked",                                                              
                            the Trustees started taking money out of                                                            
                            the reserve.  He stated that the reserve                                                            
                            allowed time for the market to recover.                                                           
 2831 Mr. Jesse             The sustainable payout was somewhere                                                                
                            between 4.5% and 5%.                                                                              
 2843 Co-Chair Williams     Thought that the payout formula was                                                                 
                            unstable and recommended addressing it                                                              
                            differently.  He commented on the PMV                                                               
                            concept.  He thought that reference made                                                            
                            by Mr. Jesse was different than that                                                                
                            provided by trusted sources.                                                                      
 2940 Representative        Summarized that the Trust's investment                                                              
      Hawker                model is a "foundation model" under a                                                               
                            perpetual trust, which is a different                                                               
                            management than that proposed under the                                                             
                            PMV system.  He asked if their style of                                                             
                            management was given in statute rather                                                              
                            than an endowment model.                                                                          
 3045 Mr. Jesse             Responded that the settlement did not lay                                                           
                            out the details of how the fund should be                                                           
                            managed.  It gave the Trustees discretion                                                           
                            over the income.  The Trustees knew that                                                            
                            the trust income would vary greatly from                                                            
                            year to year.  It was essential that it                                                             
                            be managed to guarantee a sustained                                                                 
                            payout every year.  At present time, the                                                            
                            fund could loose money every year for 4-                                                            
                            years, and the payout would remain the                                                              
 3135 Representative        Clarified that the mechanism used to                                                                
      Hawker                accomplish that is a different mechanism                                                            
                           from the PMV.                                                                                      
 3150 Representative Croft  Commented that the major difference is                                                              
                            that the Trust cannot invade their                                                                  
                            principle.  Having that restriction, a                                                              
                            set payout has been established at 3.5% -                                                           
                            4%.  5% cannot be set unless comfortable                                                            
                            building the principle.  He assured that                                                            
                            the protection should not be eliminated.                                                          
 3222 Co-Chair Williams     Asked if incorporating the PMV, money                                                               
                            would be taken from the principle of the                                                            
                            Permanent Fund.                                                                                   
 3244 Representative Croft Acknowledged that was true.                                                                        
 3248 Vice Chair Meyer      Interjected that it was possible by using                                                           
                            the PMV theory, the principle could be                                                              
                            tapped.  He noted that some years could                                                             
                            be adding more to the principle.                                                                  
3302 Co-Chair Williams     Suggested that could interpret taking out                                                            
                           from the principle and then increasing                                                               
                          the principle.                                                                                      
3331 Mr. Younker           Responded that there are years when that                                                             
                           will happen, however, there are years                                                                
                           when the principle shrank.                                                                         
3352 Mr. Younker           Commented on a scholarship fund payout                                                               
                           that he personally holds and how                                                                     
                           historically the return on that fund has                                                             
                           been affected by what is occurring in the                                                            
                           market place.                                                                                      
3435 Representative        Inquired if the principle was inflation                                                              
      Chenault             proofed.                                                                                           
3456 Mr. Younker           Replied it was inflation proofed at 3.5%.                                                          
3507 Representative        Asked about the high money and if it was                                                             
      Chenault             placed into the principle or into the                                                                
3516 Mr. Younker           Explained that there are two parts.                                                                  
                           Principle reserve receives 4 years of the                                                            
                           payout.  All income goes into that fund                                                              
                           until it is full and then it runs over.                                                              
                           The principle cannot be touched.  The                                                                
                           test is to take the fund and applying it                                                             
                           from day one and apply inflation to it.                                                            
3604 Representative        Asked about the principle strength versus                                                            
      Chenault             market performance.                                                                                
3626 Representative        He asked if the money came out of the                                                                
      Chenault             principle reserve.                                                                                 
3648 Mr. Younker           Still have not had a payout of that                                                                  
                           reserve for a 4-year period.  If less                                                                
                           than 2-years in the reserve, the Trustees                                                            
                           will change the amount to 3.5% and then                                                              
                           to 3.75%.                                                                                          
3720 Mr. Younker           Returned discussion to the Trust FY05                                                                
                           page of the handout.  He noted that                                                                  
                           $11.986 million had been budgeted for the                                                            
                           operating programs and $3.73 million has                                                             
                           been budgeted for capital projects.  He                                                              
                           pointed out that the Mental Health budget                                                            
                           has been reduced from $136.372 million                                                               
                           dollars in FY04 to $125.788 in FY05.                                                                 
                           That has created more pressure for the                                                               
                           Trust to sustain their programs.                                                                   
3828 Mr. Younker           Addressed the budget shrink and how it                                                               
                           affects the programs.  A study has been                                                              
                           started at this point.                                                                             
3914 Mr. Younker           Highlighted the New Trust Budget                                                                     
                           Recommendation Planning Process for                                                                  
                              · Collaborative planning process with                                                             
                                four Trust advisory groups, state                                                               
                                agencies and major partners.                                                                  
                              · Limited number of focus areas                                                                   
                                 targeting system change +                                                                      
                                 partnerships, mini grants and other                                                            
                                 ongoing projects.                                                                              
                              · Emphasis on partnering to maximize                                                              
                                 and coordinate funding goals across                                                            
                                 systems serving beneficiaries.                                                               
 4054 Mr. Jesse             Noted that Representative Hawker has                                                                
                            requested an accounting of the alcohol                                                              
 4100 Representative Croft  Asked if the alcohol receipts had                                                                   
                            declined.  Mr. Younker explained the                                                                
                            difference and that it was still at the                                                             
                            full level which is consistent.                                                                   
 4117 Representative        Noted that he had requested an accounting                                                           
      Hawker                of the alcohol tax fund.  He acknowledged                                                           
                            that excess funds had been budgets last                                                             
 4127 Mr. Younker           The new structure will have work groups                                                             
                            appointed.  About 20% of all expendable                                                             
                            income will be used for that project over                                                           
                            the next four or five years.                                                                      
 4316 Mr. Younker           Commented on partnerships with people                                                               
                            outside the State for leveraging dollars                                                            
                            for that particular program.  The                                                                   
                            emphasis is on partnering and the                                                                   
                            Trustees are excited about the larger                                                               
 4435 Mr. Jesse             Addressed the impacts of the reductions                                                             
                            on the beneficiaries:                                                                               
                              · Tribal substance abuse program cuts                                                             
                                 977.3 - 35% of all ADA cuts while                                                              
                                 Alaska Natives are 20% of the                                                                  
                                 population (and 40% of treatment                                                               
                              · Rural ASAP programs cut $980 - 70%-                                                             
                                 90% no show rates thus far in FY04                                                             
                                 for those programs that have tried                                                             
                              · 10% - 25% match on alcohol grants                                                             
 4548 Mr. Jesse             He stressed that the Trust is no longer                                                             
                            budgeting toward missions and measures.                                                             
                            They are budgeting to monetary targets to                                                           
                            minimize the damage to the programs and                                                             
                            beneficiaries, which is a different                                                                 
                            exercise.  He reiterated that currently,                                                            
                            they are aiming at numbers without                                                                  
                            hurting the clientele.                                                                            
 4645 Mr. Jesse             Commented on the administrative                                                                     
                            infrastructure cuts and the impacts of                                                              
                            the reorganization.                                                                               
                            TAPE HFC 04 - 18, Side B                                                                        
4647 Mr. Jesse             Spoke to the delayed grants and quarterly                                                            
                           advances and how that affects programs.                                                              
                           As the capacity of agencies is degraded,                                                             
                           getting the work done becomes more                                                                   
4547 Mr. Jesse             In FY04, the intent was to look at the                                                               
                           base budget.  He provided information on                                                             
                           that budget:                                                                                         
                              · $1.3 million in Developmental                                                                   
                                Disabilities (DD) grants was reduced                                                            
                              · Reduction in legal support for DD in                                                            
                                Bethel, Fairbanks & Juneau offices                                                              
                                of DLC.                                                                                         
                              · Hope Community Resources - closed                                                               
                                apartment for emergency rural                                                                   
                              · Quality Assurance funds (GF/Mental                                                              
                                Health) for the DD cuts                                                                         
                              · Care Coordination grants for seniors                                                            
                                reduced by 20%                                                                                
4328 Representative Joule Asked why it took so long for information                                                             
                           to go public.                                                                                      
4317 Mr. Jesse             Responded that there were not enough                                                                 
                           employees for moving the information.                                                                
                           The planning boards have been speaking                                                               
                           with the Governor's boards regarding how                                                             
                           the grant funds are awarded.  It need to                                                             
                           be determined how are emergencies are                                                                
                           being addressed.  He noted that the                                                                  
                           contingency funds are being reduced and                                                              
                           the Trust's flexibility becomes less and                                                             
4220 Representative        Thought in 1996, the Legislature                                                                     
      Stoltze              addressed DD sexual offense.  He                                                                     
                           commented that it is such a "touchy" area                                                            
                           for those victims and that it is a                                                                   
                           different class of sexual offender.  He                                                              
                           asked for personal time with the Trust                                                               
                           members to discuss that issue.                                                                     
4124 Mr. Jesse             Agreed to that.                                                                                    
4108 Mr. Jesse             Continued discussion on reducing grants                                                              
                           to the agencies and the impact of care                                                               
                           coordination for seniors.  When the                                                                  
                           systems are withdrawn, it accelerates                                                                
                           family burn out and then costs to the                                                                
                           State.  He addressed cost shifting into                                                              
                           the future of the prevention programs.                                                               
                           The cumulative effect with the loss of                                                               
                           the Longevity Bonus and the other cuts to                                                            
                           programs, create more impact to the State                                                            
                           over time.  Cost shifting to Medicaid is                                                             
                           the same as cost shifting into the                                                                 
 3850 Co-Chair Williams     Reiterated concerns with the Trust's                                                                
                            payment of 3.5%.  He hoped that the Board                                                           
                            would attempt to change the payout system                                                           
                            so that the programs can continue.                                                                
 3731 Mr. Jesse             Noted that the fund currently has a                                                                 
                            little over $300 million dollars.                                                                 
 3721 Co-Chair Williams     People are not receiving the services.                                                            
 3711 Mr. Younker           Stated that part of the growth is                                                                   
                            principle and cannot be spent.                                                                    
 3617 Co-Chair Williams     Voiced concern, emphasizing that the                                                                
                            concern is real.  Financial resources                                                               
                            must be managed to address these concerns                                                           
                            and he hoped that the Board understands                                                             
 3609 Mr. Jesse             Highlighted the FY04 impacts and securing                                                           
                            the match in the rural areas.  He spoke                                                             
                            to self-pay for the ASAP program, which                                                             
                            was cut by $908 thousand dollar.  It                                                                
                            follows those offenders.  He noted that                                                             
                            the Administration does not want to fund                                                            
                            that program anymore.  The Administration                                                           
                            wants it to be self-pay.  The issue with                                                            
                            self-pay is that the people that most                                                               
                            need the treatment are the least able to                                                            
                            pay.  Public dollars will cost more by                                                              
                            staying in the system.  Right now, there                                                            
                            is a 70-90% no show rate.                                                                         
 3344 Mr. Jesse             The self-pay program works best with a                                                              
                            class of clients that has the most                                                                  
                            resources.  Eliminating ASAP in the FY05                                                            
                            budget will cost the entire State down                                                              
                            the road.  The Department does not have a                                                           
                            plan at this time.                                                                                
 3300 Mr. Jesse             Highlighted the FY05 budget.                                                                        
                              · Medicaid - Federal control and                                                                  
                                 support concerns                                                                               
                              · Budget is built on assumptions                                                                  
                                 regarding refinancing, litigation                                                              
                                 around Medicaid, proshare viability,                                                           
                                 tribal agenda, catchment area                                                                  
                                 consolidation, Alcohol Safety Action                                                           
                                 Program (ASAP) program self-pay,                                                               
                                 restructuring of service waivers and                                                           
                                 cost containment.                                                                              
                              · Continued infrastructure cuts and                                                               
                                 reorganization impacts                                                                       
 3220 Mr. Jesse             Spoke about the Medicaid outcome.  The                                                              
                            State is becoming more dependent on the                                                             
                            Medicaid system.  The State is becoming                                                             
                            more and more dependant on what the                                                                 
                            federal government rules what you must                                                            
                           have for the program.  That involves                                                                 
                           their rules and terms.  The President has                                                            
                           recommended a 7% reduction to that                                                                   
3011 Mr. Jesse             Commented on the loose to the mental                                                                 
                           health care.  He reiterated that cost                                                                
                           shifting is a huge issue.                                                                          
2936 Mr. Jesse             The Administration has raised its risk                                                               
                           tolerance level.  The FY05 budget is                                                                 
                           launching with perhaps 100 different                                                                 
                           components this year.  He predicted that                                                             
                           some of those projects are not going to                                                              
                           make it.                                                                                           
2828 Mr. Jesse             addressed the increased risk levels:                                                                 
                              · Refinancing                                                                                     
                              · Litigation around Medicaid                                                                      
                              · Proshare viability                                                                              
                              · Tribal agenda                                                                                   
                              · Catchment area consolidation                                                                    
                              · ASAP program self-pay                                                                           
                              · Restructuring of service waivers                                                                
                              · Cost containment                                                                              
2725 Mr. Jesse             He emphasized that each item raises the                                                              
                           risk tolerance.                                                                                    
2610 Mr. Jesse             The choice is to help the Administration                                                             
                           make these correct choices so the risk                                                               
                           does not fall upon the beneficiaries.                                                              
2537 Mr. Jesse             He recommended that the Legislature                                                                  
                           considering assisting the Administration                                                             
                           with making choices, assisting with the                                                              
                           establishment of a centralized billing                                                               
                           office.  The risk of failure falls upon                                                              
                           the beneficiaries with a reduction of                                                                
2448 Mr. Jesse             Applauded Representative Hawker and the                                                              
                           work that he has done with the Department                                                            
                           of Health & Social Services subcommittee.                                                            
                           He projected that they expect the program                                                            
                           will get worse before it gets better.  He                                                            
                           was concerned with the projected FY06 and                                                            
                           FY07 budgets.                                                                                      
2403 Representative Joule  Asked about the concerns with the rising                                                             
                           Medicaid costs.  He asked how that should                                                            
                           be addressed at present time.                                                                      
2325 Mr. Jesse             The Administration is attempting to                                                                  
                           address those concerns with items such as                                                            
                           the waivers and trying to make them more                                                             
                           efficient and the tribal agenda.  The                                                                
                           only way to become less dependant upon                                                               
                           the federal government is for the State                                                              
                           to pay its own way.  That is the basic                                                             
                            fiscal gap issue.                                                                                 
 2237 Representative Croft Voiced confusion with the tribal status                                                              
                            issue and relying upon it so heavily in                                                             
                            the budget.                                                                                       
 2216 Mr. Jesse             Did not believe so and admitted that he                                                             
                            was not an expert on those issues.  Some                                                            
                            entities are entitled to bill Medicaid at                                                           
 2145 Representative Croft Commented that State funding would be                                                                
                           "wiped out".                                                                                       
 2134 Mr. Jesse             Responded that this is an issue of                                                                  
                            choice.  The Trustees have not taken a                                                              
                            stance on that concern.  In many rural                                                              
                            communities, there are not enough                                                                   
                            agencies from which to choose.                                                                    
 2056 Representative Croft Committed that if they do not get the                                                                
                            tribal funding, there is no general fund                                                            
 2046 Mr. Jesse             Correct as they would have already taken                                                            
                            the projected savings in the budget.                                                                
                            There could be a possibility of                                                                     
                            supplemental funding.                                                                             
 2031 Representative        Voiced his appreciation for the                                                                     
      Hawker                professionalism and focus of the Alaska                                                             
                            Mental Health Trust Authority providing                                                             
                            facts and problems and willingness to                                                               
                            "strike a balance".                                                                               
 1942 Co-Chair Harris       Echoed sentiments made by Representative                                                            
                            Hawker.  He addressed the fiscal revenue                                                            
                            shortage that the Legislature is                                                                    
                            currently working under.  He understood                                                             
                            that many of the beneficiaries cannot                                                               
                            help themselves.  He acknowledged that                                                              
                            Representative Hawker works hard to                                                                 
                            address these concerns on the Department                                                            
                            of Health & Social Services subcommittee                                                            
                            and the Ways and Means Committee.                                                                 
 1834 ADJOURNMENT           The meeting was adjourned at 2:55 P.M.                                                            

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