Legislature(2019 - 2020)ADAMS 519

03/12/2020 09:00 AM FINANCE

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09:07:26 AM Start
09:08:16 AM HB268
10:09:32 AM HB181
11:23:56 AM Consideration of Governor's Appointee: Lucinda Mahoney, Commissioner, Department of Revenue
11:52:11 AM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Heard & Held
-- Public Testimony --
+ Consideration of Governor's Appointees: TELECONFERENCED
Dept. of Revenue - Commissioner Lucinda Mahoney
+ Bills Previously Heard/Scheduled TELECONFERENCED
Heard & Held
-- Public Testimony --
                  HOUSE FINANCE COMMITTEE                                                                                       
                      March 12, 2020                                                                                            
                         9:07 a.m.                                                                                              
9:07:26 AM                                                                                                                    
CALL TO ORDER                                                                                                                 
Co-Chair  Johnston   called  the  House   Finance  Committee                                                                    
meeting to order at 9:07 a.m.                                                                                                   
MEMBERS PRESENT                                                                                                               
Representative Neal Foster, Co-Chair                                                                                            
Representative Jennifer Johnston, Co-Chair                                                                                      
Representative Dan Ortiz, Vice-Chair                                                                                            
Representative Ben Carpenter                                                                                                    
Representative Andy Josephson                                                                                                   
Representative Gary Knopp                                                                                                       
Representative Bart LeBon                                                                                                       
Representative Kelly Merrick                                                                                                    
Representative Colleen Sullivan-Leonard                                                                                         
Representative Cathy Tilton                                                                                                     
Representative Adam Wool                                                                                                        
MEMBERS ABSENT                                                                                                                
ALSO PRESENT                                                                                                                  
Erin  Shine, Staff,  Representative Jennifer  Johnston; Anne                                                                    
Rittgers,  Staff, Representative  Bart  LeBon; Luke  Welles,                                                                    
Senior  Director  of   Business  Development  Alaska  Native                                                                    
Tribal   Health   Consortium;  Devin   Mitchell,   Executive                                                                    
Director, Alaska  Municipal Bond Bank  Authority, Department                                                                    
of   Revenue;   Myron   Dosch,  Chief   Financial   Officer,                                                                    
University  of Alaska,  Fairbanks; Renee  Gayhart, Director,                                                                    
Division of  Health Care Services, Department  of Health and                                                                    
Social Services;  Representative Matt Claman;  Sophie Jonas,                                                                    
Staff,   Representative   Matt    Claman;   Lacey   Sanders,                                                                    
Administrative  Services Director,  Department of  Education                                                                    
and  Early Development,  Office  of  Management and  Budget,                                                                    
Office of the Governor; Senator Peter Miccichie.                                                                                
PRESENT VIA TELECONFERENCE                                                                                                    
Jason  Lessard,  Executive  Director, National  Alliance  on                                                                    
Mental  Illness  (NAMI),  Anchorage;  Lucas  Johnson,  Self,                                                                    
Brunswick,  Maine; Natalie  Fraser,  Mental Health  Advocacy                                                                    
Through Story Telling, Anchorage;  Zoe Kaplan, Mental Health                                                                    
Advocacy Through Story  Telling, Anchorage; Lucinda Mahoney,                                                                    
Commissioner Designee, Department of Revenue.                                                                                   
HB 181    PUBLIC SCHOOLS: MENTAL HEALTH EDUCATION                                                                               
HB 268    MUNI BOND BANK: UA, LOAN AND BOND LIMITS                                                                              
CONSIDERATION  OF  GOVERNOR'S  APPOINTEE:  LUCINDA  MAHONEY,                                                                    
COMMISSIONER, DEPARTMENT OF REVENUE                                                                                             
Co-Chair Johnston reviewed the agenda for the day.                                                                              
HOUSE BILL NO. 268                                                                                                            
     "An Act relating to the Alaska Municipal Bond Bank                                                                         
9:08:16 AM                                                                                                                    
Co-Chair   Foster   MOVED   to  ADOPT   proposed   committee                                                                    
substitute  for  HB  268,  Work  Draft  31-LS1440\U  (Klein,                                                                    
3/10/20)(copy on file).                                                                                                         
Co-Chair Johnston OBJECTED for discussion.                                                                                      
ERIN   SHINE,  STAFF,   REPRESENTATIVE  JENNIFER   JOHNSTON,                                                                    
relayed  that the  one difference  between the  version that                                                                    
came  to the  committee  and the  committee substitute  (CS)                                                                    
before  members, version  U, was  that the  previous version                                                                    
eliminated  the $102.5  million project  limit for  a single                                                                    
regional health  organization project.  The cap  was removed                                                                    
completely. In  the CS on  page 3, lines 21-22,  the section                                                                    
was  reinserted  with an  increased  project  limit to  $250                                                                    
Representative Josephson  asked why  the cap  was increased.                                                                    
Co-Chair   Johnson  indicated   the  explanation   would  be                                                                    
provided by the sponsor.                                                                                                        
Co-Chair Johnston WITHDREW her OBJECTION.                                                                                       
There being NO OBJECTION, it was so ordered.                                                                                    
9:10:06 AM                                                                                                                    
REPRESENTATIVE  BART  LEBON,  SPONSOR,  explained  that  the                                                                    
purpose  of  the bill  was  to  expand the  availability  of                                                                    
credit for  Alaska's regional  health organizations  as well                                                                    
as  assist  the University  of  Alaska  with potential  debt                                                                    
refinancing   opportunities.  Currently,   the  University's                                                                    
access to the Alaska Municipal Bond Bank was limited.                                                                           
Representative LeBon  provided a  brief history of  the Bond                                                                    
Bank. About  5 years prior,  access to the  Alaska Municipal                                                                    
Bond Bank  by regional health organizations  was established                                                                    
in  statute. However,  at  the time  it  was established  in                                                                    
statute the  funding was limited  to 49 percent of  the cost                                                                    
of a project and capped at  $102 million. The goal of making                                                                    
a change  was to allow  up to 100 percent  financing through                                                                    
the Alaska  Municipal Bond  Bank and to  raise the  cap from                                                                    
$102 million to  $250 million. It raised the  ceiling on the                                                                    
total funding  through the  Bond Bank  to $500  million. The                                                                    
goal  of  the  legislation  was to  give  Alaska's  regional                                                                    
health  organizations  and  the   University  of  Alaska  an                                                                    
additional tool in their toolboxes.                                                                                             
Representative  LeBon indicated  that to  finance a  project                                                                    
currently  entities were  always looking  for the  best deal                                                                    
possible  whether  through  a  private  bank,  participation                                                                    
loans, or  a bond  bank. Part of  determining the  best deal                                                                    
was  determining  how much  could  be  financed through  the                                                                    
lender. Some  lenders might go  up to 95 percent  and others                                                                    
might be more comfortable at  75 percent. He mentioned a law                                                                    
that  came   out  in  2014  that   limited  regional  health                                                                    
organizations  from  borrowing more  than  49  percent of  a                                                                    
project's  cost through  bond banking  creating a  condition                                                                    
that  forced  the  regional   health  organization  to  seek                                                                    
partnerships.  Sometimes   partnerships  could   benefit  an                                                                    
organization. He spoke  of his banking days and  a number of                                                                    
partnerships where  there was  a lead lender  in a  deal who                                                                    
would  assist in  putting together  partnerships to  benefit                                                                    
the  client  or customer.  The  legislation  would give  the                                                                    
regional health organizations additional options.                                                                               
Representative  LeBon  discussed  repayment  and  collateral                                                                    
risks.  He  explained  that  it   was  difficult  to  define                                                                    
collateral risk  in a traditional  way regarding  a regional                                                                    
health   organization.  He   provided   an   example  of   a                                                                    
traditional collateral risk  to a bank. If a  home owner did                                                                    
not pay  back a home loan,  the bank would foreclose  on the                                                                    
home. He opined that it was  unlikely any bank would want to                                                                    
foreclose on a regional  health organization. The risk would                                                                    
likely be cash  flow and, the credit risk  would be managed.                                                                    
The  bill  allowed  for  multiple   or  single  lenders  and                                                                    
provided the  option for the  Alaska Municipal Bond  Bank to                                                                    
be the  lead lender.  He indicated  his staff  would provide                                                                    
further details.                                                                                                                
9:15:23 AM                                                                                                                    
ANNE RITTGERS,  STAFF, REPRESENTATIVE BART  LEBON, explained                                                                    
that  there  were also  a  few  changes  to lending  to  the                                                                    
University of Alaska. It removed  the project scope limiting                                                                    
bond  bank   participation  to   only  heating   and  energy                                                                    
projects. It  also raised the  UA project  participation cap                                                                    
from $87.5 million to $500 million.                                                                                             
Representative Josephson  asked if it was  possible that the                                                                    
borrower  would   have  more  leverage  to   negotiate  with                                                                    
partners.    Representative   LeBon    responded   in    the                                                                    
affirmative. Additional  options helped to drive  down rates                                                                    
and provided other benefits.                                                                                                    
Representative  Sullivan-Leonard  saw  the benefits  of  the                                                                    
legislation. She  wondered if there  were any  projects that                                                                    
Representative  LeBon  was  aware   of  that  had  not  been                                                                    
established because  of how the  bond rating  was currently.                                                                    
Therefore, the  legislation being presented would  assist in                                                                    
their endeavor.                                                                                                                 
Representative  LeBon was  not  aware of  any projects  that                                                                    
lacked  financing opportunities.  He  suggested  that if  an                                                                    
entity  was  forced to  partner  with  multiple lenders,  it                                                                    
would  also  force  a parody  agreement  from  the  multiple                                                                    
lenders.  It   required  a  balanced  playing   field  among                                                                    
lenders. The borrower  was also required to be  aware of the                                                                    
relationships.  It   was  rare  in  partnerships   that  the                                                                    
borrower could  favor one lender over  another. He continued                                                                    
that a  parody relationship  had to  be clearly  defined and                                                                    
respected. It  was also important  for all  parties involved                                                                    
in the transaction  to have defined agreements  in place. He                                                                    
suggested  that the  more parties  that were  involved in  a                                                                    
transaction,  the  more  complicated  the  parody  agreement                                                                    
became. He  relayed an experience  in which there  were four                                                                    
partners. The four partners had  to reach a common agreement                                                                    
on how  the financing would  take place. Once  the agreement                                                                    
was reached,  the partners had  to share the  agreement with                                                                    
the borrower who rejected the  agreement. His point was that                                                                    
the more  players involved in  a deal, the  more complicated                                                                    
the deal would likely become.                                                                                                   
Representative  Wool  asked  if there  was  any  competition                                                                    
between Alaska  Industrial Development and  Export Authority                                                                    
(AIDEA) and  the banking industry. Representative  LeBon did                                                                    
not believe the banking industry  would be threatened by the                                                                    
legislation. In  his experience,  at times a  banking entity                                                                    
might  be brought  in to  do the  interim financing  such as                                                                    
construction financing.  The takeout  would be  AIDEA, USDA,                                                                    
or the  Alaska Municipal Bond Bank  Authority. Some entities                                                                    
would not  do interim construction financing  and would look                                                                    
to the  private banks  for assistance.  He had  done several                                                                    
projects   statewide  in   which  the   bank  financed   the                                                                    
construction of a  building providing the take  out. He also                                                                    
understood that  the Bond Bank could  help with construction                                                                    
9:20:20 AM                                                                                                                    
Representative Wool  commented that  it looked  like several                                                                    
millions were available. He assumed  that the funds were for                                                                    
something  other  than  construction.  He  asked  about  the                                                                    
6-fold increase  from $87  million to  $500 million  and the                                                                    
kinds  of projects  that  would need  a  $500,000 bond  bank                                                                    
loan.  Representative LeBon  thought most  of the  financing                                                                    
would  be  related  to  building   a  facility  and  not  to                                                                    
purchasing  equipment.  Equipment  was a  depreciable  asset                                                                    
with  a short  life. There  were  other ways  to finance  or                                                                    
purchase equipment.  The biggest benefit for  the University                                                                    
was that  it would have another  option if debt came  up for                                                                    
renewal, debt  was recallable,  or refinancing  rates became                                                                    
more favorable. He thought there  might be opportunities for                                                                    
the University to lower its  debt service because of current                                                                    
low interest rates.                                                                                                             
Representative Knopp  wondered if in  Representative LeBon's                                                                    
banking  days  he  ever  financed  100  percent  of  a  home                                                                    
purchase. He referenced the fiscal note and read from it:                                                                       
     In the event of a default by the University or a                                                                           
     regional health organization that participates in this                                                                     
     program the State  of Alaska would be  asked to provide                                                                    
     for that debt  service, and if the State  failed to act                                                                    
     on that  request a  loss of  market access,  impacts on                                                                    
     investor confidence and current  credit rating would be                                                                    
Representative Knopp  reported that since 2006  his hospital                                                                    
had  taken  on  hundreds  of   millions  of  bond  debt  for                                                                    
expansion  purposes. Since  the  passage  of the  Affordable                                                                    
Care Act the area did away  with service area mill rates and                                                                    
sold revenue bonds to help to  pay down debt. The result was                                                                    
the responsibility was taken from  the borough and placed in                                                                    
the  hands of  the  facilities. He  was  concerned with  the                                                                    
state getting overburdened with debt.  He wondered if it was                                                                    
possible for  the state to  avoid having the liability  of a                                                                    
revenue bond  issuance. He  thought the  institutions should                                                                    
have some skin in the game.                                                                                                     
Representative LeBon responded  that the loan-to-value issue                                                                    
in traditional  bank loans was  important. He  recalled that                                                                    
the bank always  tried to keep a maximum 80  percent loan to                                                                    
value. He  responded to the representative's  question about                                                                    
debt  service  and  repayment  ability.  The  loan  approval                                                                    
process by  a banker weighed  what the project  could afford                                                                    
to pay  back and the  predictability of its  revenue stream.                                                                    
He wanted to invite a couple of experts to the table.                                                                           
Representative  Josephson  asked   Representative  LeBon  to                                                                    
define  "Takeout."  Representative  LeBon responded  that  a                                                                    
takeout was the lender  who followed the construction lender                                                                    
and took out  the construction loan and converted  it into a                                                                    
long-term mortgage.                                                                                                             
9:25:50 AM                                                                                                                    
DEVIN  MITCHELL, EXECUTIVE  DIRECTOR, ALASKA  MUNICIPAL BOND                                                                    
BANK AUTHORITY, DEPARTMENT OF REVENUE, introduced himself.                                                                      
LUKE WELLES, SENIOR DIRECTOR  OF BUSINESS DEVELOPMENT ALASKA                                                                    
NATIVE TRIBAL HEALTH CONSORTIUM,  introduced himself. He had                                                                    
been on the board of the  Alaska Municipal Bond Bank and was                                                                    
currently the chair.                                                                                                            
Mr.  Mitchell responded  to Representative  Knopp's question                                                                    
about 100  percent of a  project financing and  his concerns                                                                    
related  to loan  to equity  issues. He  explained that  the                                                                    
Bond  Bank was  not  a  commercial bank,  rather,  it was  a                                                                    
public corporation  of the State of  Alaska. The corporation                                                                    
issued bonds but  did not make mortgage  loans. He continued                                                                    
that when the corporation looked  to an organization, it did                                                                    
not look  at a specific  asset being financed. It  looked at                                                                    
the  cashflow-generating  capabilities of  the  organization                                                                    
and what could be pledged to  secure the bonds that the Bond                                                                    
Bank would be purchasing from  the organization. In the case                                                                    
of  regional health  organizations, they  had some  revenues                                                                    
that  were not  pledge-able, certain  federal receipts,  and                                                                    
other revenues  that were pledge-able. The  Alaska Municipal                                                                    
Bond Bank  Authority created a  lock box situation  with the                                                                    
pledge-able revenues  in which  all the  insurance payments,                                                                    
the  co-payments, and  Medicare and  Medicaid receipts  that                                                                    
could be pledged flowed through  a trustee bank. The trustee                                                                    
bank  would  have irrevocable  control  of  the account  and                                                                    
would  ensure  that the  funding  paid  debt service  before                                                                    
being used for other purposes of the organization.                                                                              
Mr.  Mitchell continued  that  the  organizations had  other                                                                    
cashflow associated  with the non-pledge-able  revenues they                                                                    
received  from Indian  Health Service  (IHS) or  from joint-                                                                    
venture agreements that  they could rely on  to ensure their                                                                    
operations  would remain  intact  even with  a diversion  of                                                                    
revenue.  The Bond  Bank  would require  coverage  to be  in                                                                    
place  such  that the  amount  of  revenue coming  in  would                                                                    
exceed the debt  service amount paid on the  bonds issued by                                                                    
the bank.  In previous  instances involving  regional health                                                                    
organizations and the Bond Bank,  coverage had been robust                                                                      
equal  to multiple  times the  amount. In  a normal  revenue                                                                    
situation, coverage might be equal  to 1.5 times the amount.                                                                    
He added that  when the Bond Bank sold  bonds it implemented                                                                    
provisions to avoid  a diminution of the  credit pledge. The                                                                    
bank  conducted  an  additional   bond  test  ensuring  that                                                                    
historical or  projected revenue (based on  changes in rates                                                                    
and charges)  would be  sufficient to  repay the  bonds that                                                                    
might be  issued after  those of the  Bond Bank  and provide                                                                    
coverage on the bonds.                                                                                                          
Co-Chair Johnston  asked if  there was a  way to  define the                                                                    
capacity  of the  Alaska Municipal  Bond Bank.  Mr. Mitchell                                                                    
responded that in the current  instance, the Bond Bank, as a                                                                    
public corporation,  obtained its  credit rating based  on a                                                                    
moral obligation pledge  of the State of  Alaska. The Alaska                                                                    
Municipal  Bond Bank  Authority had  existed since  1975 and                                                                    
had never had to rely on  a moral obligation pledge. All the                                                                    
loans that  had been  made had been  paid by  the underlying                                                                    
borrowers. The  program was not  a grant or risk  program. A                                                                    
speculative idea  without an expectation  of being  paid 100                                                                    
percent would  not qualify for  the program. In the  case of                                                                    
the regional health organizations  and capacity, it would be                                                                    
a  matter of  the organizations  themselves. The  University                                                                    
was a different  animal. It was like a  conduit revenue bond                                                                    
program  unlike  a  traditional   bond  bank  program  which                                                                    
originally started with municipalities.                                                                                         
9:30:53 AM                                                                                                                    
Representative Josephson asked Mr.  Mitchell to describe how                                                                    
the  University   was  a  different  animal.   Mr.  Mitchell                                                                    
responded that the  University was a subagency  of the state                                                                    
which received much  of its funding from  the state already.                                                                    
The Alaska  Municipal Bond  Bank Authority  had participated                                                                    
with  the  University in  the  past.  The  Bond Bank  had  a                                                                    
statute  that allowed  for the  interception of  state funds                                                                    
appropriated  to  one  or  any of  the  borrowers  prior  to                                                                    
disbursement  to  the  lender.   The  University,  with  the                                                                    
payments it received  from the State of Alaska,  fell into a                                                                    
different credit  analysis category.  The Bond Bank  did not                                                                    
have to be quite as stringent  with the University as it was                                                                    
with the  regional health organizations. The  Bond Bank only                                                                    
made loans it expected to  get repaid. However, the coverage                                                                    
requirements for the University could possibly be reduced.                                                                      
Representative   LeBon  indicated   the  University   had  a                                                                    
representative online.                                                                                                          
9:32:04 AM                                                                                                                    
Representative Josephson noted the  University was trying to                                                                    
decrease its  square footage. Ten years  previously, it made                                                                    
sense to  build the Alaska  Airlines Arena in  his district.                                                                    
Presently, it would  not make sense. He asked  if the Alaska                                                                    
Municipal Bond Bank Authority considered all factors.                                                                           
Mr.  Mitchell  indicated that  the  University  had its  own                                                                    
requirements to  fulfill in  order to  issue bonds.  It also                                                                    
typically  had to  have legislative  approval to  do so.  He                                                                    
noted  that  the  Bond  Bank  was not  like  a  credit  card                                                                    
available  for  use by  the  University,  rather it  was  an                                                                    
option  the  University could  exercise  if  it was  already                                                                    
planning on  borrowing money. The  University would  look at                                                                    
issuing bonds  on its own based  on its credit, or  it would                                                                    
consider using  the Bond Bank,  whichever option  cost less.                                                                    
The University's  chief financial officer, Myron  Dosch, had                                                                    
undertaken   analysis   in   the   current   interest   rate                                                                    
environment. It appeared the University  would save money if                                                                    
it  refinanced its  portfolio through  the Bond  Bank rather                                                                    
than  independently.  He  concluded that  given  the  strong                                                                    
linkage between the  State of Alaska and  the University, it                                                                    
was not a  step sideways to allow the Bond  Bank to help the                                                                    
University save money.                                                                                                          
MYRON DOSCH, CHIEF FINANCIAL  OFFICER, UNIVERSITY OF ALASKA,                                                                    
FAIRBANKS, spoke in  support of the bill.  He concurred with                                                                    
the comments made by Representative  LeBon and Mr. Mitchell.                                                                    
The  bill  would  provide  the   opportunity  to  borrow  or                                                                    
refinance obligations  at lower interest rates  by accessing                                                                    
credit  through  the  Municipal   Bond  Bank  Authority.  He                                                                    
suggested  that by  avoiding interest  costs the  University                                                                    
would  have more  money for  operations. The  University had                                                                    
been able to quantify its  position. In the current interest                                                                    
rate environment,  if the  University were  to issue  a bond                                                                    
for either new  money or refinancing in the  amount of about                                                                    
$50  million  over 30  years,  the  interest rate  would  be                                                                    
better   by  about   .15  percent.   The  saving   would  be                                                                    
approximately $50,000  per year  or about $1.5  million over                                                                    
the life  of the bond.  He saw the bill  as a way  of making                                                                    
opportunities more viable.                                                                                                      
Mr. Dosch  continued that the University  did not anticipate                                                                    
any  new construction  projects in  the next  2 to  3 years.                                                                    
Accessing  credit through  the  Bond Bank  would provide  an                                                                    
opportunity  that   it  would  assess  in   the  future.  He                                                                    
reiterated that  the University had  the authority  to issue                                                                    
bonds in its  own name which it had done  in the past. There                                                                    
were other  state statute provisions  that limited  the size                                                                    
of  the bonds  the  University could  issue without  seeking                                                                    
legislative authority. The board  made its decision based on                                                                    
the University's debt capacity and  the mission of any given                                                                    
project. The board was very judicious about debt.                                                                               
Representative  Wool  asked  for  the  University's  current                                                                    
total debt  amount. Mr. Dosch  responded that  the aggregate                                                                    
total  debt was  $297 million.  Currently,  the annual  debt                                                                    
service was about $28 million.                                                                                                  
Representative  Wool noted  that  the bill  would allow  for                                                                    
$500 million in  debt service per project. He  asked if that                                                                    
limit exceeded  the cost of  any project the  University had                                                                    
undertaken  in   the  past.  Mr.  Dosch   responded  in  the                                                                    
affirmative.  He noted  that the  bill did  not provide  any                                                                    
additional authority  from the University's  perspective. It                                                                    
was merely  an avenue for  the University to  access credit.                                                                    
The University  would remain bound  by its own  authority to                                                                    
issue  debt  in  its  name  as well  as  the  other  statute                                                                    
AS.14.40.253.  He explained  that when  there was  a project                                                                    
with  expected  annual  debt   service  that  exceeded  $2.5                                                                    
million,  the  statute  required   the  University  to  seek                                                                    
separate approval from the Legislature.                                                                                         
9:39:42 AM                                                                                                                    
Representative  Carpenter  asked  who  currently  owned  the                                                                    
bonds related  to the University.  Mr. Bosch  responded that                                                                    
the University bonds were on  the general market and sold on                                                                    
the capital  market. They generally  had a 10-year  call. He                                                                    
elaborated   that  when   the  University   refinanced,  the                                                                    
existing  bond holders  were  paid off  and  new bonds  were                                                                    
reissued.  The bonds  were  owned in  the  general market  -                                                                    
traded and  sold in mutual  funds, insurance  companies, and                                                                    
the like.                                                                                                                       
Representative  Carpenter was  curious if  there were  other                                                                    
organizations that  had access to bonding  authorities other                                                                    
than the  University and regional health  organizations. Mr.                                                                    
Mitchell  responded  that  through the  program  there  were                                                                    
other  authorized  borrowers  who   had  the  capability  of                                                                    
financing  100  percent  of the  University's  projects.  He                                                                    
detailed  that the  projects themselves  were not  providing                                                                    
the  security or  source for  repayment. For  example, on  a                                                                    
general obligation pledge of the  City of Kenai or Soldotna,                                                                    
the  Bond Bank  was not  worried  about the  library or  the                                                                    
public  safety building  being financed.  Instead, the  Bond                                                                    
Bank was  worried about the  property tax base or  sales tax                                                                    
base  being able  to provide  revenue to  be used  to pay  a                                                                    
Representative  Carpenter noted  the significant  healthcare                                                                    
inflation  in  the  state.  He  wondered  how  the  cost  of                                                                    
inflation would  impact payment risk.  He also  wondered how                                                                    
getting  a handle  on inflation  would  impact payment  risk                                                                    
specifically  for health  care  organizations. Mr.  Mitchell                                                                    
indicated the Bond Bank would  rely on the current construct                                                                    
and on experts to provide  information on the expectation in                                                                    
the current  market. In terms  of the risks  moving forward,                                                                    
he thought they  were of legitimate concern.  He deferred to                                                                    
9:42:51 AM                                                                                                                    
Mr. Welles  responded that  he would  break up  the question                                                                    
into  several questions.  He  reported  that the  healthcare                                                                    
facilities being  discussed were tribally owned  by regional                                                                    
health organizations.  The joint  venture projects  in which                                                                    
facilities  were  being  built included  all  people  within                                                                    
their    respective   communities.    He   indicated    that                                                                    
reimbursement  was  primarily  through  Medicaid  (State  of                                                                    
Alaska),  Medicare  (federal  government),  and  third-party                                                                    
insurance with  price regulations. Tribal health  was unique                                                                    
in  that for  an individual  on  Medicaid who  was a  tribal                                                                    
member of one of the  229 federally recognized tribes in the                                                                    
state, their health care cost  was the responsibility of the                                                                    
federal government rather  than the state. He  noted the 100                                                                    
percent Federal Medical Assistance  Percentage (FMAP) when a                                                                    
member  received   health  care  through  a   tribal  health                                                                    
Mr.  Welles  relayed that  the  current  projects slated  to                                                                    
expand  community health  services  included  a $20  million                                                                    
project in  Kotzebue, an  $87 million  project in  Kodiak, a                                                                    
$15  million project  in Seward,  a $20  million project  in                                                                    
Cordova, and  a new hospital  project in Sitka  estimated to                                                                    
cost  more  than  $300  million.  The  projects  were  joint                                                                    
ventures with IHS  providing a unique stream  of revenue. He                                                                    
explained  that when  a tribal  health organization  entered                                                                    
into  an  agreement  with IHS  to  build  an  infrastructure                                                                    
project  (hospital  or  clinic),  the IHS  entered  into  an                                                                    
agreement  with  the  organization   to  pay  for  staffing,                                                                    
operations,  and maintenance  costs of  the facility  for 20                                                                    
years  upon  the  project's completion.  The  agreement  was                                                                    
entered  into  as part  of  compact  funding tied  to  self-                                                                    
determination.  He elaborated  that  for the  past 35  years                                                                    
Alaska's  tribes had  looked to  the federal  government for                                                                    
funding through Public Law 93.6.38.  The law allowed for the                                                                    
tribes  to   take  the  funding  to   form  regional  health                                                                    
Mr.  Welles  continued that  the  baseline  funding for  the                                                                    
organizations  came  from  the federal  government  and  was                                                                    
negotiated  every year.  The  regional health  organizations                                                                    
were able  to bill for third-party  care including Medicare,                                                                    
Medicaid, and third-parties. He  indicated that the rates of                                                                    
reimbursement  for  Medicaid  and Medicare  were  cost-based                                                                    
rates.  A   cost-based  rate   was  an   all-inclusive  rate                                                                    
determined  by  taking  all of  the  allowable  costs  under                                                                    
Medicare rules each year in  the cost reports divided by the                                                                    
number of  allowable patient encounters.  In turn,  the cost                                                                    
per  encounter  for   in-patient  services  and  out-patient                                                                    
services  could be  determined. Once  determined, the  cost-                                                                    
based   rate   was   forwarded  to   the   regional   health                                                                    
organizations addressing  the issue of price  inflation. The                                                                    
projects  would provide  equal opportunity,  improved access                                                                    
to  and  quality  of  care,   and  a  significant  boost  to                                                                    
telemedicine services.                                                                                                          
Representative  Carpenter surmised  that if  the legislature                                                                    
made  the decision  to bond,  the public  would pick  up 100                                                                    
percent  of the  debt. However,  if the  conditions changed,                                                                    
the public would be more on  the hook than it would be under                                                                    
current  law.  He was  unsure  whether  federal funds  would                                                                    
continue to flow  at the same level over the  next couple of                                                                    
decades. He  thought the situation was  challenging and that                                                                    
it was  likely that  money would  dry up.  If so,  the state                                                                    
would  pick up  the  risk  on the  bonds  more  so with  the                                                                    
proposed legislation.                                                                                                           
9:49:32 AM                                                                                                                    
Mr.  Mitchell  indicated  the  Alaska  Municipal  Bond  Bank                                                                    
Authority would address the issue  through the rate covenant                                                                    
concept in  which pledge-able revenues  would be  a multiple                                                                    
factor of  the debt service.  There would be  limitations on                                                                    
the  ability   to  pledge  the   revenue.  If   the  revenue                                                                    
diminished in  the future, a  default would not  occur until                                                                    
the diminishment  was significant. In the  current instance,                                                                    
there  was  additional  comfort  that  the  operation  would                                                                    
continue  because   of  the  funding  packages   Mr.  Welles                                                                    
described, even  if 100 percent of  the pledge-able revenues                                                                    
were  taken. He  reiterated that  the Alaska  Municipal Bond                                                                    
Bank Authority's  process in issuing loans  was conservative                                                                    
and,  there   was  a  100   percent  expectation   of  their                                                                    
repayment. The authority tried  to accommodate for potential                                                                    
future negative  events. It  was possible  there might  be a                                                                    
scenario  in which  measures were  not conservative  enough.                                                                    
However, the Bond Bank tried  to incorporate any concerns in                                                                    
its process.                                                                                                                    
Co-Chair Foster heard Mr. Welles  mention FMAP. He asked for                                                                    
an example. He  noted that there was a  hospital in Kotzebue                                                                    
that  might be  able to  take advantage  of the  program. He                                                                    
asked if a long-term care facility would be a good example.                                                                     
Mr.  Welles responded  that Tim  Gilbert, the  President and                                                                    
CEO of  the Maniilaq Association,  had provided a  letter of                                                                    
support  and  information  about the  association's  project                                                                    
submitted  to IHS.  He relayed  that although  many projects                                                                    
across the United States had  been submitted to IHS, five of                                                                    
ten of  the selected  projects were in  Alaska. One  of them                                                                    
was  the  Maniilaq  Association's project  in  Kotzebue.  He                                                                    
explained that the project would  expand dental services and                                                                    
other outpatient ancillary clinic  services at its facility.                                                                    
The  Maniilaq  facility  was  the  hub  for  12  surrounding                                                                    
communities  outside of  Kotzebue. The  Maniilaq Association                                                                    
owned   and  operated   the  clinics   in  the   surrounding                                                                    
communities referring patients to  Kotzebue when they needed                                                                    
a greater care of service.                                                                                                      
Co-Chair  Foster was  familiar with  the long-term  facility                                                                    
model.  He suggested  that  if  a tribal  member  had to  be                                                                    
placed in  a facility  not associated with  IHS or  FMAP, it                                                                    
was  his understanding  that  the  federal government  would                                                                    
only  be responsible  for 50  percent  of the  cost and  the                                                                    
state  would  be  responsible  for  the  other  50  percent.                                                                    
Ideally, a tribal member would  be placed in a facility that                                                                    
was IHS owned where the  federal government paid 100 percent                                                                    
of  the costs.  He  asked  if part  of  the  reason for  the                                                                    
legislation was to free the state  from having to pay the 50                                                                    
percent.  He asked  how the  legislation  applied to  dental                                                                    
Mr. Welles explained that  the regional health organizations                                                                    
had  traditionally  provided  dental and  behavioral  health                                                                    
services.  Whereas,  specialty  care and  tertiary  hospital                                                                    
care had been  provided at the Alaska  Native Medical Center                                                                    
in Anchorage.  If a person  needed to see a  specialist such                                                                    
as a dermatologist or a  cardiologist, they would have to be                                                                    
seen  in   Anchorage.  The  regional   health  organizations                                                                    
provided local care to Alaska Natives and non-natives.                                                                          
Mr.  Welles  addressed   Co-Chair  Foster's  question  about                                                                    
dental services.  He relayed  that Mr.  Gilbert spoke  of an                                                                    
organic growth and  a need to expand  dental services within                                                                    
the  Maniilaq facility.  The association  also wanted  to be                                                                    
able to offer more services  closer to home keeping costs as                                                                    
low as possible.  He noted a large pediatric  dental need in                                                                    
Alaska. Enhancing facilities to  handle the pediatric dental                                                                    
need in the rural areas was an important goal.                                                                                  
Mr.  Mitchell  pointed  out  that   there  was  an  existing                                                                    
provision in statute that required  the Department of Health                                                                    
and Social  Services (DHSS)  to agree  that a  project would                                                                    
glean a financial  benefit to the state  and improve quality                                                                    
of  care. He  continued  that partnerships  were created  in                                                                    
2015 to ensure both, particularly in rural Alaska.                                                                              
9:56:52 AM                                                                                                                    
Representative Wool used his  community-owned hospital as an                                                                    
example. He  wondered if  it would be  eligible to  apply to                                                                    
the Bond Bank.                                                                                                                  
Mr.  Mitchell responded  that the  Fairbanks Hospital  would                                                                    
not be  eligible to apply directly  to the Bond Bank,  as it                                                                    
was a non-profit  facility. He noted that the  Bond Bank had                                                                    
a loan with a long-term  care facility in Juneau, Wildflower                                                                    
Court. He  elaborated that  the City  and Borough  of Juneau                                                                    
(CBJ)  applied to  the Bond  Bank because  they had  a close                                                                    
association with  Wildflower Court   it  was co-located with                                                                    
Bartlett  Regional Hospital,  a  place  where patients  went                                                                    
after  surgery  to  convalesce,   and  a  place  to  receive                                                                    
end-of-life care. The facilities were  on land owned by CBJ.                                                                    
He noted there was an  agreement in place that if Wildflower                                                                    
Court  were  to  fail,  Bartlett Hospital  would  take  over                                                                    
operations  of  the  facility. Otherwise,  the  organization                                                                    
would be looking  to issue bonds on a  conduit basis through                                                                    
some  entity  such  as  Alaska  Industrial  Development  and                                                                    
Export  Authority  (AIDEA)  or   the  Fairbanks  North  Star                                                                    
Borough. The  borough or the  city would have to  be willing                                                                    
to  commit financially  to the  Bond Bank,  as their  credit                                                                    
would  be  pledged. If  the  non-profit  were to  fail,  the                                                                    
municipality would take on the debt.                                                                                            
Representative LeBon asked to hear from Ms. Gayhart.                                                                            
9:59:20 AM                                                                                                                    
RENEE GAYHART,  DIRECTOR, DIVISION OF HEALTH  CARE SERVICES,                                                                    
DEPARTMENT OF HEALTH AND SOCIAL  SERVICES referenced 2 lines                                                                    
on page 2. She explained that  when the Bond Bank received a                                                                    
project, the department took a look  at it from a health and                                                                    
social  services perspective.  The Medicaid  Office and  the                                                                    
Office of  Rate Review evaluated the  project. She continued                                                                    
that in  many cases the project  would entail a build  or an                                                                    
enhancement of existing  services. The department considered                                                                    
whether  the project  would divert  travel  as new  services                                                                    
were added. Some examples included  increasing the number of                                                                    
available  dental  chairs  or enhancing  facilities  in  the                                                                    
outlying areas  in order to  perform dental  crowns locally.                                                                    
The  department  reviewed  travel costs,  potential  revenue                                                                    
generation, and  the costs for  additional hospital  beds or                                                                    
dental services.                                                                                                                
Ms.  Gayhart addressed  Representative Carpenter's  question                                                                    
regarding inflation.  The department  did not set  the rates                                                                    
for  tribal health  organizations    they  were  set in  the                                                                    
federal register by  IHS. The department paid  the set rates                                                                    
and was  reimbursed 100 percent.  She indicated  things were                                                                    
more  complicated  with  reclaiming.  She  noted  the  state                                                                    
health official letter  that came out in  2016. She reported                                                                    
that in  some cases when  tribal members went  to non-tribal                                                                    
sites,  if the  requirements  of the  state health  official                                                                    
letter  were  met,  the  state  would  receive  100  percent                                                                    
reimbursement. Additional  analysis had  to be  completed to                                                                    
assess how much Medicaid  would contribute or alleviate from                                                                    
the state's  expenses. Expenses would include  items such as                                                                    
transportation or  services in another region.  The Medicaid                                                                    
Office and  the Office of  Rate Review compiled  the numbers                                                                    
and sent  them to the  Commissioner's Office to  be reviewed                                                                    
and  forwarded to  the Bond  Bank. The  information included                                                                    
what the state would  contribute. She conveyed that Medicaid                                                                    
was a different payer mix  in every region with the Medicaid                                                                    
population being a factor.                                                                                                      
Ms. Gayhardt relayed  that there was another  piece that had                                                                    
to  be  analyzed.  There were  several  non-native  Medicaid                                                                    
beneficiaries that  went to  tribal health  organizations in                                                                    
the regions. They met the  regular match qualifications. The                                                                    
state would pay the all-inclusive  IHS rate but only receive                                                                    
a  reimbursement  rate of  50  percent.  The State  Medicaid                                                                    
Office had  a detailed analysis  of the numbers  before they                                                                    
were  sent  to the  Bond  Bank.  The department  weighed  in                                                                    
either supporting or remaining neutral on a project.                                                                            
10:02:48 AM                                                                                                                   
Representative  Carpenter wondered  what other  avenues were                                                                    
available for moving  forward with projects if  the bill did                                                                    
not  pass.  Mr.  Welles  indicated  that  there  were  other                                                                    
alternatives. Typically,  the other options  entailed paying                                                                    
additional interest costs. He  used the new hospital project                                                                    
in Sitka  as an  example. He indicated  that the  entity was                                                                    
large enough to get its own  credit rating and issue its own                                                                    
bonds.  More than  likely they  would  receive an  A+ or  AA                                                                    
rating based on  their financials having the  same raking as                                                                    
the Bond Bank and the ability to stand alone.                                                                                   
Mr. Welles continued that the  Maniilaq Association might be                                                                    
able to get  its own credit rating and issue  its own bonds,                                                                    
but perhaps  at a credit rating  less than that of  the Bond                                                                    
Bank at  higher interest rates.  He noted that  a commercial                                                                    
bank was also an option.  He reported that the Tanana Chiefs                                                                    
Conference was one  of the first entities to  go through the                                                                    
Bond Bank.  They were able  to refinance and save  more than                                                                    
$30  million  in  interest  charges  for  the  life  of  the                                                                    
financing. He  mentioned going to  Fitch and Moody's  to get                                                                    
credit   ratings   and   provide  them   with   information.                                                                    
Subsequently, with  the follow up  issuance of bonds  in the                                                                    
market  they  were  found  to  be a  good  credit  risk.  In                                                                    
September Tanana  Chief Conference  Received its  own credit                                                                    
rating (single A) and issued  $126 million of bonds on their                                                                    
own  with  a  30-year  term  and an  interest  rate  of  3.4                                                                    
percent. He noted several tools in the tool box.                                                                                
Representative  Wool brought  up the  hospital in  Sitka for                                                                    
$300 million.  He noted that  the current cap for  a project                                                                    
was  $102  million.  He  asked  if  the  Sitka  project  was                                                                    
dependent on the cap being raised.                                                                                              
Mr. Welles replied that it would  be helpful to have the cap                                                                    
raised.  He  noted the  project  in  Bethel associated  with                                                                    
Yukon-Kuskokwim Health Corporation (YKHC)  was 50 percent to                                                                    
the  cap. He  relayed  that  the new  hospital  was a  joint                                                                    
venture  project with  the  U.S.  Department of  Agriculture                                                                    
(USDA).  He  was aware  of  similar  projects in  Sitka  and                                                                    
Anchorage. He added that the  larger projects could stand on                                                                    
their own.                                                                                                                      
10:07:04 AM                                                                                                                   
Representative Wool  asked if the  cost of the  Tanana Chief                                                                    
Conference project  was $127  million. Mr.  Welles indicated                                                                    
that the amount applied to multiple projects.                                                                                   
Representative Wool clarified that  the figure reflected the                                                                    
construction  cost  of  the  original  project.  Mr.  Welles                                                                    
indicated that  the $127 million was  the refinancing amount                                                                    
of the  original project which  was $87 million.  There were                                                                    
additional   projects  underway   next  door   to  Fairbanks                                                                    
Memorial Hospital (FMH).                                                                                                        
Representative Knopp  asked about the hospital  in Sitka and                                                                    
whether  it changed  hands. Mr.  Welles  responded that  the                                                                    
Sitka  Community  Hospital  had  been taken  over  by  Sitka                                                                    
Community Health Services (SEARHC)  - the two hospitals were                                                                    
becoming one.                                                                                                                   
10:08:10 AM                                                                                                                   
AT EASE                                                                                                                         
10:08:30 AM                                                                                                                   
Co-Chair Johnston OPENED Public Testimony.                                                                                      
10:08:48 AM                                                                                                                   
Co-Chair Johnston CLOSED Public Testimony.                                                                                      
Co-Chair Johnston would be setting the bill aside.                                                                              
HB 264 was HEARD and HELD in committee for further                                                                              
10:09:11 AM                                                                                                                   
AT EASE                                                                                                                         
10:09:32 AM                                                                                                                   
HOUSE BILL NO. 181                                                                                                            
     "An Act relating to mental health education."                                                                              
10:09:32 AM                                                                                                                   
Co-Chair Johnston invited the sponsor to the table.                                                                             
REPRESENTATIVE   MATT   CLAMAN,    SPONSOR   read   prepared                                                                    
     Co-chairs,  members  of  the House  Finance  committee,                                                                    
     thank you for hearing House  Bill 181, "An Act relating                                                                    
     to mental health education." House  Bill 181 amends the                                                                    
     existing  K-12 public  school health  education statute                                                                    
     to  include  mental  health  guidelines  for  all  K-12                                                                    
     health   classrooms  to   educate  students   on  vital                                                                    
     information  about mental  health symptoms,  resources,                                                                    
     and treatment.                                                                                                             
     Currently,  the  Alaska  health  curriculum  guidelines                                                                    
     include prevention and  treatment of diseases; learning                                                                    
     about "good" health practices  like diet, exercise, and                                                                    
     personal  hygiene;  and  "bad" health  habits  such  as                                                                    
     substance  abuse, alcoholism,  and physical  abuse. But                                                                    
     the  guidelines do  not address  mental health.  HB 181                                                                    
     will   result  in   updating   the  health   curriculum                                                                    
     guidelines to  include mental  health. It  is important                                                                    
     to  keep  in mind,  however,  that  the guidelines  are                                                                    
     voluntary and  school districts  can choose  whether to                                                                    
     offer  health  classes.   The  local  districts  retain                                                                    
     control of their health curriculum.                                                                                        
     Lucas Johnson, who you will  hear testify today, was 18                                                                    
     years old  and in  his junior  year at  Monticello High                                                                    
     School  in  Virginia's  Albemarle County  when  he  and                                                                    
     fellow classmates Alexander  Moreno and Choetsow Tenzin                                                                    
     began  lobbying for  more  mental  health resources  in                                                                    
     their  school. From  troubling  social  media posts  to                                                                    
     bullying  to students  in distress  who  felt they  had                                                                    
     nowhere  to turn,  Johnson and  his classmates  saw how                                                                    
    unaddressed mental health was hurting their peers.                                                                          
     Johnson and  his classmates  recognized that  while the                                                                    
     Virginia  Board of  Education's  Standards of  Learning                                                                    
     already  included  some  mental health  education,  the                                                                    
     standards  were by  no  means  comprehensive. So,  they                                                                    
     pushed  for  a law  that  would  require the  Board  of                                                                    
     Education to review and update  the health Standards of                                                                    
     Living  for students  in  grades 9  and  10 to  include                                                                    
     mental  health. Since  this provision  was signed  into                                                                    
     law in  Virginia in March  of 2018, the State  of Maine                                                                    
     passed a similar  law. Now, we have  the opportunity to                                                                    
     consider  similar  legislation  in  Alaska,  where  the                                                                    
     statistics  show  that   the  severity  of  unaddressed                                                                    
     mental health  among our youth and  teenage populations                                                                    
     is nothing short of a public health crisis.                                                                                
     According  to the  2017 Alaska  High School  Youth Risk                                                                    
     Behavior  Survey,  which  surveyed  1,343  students  in                                                                    
     grades  9-12 from  40 high  schools  across the  state,                                                                    
     more  than 1  in  3 students  reported  feeling sad  or                                                                    
     hopeless, for a period of  at least 2 weeks, during the                                                                    
     12  months  preceding   the  survey.  Furthermore,  the                                                                    
     SAMHSA  National   Survey  in   Drug  Use   and  Health                                                                    
     estimates  that in  2015 and  2016, 15%  of adolescents                                                                    
     aged  12-17 reported  that they  had at  least 1  major                                                                    
     depressive episode  during the 12 months  preceding the                                                                    
     survey.  Both of  these studies  are  included in  your                                                                    
     bill packets for reference.                                                                                                
     HB  181 requires  the Alaska  State Board  of Education                                                                    
     and  Early Development  and  the  Alaska Department  of                                                                    
     Education and  Early Development to  develop guidelines                                                                    
     for   instruction  in   mental   health  education   in                                                                    
     consultation with  the Alaska Department of  Health and                                                                    
     Social   Services,  counselors,   educators,  students,                                                                    
     administrators  and  representatives  of  national  and                                                                    
     state mental  health organizations and  regional tribal                                                                    
     health organizations.                                                                                                      
     After standards  have been developed, the  Alaska State                                                                    
     Board  of  Education  and  Early  Development  and  the                                                                    
     Alaska  Department of  Education and  Early Development                                                                    
     will  be  responsible for  facilitating  implementation                                                                    
     throughout  the  Alaska  school  system,  utilizing  an                                                                    
     existing  school health  education specialist  position                                                                    
     to assist  in state-wide program coordination.  As with                                                                    
     existing  health education  curriculum, the  Department                                                                    
     of Education  and Early Development, the  Department of                                                                    
     Health  and   Social  Services,  and  the   Council  in                                                                    
     Domestic  Violence  and  Sexual  Assault  will  provide                                                                    
     technical  assistance   to  school  districts   in  the                                                                    
     development of curricula.                                                                                                  
     The  state has  a responsibility  to treat  the current                                                                    
     mental  health crisis  in Alaska  as  a serious  public                                                                    
     health  issue.  By  creating  mental  health  education                                                                    
     standards  and encouraging  schools to  teach a  mental                                                                    
     health curriculum,  HB 181 aims to  decrease the stigma                                                                    
     surrounding  mental  illnesses and  increase  students'                                                                    
     knowledge  of mental  health, encouraging  conversation                                                                    
     around and understanding of the issue.                                                                                     
Representative Claman indicated his staff, Sophie Jonas,                                                                        
would present a Sectional Analysis of the bill.                                                                                 
10:15:52 AM                                                                                                                   
SOPHIE JONAS, STAFF, REPRESENTATIVE MATT CLAMAN read the                                                                        
sectional analysis:                                                                                                             
     Section 1                                                                                                                  
     Legislative Intent                                                                                                         
     Adds intent  language stating it  is the intent  of the                                                                    
     legislature  that  the  Board of  Education  and  Early                                                                    
     Development  develop  guidelines   for  instruction  in                                                                    
     mental health  in consultation with  representatives of                                                                    
     mental health organizations  and regional tribal health                                                                    
     organizations,  including  the   National  Council  for                                                                    
     Behavioral  Health,  Providence   Health  and  Services                                                                    
     Alaska,  Southcentral  Foundation, Anchorage  Community                                                                    
     Mental  Health Services,  Inc.,  North Star  Behavioral                                                                    
     Health  System, and  the  National  Alliance on  Mental                                                                    
     Health Illness Alaska.                                                                                                     
     Section 2                                                                                                                  
     AS  14.30.360.  Health education  curriculum;  physical                                                                    
     activity  guidelines. Amends  AS 14.30.360  by removing                                                                    
     the  word "physical"  when referencing  instruction for                                                                    
     health  education and  adding  "mental  health" to  the                                                                    
     list  of curriculum  items  each  district includes  in                                                                    
     their health education programs.                                                                                           
     Section 3                                                                                                                  
     AS  14.30.360.  Health education  curriculum;  physical                                                                    
     activity guidelines. Amends  AS 14.30.360 by clarifying                                                                    
     that  health  guidelines  developed  by  the  Board  of                                                                    
     Education and Early  Development must provide standards                                                                    
     for instruction  in mental health  and be  developed in                                                                    
     consultation with  the Department of Health  and Social                                                                    
     Services  and  representatives  of national  and  state                                                                    
     mental health organizations.                                                                                               
     Section 4                                                                                                                  
     Amends the  uncodified law  of the  State of  Alaska by                                                                    
     adding  a  new section  to  read  "the state  Board  of                                                                    
     Education  and  Early  Development  shall  develop  the                                                                    
     mental health  guidelines required by  AS 14.30.360(b),                                                                    
     as  amended by  sec. 3  of this  Act, within  two years                                                                    
     after the effective date of this Act."                                                                                     
Ms. Jonas was available for questions.                                                                                          
10:17:34 AM                                                                                                                   
[A video was played entitled, "And Mental Health."]                                                                             
10:21:45 AM                                                                                                                   
Co-Chair  Johnston indicated  there  was invited  testimony.                                                                    
She asked testifiers to limit their testimony to 3 minutes.                                                                     
JASON  LESSARD,  EXECUTIVE  DIRECTOR, NATIONAL  ALLIANCE  ON                                                                    
MENTAL  ILLNESS  (NAMI),  ANCHORAGE,  spoke  in  support  of                                                                    
HB 181.   He  provided   some  background   information  and                                                                    
important  statistics. He  reported that  one in  five teens                                                                    
had a serious mental disorder  at some point in their lives.                                                                    
He claimed that 50 percent  of all lifetime mental illnesses                                                                    
began by  age 14  and 75  percent by  age 24.  He recognized                                                                    
that  mental  illness onset  was  largely  happening in  the                                                                    
teenaged brain and in the  brain of transitional aged youth.                                                                    
He returned to  the notion that half of  all lifetime mental                                                                    
illnesses began by  freshman year of high  school for youth.                                                                    
He  thought   it  was  imperative  to   have  safe  informed                                                                    
conversations with  youth about mental illnesses  and mental                                                                    
wellness. One  of the largest  barriers to seeking  help was                                                                    
stigma. He  asserted that stigma  was born of  ignorance and                                                                    
education was the most effective antidote.                                                                                      
Mr. Lessard asserted that although  there were several great                                                                    
programs  educating youth  and staff  around the  state, the                                                                    
programs  did not  engage directly  with Alaska's  youth. He                                                                    
thought the bill would help  to put standards into place. He                                                                    
asserted that not all programs  were created equal. Although                                                                    
some  of the  programs  were created  with good  intentions,                                                                    
some of  them had negative  or fatal consequences.  He noted                                                                    
the example  of ALICE  Training    the active  shooter drill                                                                    
training.   Improperly  implemented,   the  trainings   were                                                                    
causing  Post  Traumatic  Stress  Disorder  (PTSD)  in  some                                                                    
youth. He  also pointed  out that interaction  between peers                                                                    
was  imperative.  He  mentioned  a  NAMI  program  that  was                                                                    
presented  in schools  that had  been effective  in changing                                                                    
knowledge  and attitudes  towards mental  health as  well as                                                                    
seeking help. The National Council  on Behavioral Health saw                                                                    
value in early engagement and  was currently piloting a teen                                                                    
mental  health  first  aid program  in  various  communities                                                                    
around  the  state. He  stressed  the  importance of  adding                                                                    
mental health  to the current health  curriculum statute and                                                                    
creating guidelines to ensure  that the curriculum was being                                                                    
implemented   safely   and   effectively  in   the   various                                                                    
10:27:08 AM                                                                                                                   
LUCAS JOHNSON, SELF, BRUNSWICK,  MAINE, supported HB 181. He                                                                    
spoke of  the importance of  ensuring that all  students had                                                                    
the  opportunity  to  talk  about  and  learn  about  mental                                                                    
health. He  thought it  was critical  to have  mental health                                                                    
education within  Alaska's statutes  and in  its classrooms.                                                                    
He believed  that HB  181 was an  integral bill  to ensuring                                                                    
all students were  given the opportunity to  learn about one                                                                    
of  the  most  important  aspects of  their  health:  mental                                                                    
health. He  suggested that it was  fundamental to understand                                                                    
that   having  the   requisite   language,  materials,   and                                                                    
knowledge  to  get help  when  a  person  needed it  was  as                                                                    
important as teaching someone about  any other part of their                                                                    
body. He  thought HB  181 would  ensure that  Alaska's youth                                                                    
received  what  they  needed.   He  thought  the  statistics                                                                    
mentioned by  the previous speaker provided  enough evidence                                                                    
that  early  intervention  in teaching  youth  about  mental                                                                    
health was critical. He reiterated his support FOR HB 181.                                                                      
10:29:56 AM                                                                                                                   
NATALIE  FRASER,   MENTAL  HEALTH  ADVOCACY   THROUGH  STORY                                                                    
TELLING,  ANCHORAGE, spoke  in support  in HB  181. She  was                                                                    
currently  a high  school student  in Anchorage.  She talked                                                                    
about learning about physical health  and care. However, she                                                                    
experienced mental  health conditions that  were detrimental                                                                    
to  her  wellbeing. She  believed  that  mental illness  was                                                                    
thought to  be what other  people had. She talked  about the                                                                    
benefits of suicide prevention  programs. She indicated that                                                                    
if  she had  not  received help  from  a suicide  prevention                                                                    
program, she would not be  present today. She thought it was                                                                    
important to  recognize that life  was hard.  She reiterated                                                                    
her support for HB 181.                                                                                                         
10:32:59 AM                                                                                                                   
Co-Chair Johnston OPENED Public Testimony.                                                                                      
ZOE KAPLAN,  MENTAL HEALTH  ADVOCACY THROUGH  STORY TELLING,                                                                    
ANCHORAGE,  spoke  in support  of  HB  181. She  provided  a                                                                    
personal experience  with depression.  She had a  network of                                                                    
support.  However, she  relayed  her  observation of  others                                                                    
struggling  with their  mental  Health.  She thought  mental                                                                    
health had  not become a  topic of normal  conversation. She                                                                    
suggested  that people  were not  able to  get the  help and                                                                    
resources  they  needed  because   they  did  not  have  the                                                                    
education  to identify  what  they  were experiencing.  [The                                                                    
testifier  faded  in  and out  during  her  testimony].  She                                                                    
thought it was neglectful and a  risk to Alaska youth not to                                                                    
provide them  with information  that could  potentially save                                                                    
them. She reiterated her support for the legislation.                                                                           
10:36:23 AM                                                                                                                   
Co-Chair Johnston CLOSED Public Testimony.                                                                                      
Co-Chair Johnston  wanted to hold questions  until after the                                                                    
fiscal note was presented.                                                                                                      
Representative Claman  indicated he  had some  concerns with                                                                    
the fiscal note.                                                                                                                
LACEY SANDERS, ADMINISTRATIVE  SERVICES DIRECTOR, DEPARTMENT                                                                    
OF  EDUCATION AND  EARLY DEVELOPMENT,  OFFICE OF  MANAGEMENT                                                                    
AND  BUDGET, OFFICE  OF THE  GOVERNOR,  reviewed the  fiscal                                                                    
note with OMB  component number 2796. She  detailed that the                                                                    
cost  associated with  implementation of  standards for  the                                                                    
Department  of  Education (DEED)  consisted  of  a total  of                                                                    
$113,000  unrestricted general  funds (UGF).  The department                                                                    
had requested  a multi-year appropriation due  to the 2-year                                                                    
implementation covering  FY 21  and FY  22. The  fiscal note                                                                    
contained 4 one-time multi-year  expenses. The first expense                                                                    
in the amount of $35,000  would pay for a year-long contract                                                                    
with   state  of   national  subject   matter  expert   with                                                                    
experience  facilitating the  creation of  the state  health                                                                    
education  standards. The  second expense  in the  amount of                                                                    
$60,000  paid for  travel for  20 to  30 representatives  of                                                                    
mental health  organizations to convene  in Anchorage  for 2                                                                    
separate  2-day meetings.  The next  expense was  for $6,000                                                                    
for  legal  services  costs associated  with  producing  new                                                                    
regulations.  Lastly, there  was an  expense of  $12,000 for                                                                    
the creation  and printing  and booklets  of the  new health                                                                    
education  standards  that  would   be  distributed  to  500                                                                    
schools,  54 school  districts, and  other health  education                                                                    
stakeholders. She  noted that the fiscal  note reflected the                                                                    
department's standard  request when  implementing standards.                                                                    
The  department had  implemented  several  standards in  the                                                                    
past and were being put  forward currently. It reflected the                                                                    
associated costs  each time  the department  implemented new                                                                    
10:39:11 AM                                                                                                                   
Representative  LeBon  asked  what the  expectation  or  the                                                                    
responsibility of the Fairbanks  School District would be to                                                                    
the program.  Ms. Sanders  responded that  the way  the bill                                                                    
was  currently written  the implementation  of standards  at                                                                    
the school  district level were optional.  The Department of                                                                    
Education and Early Development  would develop the standards                                                                    
and would present  them to the State Board  of Education for                                                                    
approval.  The department  would then  work with  the school                                                                    
districts to address any concerns.                                                                                              
Co-Chair Foster  referred to Ms.  Sanders' remark  about the                                                                    
fiscal note  reflecting a  multi-year appropriation.  He saw                                                                    
that money  was only listed  in the  FY 21 column.  He asked                                                                    
for clarification.                                                                                                              
Ms. Sanders  replied that the  fiscal note was  a reflection                                                                    
of  the department's  needs. The  department identified  the                                                                    
appropriation as  a multi-year appropriation.  She continued                                                                    
that the need is listed in  the comment box and the analysis                                                                    
on the  second page of  the fiscal note. She  explained that                                                                    
when the legislature reached the  point of incorporating the                                                                    
fiscal  note appropriations  that  were  approved for  bills                                                                    
into  the appropriation  bill, it  would be  up to  the bill                                                                    
drafters  and the  Legislative  Finance  Division to  ensure                                                                    
that there  was a multi-year appropriation  with an extended                                                                    
lapse date. The  fiscal note did not allow for  the costs to                                                                    
be broken  out into  a 2-year appropriation.  Therefore, the                                                                    
department  put it  all in  the  appropriation requested  so                                                                    
that  it  could get  started  on  the  work  in FY  21.  She                                                                    
furthered that  with an extended  lapse date it  would allow                                                                    
the department 2 years to expend the money.                                                                                     
Co-Chair  Johnston asked  if Ms.  Sanders was  familiar with                                                                    
HB 136.  It  had to  due  with  public schools'  social  and                                                                    
emotional learning.  Ms. Sanders was only  familiar with the                                                                    
bill in  name. She  indicated Erin Harden  might be  able to                                                                    
better  speak  to  the  bill  referenced  by  Representative                                                                    
Co-Chair Johnston  relayed that the  fiscal note for  HB 131                                                                    
was  only  $6,000. Ms.  Sanders  explained  that the  $6,000                                                                    
Representative Johnston  was referring to  in HB 136  had to                                                                    
do  with   the  regulation   work  contracted  out   to  the                                                                    
Department of Law by DEED.  The fiscal note reflected a cost                                                                    
of  $6,000  for  regulation  work  related  to  HB 181.  She                                                                    
continued that because there were  no existing standards for                                                                    
mental  health,  additional  work  had to  be  completed  to                                                                    
implement them.                                                                                                                 
Co-Chair Johnston  asked for  confirmation that  the $60,000                                                                    
was  to facilitate  people convening  together. Ms.  Sanders                                                                    
responded in the affirmative.                                                                                                   
Co-Chair Johnson asked if the  $12,000 appropriation was for                                                                    
printing  costs and  the  distribution  of information.  Ms.                                                                    
Sanders replied, "Correct."                                                                                                     
10:42:46 AM                                                                                                                   
Representative Wool asked about  the $12,000 for 500 schools                                                                    
and 54 school  districts. He asked if the  booklets were for                                                                    
administrators rather  than students.  He did not  think the                                                                    
amount  was  very sizable  to  distribute  booklets to  many                                                                    
places.  Ms. Sanders  replied that  the amount  was for  the                                                                    
purpose of distributing booklets to  all of the 500 schools,                                                                    
54  school district  offices, and  to  any other  additional                                                                    
Representative Wool  asked if each school  only received one                                                                    
booklet. Ms. Sanders responded, "Yes."                                                                                          
Co-Chair  Johnston  requested   that  Representative  Claman                                                                    
return  to the  testifier  table. She  asked  if there  were                                                                    
tools available  in other states  that would  help eliminate                                                                    
Alaska's need for a broadband conversation.                                                                                     
Representative Claman responded that  Alaska was not unique.                                                                    
The health  education curriculum of the  Centers for Disease                                                                    
Control (CDC)  did not contain information  on mental health                                                                    
either. However, the  CDC had some resources equal  to a few                                                                    
pages  about what  they would  recommend for  guidelines for                                                                    
mental  health. Interestingly,  the  health guidelines  that                                                                    
Alaska currently had  was on 2 pages. He was  skeptical of a                                                                    
$6,000 fiscal  note in the  current age of the  internet. He                                                                    
suspected mental  health could  be uploaded  to the  rest of                                                                    
the health curriculums online.  He thought several resources                                                                    
were available. He  also questioned the notion  of having to                                                                    
bring 20  to 30 people  to Anchorage twice,  especially with                                                                    
the  current  budget challenges.  He  suggested  the use  of                                                                    
telephonic   meetings.   He   opined   that   updating   the                                                                    
information  on mental  health that  was  currently 2  pages                                                                    
could be done for much less.                                                                                                    
10:46:19 AM                                                                                                                   
Representative  Josephson   asked  the  sponsor   about  the                                                                    
potential for  expanding the school  year. He asked  how the                                                                    
bill would affect on-the-ground  activity. He requested that                                                                    
the representative  paint a  picture of  how the  bill would                                                                    
work. Representative  Claman replied  that the bill  did not                                                                    
create a  separate mental health class.  He recalled growing                                                                    
up in high  school that health was a  one-semester class. If                                                                    
the  class was  a  10-week class  containing everything  but                                                                    
mental  health, he  thought the  curriculum could  fold into                                                                    
the 10-week  period. He cited  an example of an  annual exam                                                                    
incorporating a question about a person's mental health.                                                                        
Representative Wool  thought there was more  time devoted to                                                                    
health  classes. He  indicated his  kids were  spending more                                                                    
time in the  classroom on the topic of  health. He suggested                                                                    
that the  more curriculum  that was  expected to  be taught,                                                                    
the longer  the class hours or  days in the school  year. He                                                                    
wondered  if any  of the  language  prevented mental  health                                                                    
from being part of the classroom curriculum.                                                                                    
Representative  Claman  replied  that  presently  there  was                                                                    
nothing  preventing school  districts from  including mental                                                                    
health in  their curriculum.  There was  a number  of school                                                                    
districts that  already provided different levels  of mental                                                                    
health education.  He indicated  the bill was  about suicide                                                                    
prevention. He  though it was  a worthy investment  in time.                                                                    
He  understood the  pressure of  having to  teach additional                                                                    
curriculum. He thought  it was a priority and  would need to                                                                    
be balanced with additional curriculum.                                                                                         
10:51:38 AM                                                                                                                   
Vice-Chair Ortiz  appreciated the  bill being  presented. He                                                                    
understood that the bill was  not a mandate but was supposed                                                                    
to  bring  a  heightened  awareness  to  mental  health.  He                                                                    
wondered if it  was still up to the district  to fold in the                                                                    
curriculum. He wondered what it  would look like in terms of                                                                    
process and implementation.                                                                                                     
Representative  Claman expected  the districts  to have  the                                                                    
conversation  with  the  school  board and  the  state.  The                                                                    
Department of Education and  Early Development would provide                                                                    
assistance  to those  school districts  that  wanted to  add                                                                    
mental health  to their curriculum. He  thought parents with                                                                    
kids with  mental health illnesses  might push  things along                                                                    
as well.                                                                                                                        
10:54:47 AM                                                                                                                   
Representative Carpenter asked for  the definition of mental                                                                    
health. He suggested  that it was the quality  of a person's                                                                    
thinking. He  wondered if the  curriculum would  be testable                                                                    
or measurable. He  thought the video was  a demonstration of                                                                    
the need  for healthy  relationships with parents  and other                                                                    
people that  influenced children. He was  concerned with the                                                                    
notion   that   the   school  would   be   responsible   for                                                                    
implementing   additional   curriculum  without   additional                                                                    
support. He  suggested the standards that  would be required                                                                    
to  be set  would  essentially guide  children  on what  was                                                                    
appropriate to  think. He suggested  the bill  was venturing                                                                    
into the realm of parenting.                                                                                                    
10:58:20 AM                                                                                                                   
Representative Sullivan-Leonard  indicated that some  of the                                                                    
school nurses she  had talked with shared  the sentiments of                                                                    
Representative  Carpenter.  She  thought  that  many  school                                                                    
nurses were  the first to  hear from students  about feeling                                                                    
depressed or being bullied. She  wondered who at each school                                                                    
would  be encapsulating  and  disbursing  the mental  health                                                                    
information. She  thought it would likely  be school nurses.                                                                    
She  asked if  the  bill would  remove  the term,  "physical                                                                    
health"  from the  statute. Representative  Claman responded                                                                    
that the way to incorporate  mental health was to remove the                                                                    
word, physical. By  doing so, it would  allow the guidelines                                                                    
to include mental health.                                                                                                       
Representative Sullivan-Leonard wondered  if the term should                                                                    
remain  in the  statute,  as physical  education  was a  key                                                                    
component  to  a  child's   health.  She  believed  students                                                                    
getting outside  and doing something physical  was essential                                                                    
to  having  strong   mental  health.  Representative  Claman                                                                    
thought physical health  was a part of  the current statute.                                                                    
He continued  that by removing  the word, "physical"  it did                                                                    
not  remove  physical  health from  curriculum.  He  read  a                                                                    
portion  of the  bill.  From his  perspective, the  language                                                                    
undoubtedly included physical health.                                                                                           
11:01:30 AM                                                                                                                   
Representative  LeBon had  previously sat  on the  Fairbanks                                                                    
School  Board for  6 year.  He indicated  that in  a similar                                                                    
situation  the  school  board  would assign  a  topic  to  a                                                                    
curriculum committee  made up of  parents. There was  a full                                                                    
vetting   process   that   included  family   and   parents.                                                                    
Representative Claman  agreed that  school nurses  were some                                                                    
of the  first people students approached.  He had confidence                                                                    
in  nurses' medical  training and  the consistency  of their                                                                    
Co-Chair  Johnston invited  Ms.  Sanders to  comment on  the                                                                    
remarks made regarding the fiscal  note. Ms. Sanders replied                                                                    
that the department understood  that mental health standards                                                                    
were  missing  from  what  was  considered  physical  health                                                                    
standards  and  supported  implementing them.  Today  mental                                                                    
health was a  complex issue. The department  believed it was                                                                    
in  the  best  interest  of  the  students  and  the  school                                                                    
districts to  ensure that experts were  available to provide                                                                    
input  in the  development  of the  standards. She  admitted                                                                    
that the  department did not  have the expertise  within the                                                                    
department to develop them on  their own which was reflected                                                                    
in the fiscal note.                                                                                                             
11:04:30 AM                                                                                                                   
Representative Carpenter was looking  at the intent language                                                                    
of  the  bill.  He  read  a portion  containing  a  list  of                                                                    
organizations.  He suggested  that unless  the organizations                                                                    
involved parents  and experts in  the process  of developing                                                                    
standards, there  was nothing  in the  bill that  pointed to                                                                    
parental involvement in determining the state's standards.                                                                      
Representative Josephson noted  that parents participated by                                                                    
testifying before their local  school boards. He argued that                                                                    
there  would   be  opportunities  for   parent  involvement.                                                                    
Representative  Claman  agreed   that  testifying  before  a                                                                    
school board  provided the  most consistent  opportunity for                                                                    
parental involvement. He also noted  that the members of the                                                                    
State  Board of  Education were  established in  statute and                                                                    
appointed  by the  governor. He  thought board  members were                                                                    
consistently parents.                                                                                                           
Representative Josephson questioned the  role of the parents                                                                    
surrounding   mental   health   issues  because,   in   some                                                                    
instances,  parents  were  a   contributing  factor  to  the                                                                    
problem.  He  was not  aiming  to  be critical  of  parents.                                                                    
Representative Claman  replied that  parents were  always an                                                                    
issue according to Dr. Freud.  Co-Chair Johnston thought the                                                                    
topic was straying from the bill.                                                                                               
Representative  Josephson   did  not  think  the   bill  was                                                                    
designed to identify appropriate  thoughts. Rather, the bill                                                                    
was about providing  a broad understanding that  if a person                                                                    
was feeling  suicidal, a remedy  was needed. He asked  if he                                                                    
was   correct.   Representative   Claman  replied   in   the                                                                    
Representative Josephson  thought if  the bill was  going to                                                                    
work,  the periods  of instruction  should provoke  the need                                                                    
for other referrals. It would  give a student the confidence                                                                    
to  seek  help  which  would create  a  positive  downstream                                                                    
effect but would require other resources.                                                                                       
11:08:47 AM                                                                                                                   
Representative  Claman largely  agreed.  He elaborated  that                                                                    
the funding received by Alaska's  Department of Military and                                                                    
Veterans  Affairs  (DMVA)  and  by the  U.S.  Department  of                                                                    
Veterans  Affairs had  increased over  time for  psychiatric                                                                    
services  due  to an  increase  in  awareness. He  shared  a                                                                    
personal  story about  a  family member  who  had fought  on                                                                    
three islands in the Pacific,  survived, and never went to a                                                                    
psychologist. However,  the way in which  he interacted with                                                                    
his  colleagues  he  served  with  in  the  Marines  in  WWI                                                                    
suggested that  they all suffered  from their own  degree of                                                                    
Post-Traumatic   Stress   Disorder.   He  thought   as   the                                                                    
conversation changed  people would  look for  resources that                                                                    
they did not pursue in the past.                                                                                                
Representative  Carpenter   thought  the   conversation  was                                                                    
surreal.  He  had personally  fought  in  two wars  and  had                                                                    
spoken to a  psychologist. He stated that  the Department of                                                                    
Defense had  mandated annual suicide awareness  training for                                                                    
many years. However,  the United States had  very high rates                                                                    
of suicide. He did not  believe the training was lacking. He                                                                    
suggested that  the problem was effective  relationships. He                                                                    
suggested  people   turn  to   government  to   solve  their                                                                    
problems. They  looked to schools and  other institutions to                                                                    
solve the  problem which  he identified  as the  failure. He                                                                    
argued  that people  should  be looking  to  each other  and                                                                    
effective   relationships,   not  to   government   training                                                                    
solutions. His opinion was based on his own experience.                                                                         
Representative Wool  referred to  representative Josephson's                                                                    
comments that  the bill  might create  additional referrals.                                                                    
He believed the curriculum might  also help kids not to feel                                                                    
alone  or abnormal.  He noted  that many  kids did  not have                                                                    
healthy homes. Even kids from  good homes with well-balanced                                                                    
families had mental illness.                                                                                                    
Co-Chair   Johnston  commented   that   the  committee   had                                                                    
participated in  a robust discussion.  She would  be setting                                                                    
the bill aside.                                                                                                                 
HB  181  was  HEARD  and   HELD  in  committee  for  further                                                                    
11:13:15 AM                                                                                                                   
AT EASE                                                                                                                         
11:23:36 AM                                                                                                                   
Co-Chair  Johnston indicated  the  committee would  consider                                                                    
the governors  appointee for commissioner of  the Department                                                                    
of Revenue, Lucinda Mahoney.                                                                                                    
^CONSIDERATION  OF  GOVERNOR'S APPOINTEE:  LUCINDA  MAHONEY,                                                                  
COMMISSIONER, DEPARTMENT OF REVENUE                                                                                           
11:23:56 AM                                                                                                                   
LUCINDA  MAHONEY,   COMMISSIONER  DESIGNEE,   DEPARTMENT  OF                                                                    
REVENUE, thought she would review  her resume' and pertinent                                                                    
experience. She asked the co-chair if that was acceptable.                                                                      
Co-Chair Johnston responded in the affirmative.                                                                                 
Commissioner Designee  Mahoney relayed  that she  attained a                                                                    
Bachelor of  Business Administration  degree with  a finance                                                                    
concentration  from  the  University  of  Texas.  Later  she                                                                    
attained  a  Masters  of Business  Administration  from  the                                                                    
University of  Alaska Anchorage.  She attended  school while                                                                    
working full  time. She described herself  as intellectually                                                                    
curious and  continued to  pursue additional  education. She                                                                    
was a  certified valuation  analyst for  conducting business                                                                    
valuations  for   merger  acquisitions.  She  also   had  an                                                                    
investment  portfolio  certificate  from Wharton  School  of                                                                    
Business  [University  of   Pennsylvania].  The  certificate                                                                    
pertained  to investments  and  investment allocations.  She                                                                    
obtained  investment  training   at  the  Callan  Investment                                                                    
Institute.  She  also  obtained   formal  training  in  real                                                                    
Commissioner Designee Mahoney started  her career in the oil                                                                    
industry in Alaska. She spent  the majority of her time with                                                                    
ARCO  Alaska where  she was  responsible for  many different                                                                    
finance and accounting positions.  Most Relevant, she worked                                                                    
on the North Slope at Kuparuk  and Prudhoe Bay as a business                                                                    
manager. She was  able to learn the operations  of the field                                                                    
and understand  the oil industry.  She worked on  net income                                                                    
forecasting and  long-range planning. She worked  on 30-year                                                                    
plans or  plans for the  life of a  field. She left  ARCO to                                                                    
begin a career at KPMG  in the Advisory Services Department.                                                                    
She  was responsible  for the  development  of a  consulting                                                                    
practice in  Alaska and worked with  many different entities                                                                    
including    village     corporations,    native    regional                                                                    
corporations,  fisheries   industries,  and  publicly-traded                                                                    
telecommunication  companies.  It  opened her  eyes  to  the                                                                    
various  communities within  Alaska. She  worked in  Barrow,                                                                    
Nome,  Seward, Fairbanks,  and Anchorage.  Her time  at KPMG                                                                    
provided her a great learning experience.                                                                                       
Commissioner  Designee  Mahoney  moved to  a  position  with                                                                    
Arctic Slope Regional Corporation  as the Executive Director                                                                    
of  the shared  services organization.  She was  responsible                                                                    
for much  of the  back-office operations  in support  of the                                                                    
business   units  with   the  goal   of  attaining   process                                                                    
improvements and  efficiencies. She  left her  position with                                                                    
the  regional  corporation  to   start  her  own  management                                                                    
consulting  company called,  Value  Solutions. She  provided                                                                    
consulting services much  in line with what she  did at KPMG                                                                    
for similar types of clients.                                                                                                   
11:27:56 AM                                                                                                                   
Commissioner  Mahoney   reported  that   in  2009   she  was                                                                    
contacted  by  Mayor  Dan  Sullivan to  work  as  the  Chief                                                                    
Financial Officer for the Municipality  of Anchorage. It was                                                                    
her first job working in the  public sector. All of her work                                                                    
prior was  in the  private sector.  The work  environment at                                                                    
the municipality  was similar to working  for the Department                                                                    
of  revenue. She  started working  for  the Municipality  of                                                                    
Anchorage  during the  Great Recession  and  worked to  help                                                                    
develop a fiscal  plan after reserves had  been depleted and                                                                    
revenues were  down significantly.  She and her  team worked                                                                    
diligently to evaluate sources  of revenues, combinations of                                                                    
revenues,  potential  reductions,  and  the  possibility  of                                                                    
refinancing debt. Her  team came up with  a plan identifying                                                                    
financial goals  to create  a culture  of thrift  and strict                                                                    
discipline. The  plan was  implemented and  the Municipality                                                                    
of  Anchorage ended  up with  surplus  balances for  several                                                                    
years  of her  tenure. She  was  the financial  face of  the                                                                    
organization  meeting with  the  rating agencies,  including                                                                    
Standard  and Poor's  and  Fitch,  about the  municipality's                                                                    
financial  condition. Over  a period  of years,  it received                                                                    
small credit upgrades eventually  reaching a AAA rating. The                                                                    
rating  was a  reflection of  the collaboration  of everyone                                                                    
working  together.   The  entities  involved   included  the                                                                    
political   body,   the   administration,   the   operations                                                                    
managers, and the finance department.  She resigned from the                                                                    
City  of Anchorage  in  2014  to spend  more  time with  her                                                                    
mother who  had taken  ill. She  continued to  do consulting                                                                    
work through her company, Value Solutions.                                                                                      
Commissioner  Mahoney  relayed  that   in  January  she  was                                                                    
approached   by  the   administration   to   serve  as   the                                                                    
commissioner for the Department  of Revenue (DOR). She noted                                                                    
her concern that  she might have a conflict  of interest due                                                                    
to her husband's  work as an attorney for  the oil industry.                                                                    
She  noted  that  the  chief   of  staff  for  the  governor                                                                    
implemented a  proper ethics shield in  conjunction with the                                                                    
Department of  Law. The Deputy Commissioner,  Mike Barnhill,                                                                    
would handle  anything that would  otherwise be  a conflict.                                                                    
She  intended  to  be  involved  in  any  process  regarding                                                                    
changes to the oil tax structure.  She was excited to do her                                                                    
best  to help  the  state. She  made  herself available  for                                                                    
11:33:36 AM                                                                                                                   
Representative  LeBon asked,  given the  economic activities                                                                    
such  as the  price  of oil  and the  stock  market, if  the                                                                    
commissioner designee  had an opinion  on following  the law                                                                    
and a full Permanent Fund Dividend (PFD).                                                                                       
Commissioner Mahoney  responded that it was  the position of                                                                    
the  administration that  the state  followed the  statutory                                                                    
law associated with  the PFD unless there was  a change from                                                                    
the vote of the people.                                                                                                         
Representative   Josephson  asked   about  auditors   having                                                                    
sufficient access to files - he  read a portion of the audit                                                                    
prepared  regarding  the  Department   of  Revenue  and  the                                                                    
settlement  of   oil  and  gas   taxes.  He  asked   if  the                                                                    
commissioner  would be  more  cooperative  with the  auditor                                                                    
than the previous commissioner.                                                                                                 
Commissioner  Mahoney  relayed  that the  incident  occurred                                                                    
prior  to  her appointment.  She  relayed  that in  December                                                                    
[2019] the  Department of Revenue advised  Legislative Audit                                                                    
in writing  that it would  provide the tax  settlement files                                                                    
that  reversed the  position of  the previous  commissioner.                                                                    
Based on the advice of the  Department of Law, DOR would not                                                                    
disclose the  attorney/client communications. It  placed the                                                                    
commissioner in a  quandary because of the  direction of the                                                                    
Department  of  Law. However,  she  planned  to discuss  the                                                                    
issue  with Attorney  General Clarkson  as soon  as she  was                                                                    
Representative Josephson  asked if  it was  the commissioner                                                                    
designee's understanding  that her  predecessor had  taken a                                                                    
position but,  in December [2019] the  administration became                                                                    
more  cooperative.  Commissioner Mahoney  responded,  "Yes."                                                                    
The  files were  provided  other than  the  files which  the                                                                    
attorney/client privilege applied.                                                                                              
Representative Josephson  thought it was typical  that other                                                                    
agencies of  state government would  not look  at settlement                                                                    
papers because of  the nature of the  documents. However, he                                                                    
interpreted the auditor's comments  indicating she could not                                                                    
see the documents  relative to the reduction  in tax credits                                                                    
owed.  He asked  if the  commissioner was  sensitive to  her                                                                    
Commissioner  Mahoney   replied  in  the   affirmative.  She                                                                    
provided  an   example  working  for  the   Municipality  of                                                                    
Anchorage. When  she addressed entities on  Wall Street, she                                                                    
had to  address questions  regarding the caffer.  She valued                                                                    
the importance of numbers being  accurate. In the particular                                                                    
case  being  addressed,  she could  not  review  the  detail                                                                    
because of the ethics screen  associated with any of the tax                                                                    
settlements. However,  she would  be able  to work  with the                                                                    
attorney  general to  better  understand  the Department  of                                                                    
Law's  position  regarding  disclosing  the  attorney/client                                                                    
communications. After  she researched  the issue,  she could                                                                    
determine  whether   it  was  appropriate  to   release  the                                                                    
information.  She would  want to  work collaboratively  with                                                                    
Attorney  General  Clarkson  and potentially  influence  him                                                                    
about the importance of transparency in the caffer.                                                                             
11:39:25 AM                                                                                                                   
Representative   Josephson   inquired    about   the   State                                                                    
Assessment Review  Board. It was his  understanding that Mr.                                                                    
Greeley  was the  state assessor  and would  be working  for                                                                    
Commissioner Designee Mahoney. He  had learned a significant                                                                    
amount  about  the  State   Assessment  Review  Board  while                                                                    
serving  as a  member of  the legislature.  Between 2013  to                                                                    
2015  there was  constant  media  coverage about  litigation                                                                    
regarding the state's property  and equipment valuation. The                                                                    
wide disparity was about $10  billion. The industry reported                                                                    
assets of  $5 billion rather  than $10 billion.  He wondered                                                                    
if Mr. Greeley would be given the latitude to do his job.                                                                       
Commissioner Mahoney responded that  under the ethics screen                                                                    
she would  not be overseeing  those issues at  all. However,                                                                    
her  general expectation  would  be that  Mr. Greeley  would                                                                    
perform   his  functions   independently  and   conduct  his                                                                    
evaluations in compliance with state statutes.                                                                                  
Vice-Chair Ortiz  thanked Commissioner Designee  Mahoney for                                                                    
being available.  He wondered  about her  experience working                                                                    
for  the City  of Anchorage.  One  of the  things she  spoke                                                                    
proudly of  was helping to  implement a proper  fiscal plan.                                                                    
He  noted   the  state's  untenable  fiscal   situation.  He                                                                    
wondered  if  she saw  herself  playing  an active  role  in                                                                    
helping  the state  resolve  its  fiscal plan.  Commissioner                                                                    
Mahoney responded that she absolutely  wanted to be involved                                                                    
and would be looking at all fiscally sustainable solutions.                                                                     
Vice-Chair  Ortiz understood  her  role  would require  good                                                                    
communication. He  asked her to  comment on how  she thought                                                                    
the state  could resolve its fiscal  situation. Commissioner                                                                    
Mahoney  indicated her  view was  complicated. From  a high-                                                                    
level  perspective, she  would look  at all  revenue sources                                                                    
for  consideration.  She  would  also  evaluate  expenditure                                                                    
downward  pressures.   She  would  look  at   what  kind  of                                                                    
government  services   the  state  wanted  to   continue  to                                                                    
provide. Additionally,  she would consider the  state's debt                                                                    
and bonds.  She noted  the current  low interest  rates. She                                                                    
thought the  state might have  an opportunity to  refund and                                                                    
refinance  its bonds.  Bringing  interest  rates down  would                                                                    
provide more leverage for capital  projects. The fiscal plan                                                                    
would include a combination of things.                                                                                          
11:45:28 AM                                                                                                                   
Vice-Chair  Ortiz  noted  her mentioning  the  need  to  put                                                                    
downward pressure  on government expenditures. He  asked her                                                                    
to speak  about what the state  was trying to do  to support                                                                    
government services.  He asked  her whether she  thought the                                                                    
state was providing too  many services. Commissioner Mahoney                                                                    
indicated that it would be  difficult for her to comment, as                                                                    
she would  need to take  a thorough look at  each department                                                                    
first. She  noted that any  kind of reductions needed  to be                                                                    
done with significant care and consideration.                                                                                   
Representative Wool  noted the  presentation from  the prior                                                                    
day's  hearing.  He  wondered   if  the  commissioner  would                                                                    
support  an  unscheduled  draw  to   pay  for  a  full  PFD.                                                                    
Commissioner  Mahoney  could  not  comment  without  further                                                                    
Representative  Wool asked  if she  spent any  time studying                                                                    
sovereign  wealth funds.  Commissioner Mahoney  replied that                                                                    
she primarily  studied the  subject of  portfolio investment                                                                    
analysis  while attending  Wharton School  of Business.  She                                                                    
received training  in asset classes and  fund allocations to                                                                    
minimize risk.                                                                                                                  
Representative  Wool clarified  that she  was responding  in                                                                    
the negative about  being trained on the  topic of sovereign                                                                    
wealth  funds.   Commissioner  Designee  responded   in  the                                                                    
Representative  Wool  noted   Deputy  Commissioner  Barnhill                                                                    
presented  a  bill  earlier  in  the  week  to  backpay  PFD                                                                    
amounts. The  money would come  out of the  Earnings Reserve                                                                    
Account. He  looked forward to  her comments on  the subject                                                                    
when she was ready.                                                                                                             
11:49:50 AM                                                                                                                   
Co-Chair Johnston OPENED Public Testimony.                                                                                      
11:50:01 AM                                                                                                                   
Co-Chair Johnston CLOSED Public Testimony.                                                                                      
Vice-Chair Ortiz indicated that  the House Finance Committee                                                                    
had reviewed the qualifications  of the governor's appointee                                                                    
and  recommended  the following  name  be  forwarded to  the                                                                    
joint session for consideration:                                                                                                
     Lucinda Mahoney, Commissioner, Department of Revenue                                                                       
Representative Ortiz continued that  forwarding the name did                                                                    
not reflect by  any of the members an intent  to vote for or                                                                    
against this individual during any  further sessions for the                                                                    
purpose of confirmations.                                                                                                       
Co-Chair Johnston reviewed the  agenda for the afternoon and                                                                    
evening.  The committee  would be  hearing public  testimony                                                                    
for  HB  300 and  HB  306.  She provided  details  regarding                                                                    
public testimony.                                                                                                               
11:52:11 AM                                                                                                                   
The meeting was adjourned at 11:52 a.m.                                                                                         

Document Name Date/Time Subjects
HB 268 Sectional Analysis 030320.pdf HFIN 3/12/2020 9:00:00 AM
HB 268
HB 268 Southcentral Foundation - Support 2020 03 09.pdf HFIN 3/12/2020 9:00:00 AM
HB 268
HB 268 Support Univ. of Alaska -2020 03 06 -.pdf HFIN 3/12/2020 9:00:00 AM
HB 268
HB 268 Sponsor Statement v.M 030320.pdf HFIN 3/12/2020 9:00:00 AM
HB 268
HB 268 Sectional Analysis version U 3.10.2020.pdf HFIN 3/12/2020 9:00:00 AM
HB 268
HB 268 verison U 3.10.2020.pdf HFIN 3/12/2020 9:00:00 AM
HB 268
HB 268 Summary of Changes version M to version U 3.10.2020.pdf HFIN 3/12/2020 9:00:00 AM
HB 268
HB 268 AMBBA Annual Report Fiscal Year 2019 Final 12.12.19.pdf HFIN 3/12/2020 9:00:00 AM
HB 268
HB 268 - Chugachmiut - Letter of Support 031120.pdf HFIN 3/12/2020 9:00:00 AM
HB 268
HB268 APIA - Letter of Support 031120.pdf HFIN 3/12/2020 9:00:00 AM
HB 268
HB 268 - KANA - Letter of Suppport 031120.pdf HFIN 3/12/2020 9:00:00 AM
HB 268
Lucinda_Mahoney Appointee Commissioner DOR 031220.pdf HFIN 3/12/2020 9:00:00 AM
Governor's Appointee DOR - HFIN
HB268 ANHB re.Municiple Bond Bank - Final 20.03.12.pdf HFIN 3/12/2020 9:00:00 AM
HB 268
Response HFIN COS Approved Mahoney Ethics 021220.pdf HFIN 3/12/2020 9:00:00 AM
Appointee Response HFIN