Legislature(2003 - 2004)
03/29/2004 03:19 PM House FIN
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* first hearing in first committee of referral
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= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE FINANCE COMMITTEE
March 29, 2004
3:19 P.M.
TAPE HFC 04 - 70, Side A
TAPE HFC 04 - 70, Side B
CALL TO ORDER
Co-Chair Williams called the House Finance Committee meeting
to order at 3:19 P.M.
MEMBERS PRESENT
Representative John Harris, Co-Chair
Representative Bill Williams, Co-Chair
Representative Kevin Meyer, Vice-Chair
Representative Mike Chenault
Representative Eric Croft
Representative Hugh Fate
Representative Richard Foster
Representative Mike Hawker
Representative Reggie Joule
Representative Carl Moses
Representative Bill Stoltze
MEMBERS ABSENT
None
ALSO PRESENT
Jim Pound, Staff to Representative Fate; Representative
Ralph Samuels; Janet Clarke, Director, Division of
Administrative Services, Department of Health and Social
Services; Jim Derringer, Staff to Representative Fate; Matt
Davidson, Executive Director, Alaska Conservation Voters;
Rod Betit, President, Alaska State Hospital & Nursing Home
Association; Sam Korsmo, Alaska Open Imaging Center, Wasilla
PRESENT VIA TELECONFERENCE
Nancy Welch, Special Assistant, Commissioner's Office,
Department of Natural Resources, Anchorage; Harold C.
Heinze, Chief Executive Officer, Alaska Natural Gas Pipeline
Authority, Anchorage; Bob Favretto, Board Member, Alaska
Natural Gas Development Authority, Kenai; Brian Slocum,
Administrator, Tanana Valley Clinic, Fairbanks; Laurie
Herman, Director of Government affairs, Providence Hospital,
Anchorage; Rob Gould, Assistant Administrator for Finance
and Operations, Fairbanks Memorial Hospital
SUMMARY
HB 319 An Act relating to the disposal of state land by
lottery; and relating to the disposal, including
sale or lease, of remote recreational cabin sites.
HB 319 was heard and HELD in Committee for further
consideration.
HB 417 An Act amending the definition of 'project' in the
Act establishing the Alaska Natural Gas
Development Authority; and providing for an
effective date.
HB 417 was REPORTED out of Committee with a "do
pass" recommendation and with a previously
published indeterminate fiscal note.
HB 511 An Act relating to the certificate of need program
for health care facilities; and providing for an
effective date.
HB 511 was heard and HELD in Committee for further
consideration.
HOUSE BILL NO. 417
An Act amending the definition of 'project' in the Act
establishing the Alaska Natural Gas Development
Authority; and providing for an effective date.
REPRESENTATIVE MIKE CHENAULT explained that HB 417 amends
the definition of "project" to include all options for a
terminus for the Alaska natural gas pipeline, and it
specifically identifies Cook Inlet as one terminus. The
voters gave the Alaska Natural Gas Development Authority
(ANGDA) the power to study the Prudhoe Bay to Prince William
Sound route with a spur run to the Southcentral gas
distribution grid. This bill would allow ANGDA to also
consider Cook Inlet as a potential and possibly more
advantageous terminus.
Representative Fate noted that 3 months ago ANGDA made a
unanimous decision to expand its purview and do what this
bill addresses, and he asked if HB 417 is necessary.
Representative Chenault replied that he couldn't speak to
the Board's decision. He argued for not limiting ANGDA to
one option but allowing it to look at all viable options by
June 30. Representative Fate expressed support for the
concept.
Representative Joule thought that the title limits the scope
to ANGDA and not the Stranded Gas Act. He also questioned
the impact of this language on proposals that have been
submitted. Representative Chenault clarified that ANGDA's
only current authority is to study a Prudhoe Bay/North Slope
route to Prince William Sound with a spur line to the
Southcentral gas distribution grid. He reiterated that this
bill amends their authority to include Cook Inlet as a
viable option.
Co-Chair Harris expressed support for providing gas where it
makes the most economic sense for the benefit of all
Alaskans. The initiative authorizing ANGDA was project-
specific, and this bill would give ANGDA additional
authority. He pointed out that major industries on the Kenai
Peninsula depend on natural gas and he spoke for protection
of those jobs.
HAROLD C. HEINZE, CHIEF EXECUTIVE OFFICER, ALASKA NATURAL
GAS DEVELOPMENT AUTHORITY, VIA TELECONFERENCE, ANCHORAGE,
explained that the Board considered this and other
legislation changing the scope of ANGDA. He clarified that
this bill does not relate to the Stranded Gas Act, and ANGDA
itself is outside the limits of the Stranded Gas Act. He
made three points. The charge for ANGDA in the initiative
was to study the route from Prudhoe Bay to Prince William
Sound, with a spur line from Glenallen to the Cook Inlet
area. The current feasibility level of study makes it
difficult to determine the difference between any of the
specific routes to Cook Inlet without a lot more detail
and a lot more funding. He urged the funding of ANGDA.
Mr. Heinze continued explaining that ANGDA is working on
three projects: the Liquefied Natural Gas (LNG) project to
export gas, use of ANGDA's financing and tax advantage for
the highway project, and the Cook Inlet spur line and
utility concept to be a gas aggregate and transporter to the
commercial entities in that area.
BOB FAVRETTO, BOARD MEMBER, ALASKA NATURAL GAS DEVELOPMENT
AUTHORITY (ANGDA), VIA TELECONFERENCE, KENAI, spoke as a
board member and a resident of Kenai Peninsula Borough. He
explained that the industries in the area have a shortfall
of natural gas at a sustainable price for operation. He
noted that gas projects in Alaska are changing weekly. This
legislation is a companion bill to Senator Wagoner's SB 247.
It is an issue of timing, and he spoke for funding ANGDA to
study alternative gas routes. He expressed that he
wholeheartedly supports the bill.
Co-Chair Williams asked if the title is a little broad.
Representative Chenault replied that he didn't see a problem
with the title and he noted that SB 247, which is moving
through the Senate, has the same title. He said that there
has not been discussion of tightening the title.
At Ease: 3:34 P.M.
Reconvene: 3:36 P.M.
Representative Chenault MOVED to report HB 417 out of
Committee with the accompanying fiscal note. There being NO
OBJECTION, it was so ordered.
HB 417 was REPORTED out of Committee with a "do pass"
recommendation and with a previously published indeterminate
fiscal note.
HOUSE BILL NO. 319
An Act relating to the disposal of state land by
lottery; and relating to the disposal, including sale
or lease, of remote recreational cabin sites.
REPRESENTATIVE HUGH FATE explained that the legislation was
first introduced four years ago as HB 232, and since that
time it has evolved with assistance from the environmental
community, the Alaska Miners' Association, and the
Department of Natural Resources (DNR). He said that the bill
basically would move some public sector lands into private
hands. It also designates which lands are available. He
noted that high mineral-value lands, military reservations
and selections by boroughs would be off limits. It
designates those areas of land up for nomination, giving an
individual the ability to nominate and choose land that he
prefers. The DNR Commissioner makes the final decision
whether the land is compatible with the nomination, and the
Department would formulate regulations to address the
program.
Representative Fate explained that the fiscal note includes
DNR's low figure of about $900 per acre, multiplied by the
number of acres sold, to show a profit in the second, third
and fourth years. He advised that during the first year,
there would be expenditures in formulating regulations and
public notices. He estimated that sales could be three to
four times the conservative figures in the fiscal note.
Representative Joule asked if the bill would limit how much
land an individual could obtain in various regions of the
state. Representative Fate answered that nothing limits the
number of locations where an individual could purchase land,
but there is a 5-acre limit.
Representative Joule asked the type of title that would be
involved. Representative Fate replied that it is fee simple,
and clarified that the minerals are reserved by the State
and the buyer wouldn't have subsurface rights. He reiterated
that the high-mineral potential areas are off limits for
staking. He pointed out that the bill includes safeguards
against lawsuits by the buyer if someone comes in to exploit
the subsurface minerals.
Representative Foster noted that the backup is limited to
Southcentral Alaska and the Copper Valley, and he asked if
land would be available in Northwest Alaska. Representative
Fate stated that it is anywhere there is available state
land that is not encumbered. The final application would be
reviewed by the DNR.
JIM POUND, STAFF TO REPRESENTATIVE FATE, explained that
Amendment #1 removes contractual language that was in the
original bill. The contractual language is used by the
Department of Natural Resources for all their land sales,
and Legal felt it was unnecessary. The sponsor also wanted
to delete the 150% lawsuit in Section 3 of the bill.
Amendment #1 reads:
Page 1, lines 1-2:
Delete "relating to the reservation of rights by
the state in land contracts and deeds;"
Page 2, line 1, through page 3, line 15:
Delete all material.
Renumber the following bill sections accordingly.
Page 5, lines 2-5:
Delete all material.
Representative Croft asked if the deleted language included
provisions that the mining industry wanted as a penalty to
any lawsuits. Representative Fate replied that the mining
industry never requested the 150% and he had included it for
a high threshold but the penalty would have been more than
the land was worth.
Representative Croft asked what protections remain in the
bill. Mr. Pound replied that the language in Section 2, even
though deleted from the bill, would still apply to the
contract between the DNR and the purchaser.
Co-Chair Harris asked if Amendment #1 deletes all of
Sections 2 & 3. Mr. Pound affirmed.
Co-Chair Harris expressed concern that this bill might
create a situation similar to that in the Mat-Su Valley with
coal bed methane. He reiterated that under the
Constitution, the State owns the subsurface rights. He noted
limited protection in the bill for the private property
owner who desires protection from drilling or mining on his
property. He expressed that if this bill makes the situation
worse, his intention is not to support it. He spoke to the
need to strike a balance between mining and people's private
property rights.
Co-Chair Harris asked if the deletion of Section 2
eliminates the problem. Mr. Pound replied that the language
in Section 2 is in existing statute, and it would still be
used in the land contracts between the Department and the
purchasers. He was unsure of the language in the Mat-Su
Valley private sector contracts, but he thought that this
language was more specific. Co-Chair Harris said that he
would talk to Representative Fate.
Representative Chenault referred to the new fiscal note that
shows 7 full-time and one half-time employees in 2006.
JIM DERRINGER explained that pages 7 and 8 of the fiscal
note backup describe the 7-1/2 positions in the fiscal note.
The sponsor increased the staff by one position over the
Department's request. Representative Chenault noted that the
older fiscal note backup showed 6-1/2 positions, and Mr.
Derringer clarified that there would be 7-1/2 positions.
Representative Hawker referred to the analysis in the
previously published Fiscal Note #1 prepared by Land
Sales/Municipal Entitlements in DNR. He noted the language,
"The new program would have DNR negotiate private, non-
competitive sales. (This is a significant change from the
existing policy of only public, competitive land sales.)"
He asked if that is an accurate statement. Mr. Pound replied
that the bill authorizes an individual to select a parcel
and request a first right of refusal, which could be
considered a private sale, but it is ultimately up to the
Commissioner whether it would be a private sale.
Representative Hawker commented that, as written, it is not
quite an accurate statement. Mr. Pound agreed.
Representative Joule requested a sectional analysis of the
bill. Mr. Pound said that he would provide one.
MATT DAVIDSON, EXECUTIVE DIRECTOR, ALASKA CONSERVATION
VOTERS, commented that the group had been involved in this
legislation during the previous legislature. He explained
that the Alaska Conservation Voters (ACV) could not support
the bill at this time. The ACV supports land sales that
safeguard important lands for public access, recreational
opportunities, and fish and wildlife habitat. He said that
HB 319 is unnecessary and unfair, and it would invite
conflict with other users of these lands. Mr. Davidson urged
the committee not to take quick action on the bill.
Mr. Davidson thought the fiscal note figures were optimistic
regarding how much land would be sold, and said that State
land disposal programs don't make money. He referred to the
April 2003 Alaska Conservation Alliance report (copy on
file.) that shows that past state land sales haven't made
money. The Department of Natural Resources has worked hard
to make the state land sale program more efficient, and HB
319 is a step backward. He said that best interest findings
for every single application would be cumbersome. The
Department's estimate of over $400 thousand a year to
process the applications would make it difficult for the
state to make any money. The Department would be prohibited
from selling land directly adjacent to these properties. If
HB 319 isn't fully funded, and existing land sale programs
stay in the budget, DNR resources would be drained for the
existing programs.
Mr. Davidson continued, expressing that the best interest
findings by DNR would lead to the expectation of a decision
to rule in the applicant's favor. He argued that because the
bill language is noncompetitive and gives individuals the
right of first refusal to the land selected, only Alaskans
with access to the backcountry would have knowledge of these
areas, and only the most powerful Alaskans would obtain the
land. The bill has no mechanism to deal with conflicts that
may arise. He discussed potentially conflicting adjacent
uses that have not been addressed in the bill. He concluded
that when the state builds a new subdivision in wild areas,
it results in an over-harvest of fish and game resources.
Co-Chair Harris asked if the Alaska Conservation Voters
supports any more land going into public hands. Mr.
Davidson affirmed that it supports the current DNR land sale
program. Co-Chair Harris asked if the ACV supports any
natural resource development. Mr. Davidson replied,
"absolutely." Co-Chair Harris asked when in the past couple
years the ACV has supported natural resource development.
Mr. Davidson replied that natural resource development
should pay its own way, provide jobs for Alaskans, not
overly harm the environment, and be supported by locals. He
asserted that in the coal bed methane development, three of
those four principles were not met by the State.
Co-Chair Harris asked if the ACV supports opening ANWR. Mr.
Davidson replied the ACV does not have a position on it, but
it would be fair to say that it does not support it.
Co-Chair Harris commented that Mr. Davidson's critique of
the bill was against public land going to the private
sector, although he did express support for the Department's
land lottery. He pointed out that Alaska has the most
federal lands of any state in the nation, and Alaskans want
to be able to own land.
Mr. Davidson responded that the majority of state lands are
neither high quality nor accessible. He said that there
would be a lot of competition for the parcels in Southeast
if the bill moves forward. He thought that there would be
competition to use those parcels for public uses as well,
and the lands have other values.
HB 319 was heard and HELD in Committee for further
consideration.
HOUSE BILL NO. 511
An Act relating to the certificate of need program for
health care facilities; and providing for an effective
date.
REPRESENTATIVE RALPH SAMUELS explained that HB 511 has two
goals. The first part of the bill is the language on page 2,
line 4, "'expenditure' includes the net present value of a
lease for space occupied by or the equipment required for a
health care facility." He explained that the Certificate of
Need (CON) applicant would have had to spend a million
dollars before entering the system, but now "expenditure"
includes the leased space or the leased equipment. The
facility would form a holding company and lease the space
and equipment. The goal of this bill is to make the CON fair
to all players, and he noted that it doesn't change the CON.
TAPE HFC 04 - 70, Side B
Representative Samuels continued, explaining that part 2 of
the bill requires that residential psychiatric treatment
homes, which will increase and drive the Medicaid budget, be
put into the CON process. He pointed out the zero fiscal
note.
BRIAN SLOCUM, ADMINISTRATOR, TANANA VALLEY CLINIC, VIA
TELECONFERENCE, FAIRBANKS, stated that he opposes the bill.
He explained that United Bank documented that there are not
sufficient healthcare services in Fairbanks to meet the
needs of the citizens. The study revealed over the past 1-
1/2 years a consistent one-to-two week backlog in scheduling
non-emergency cases for MRIs, CTs, and ultrasounds. Nearly
80% of the patients couldn't get their tests done because
there weren't enough services available. He thought that
passage of HB 511 would prevent companies from attempting to
fill community health care needs. The quantity of healthcare
services would decrease and lead a monopoly provider to
ignore growing community needs.
JANET CLARKE, DIRECTOR, DIVISION OF ADMINISTRATIVE SERVICES,
DEPARTMENT OF HEALTH AND SOCIAL SERVICES, stated that the
Department supports HB 511, which strikes the right balance
of technical corrections as well as making the program work
better. She explained that in its pure form, the Certificate
of Need program is a health planning function. It provides
a mechanism for health facilities to go through a public
planning process that requires hearings and public
testimony.
Ms. Clarke gave a brief sectional review. Section 1 is a
technical correction that changes the requirements for
ambulatory surgery centers so that space vacated by a center
could continue to operate without going through a CON
process. Current law presents a hardship for these centers,
which this bill would correct.
Ms. Clarke explained that Section 2 does two things: it
limits the relocation of a healthcare facility without
having a CON to one time, and it also closes a loophole in
the CON. Currently if a healthcare facility spends $1
million for construction or purchase of a large piece of
equipment, it is required to go through CON, whereas if the
facility leases the same equipment and pays over time, it is
not required. The facility would have to do net present
value, and it evens the playing field.
Ms. Clarke explained that the Department is most interested
in Section 3. Section 3 would add residential psychiatric
treatment centers to CON review. The Legislature asked the
Department to do cost containment initiatives in its budget
development. Residential psychiatric treatment centers have
grown from $5 million in FY 1998 to an expected $43 million
in 2003. The Department spends Medicaid money for most of
these facilities that are out-of-state. The DHSS is
beginning an initiative to bring many of the children in
these facilities back to Alaska. Ms. Clarke explained that
the plan has three components: a gate-keeping mechanism,
planned growth (which the CON would facilitate), and
ensuring that the Alaska treatment centers be built in
various locations rather than one large facility in an urban
center.
Ms. Clarke noted that Section 4 basically changes the
definition and adds residential psychiatric treatment
centers and independent diagnostic testing facilities to the
definition of a healthcare facility. Section 5 adds a new
paragraph defining a residential psychiatric treatment
center. She concluded that HB 511 adds a tool to help the
Department control the growth of the Medicaid budget, and it
addresses needed technical changes and current loopholes in
the law.
Representative Croft asked why a gatekeeper would be needed,
and questioned slowing the process of bringing kids home.
Ms. Clarke clarified that a gatekeeper is a mechanism to
decide the best course of treatment for the individual
child. She said that treatment might include placement in
the community, with wraparound intensive services, rather
than a high-cost residential placement.
Representative Croft wondered if the Department also wants
the CON as a gatekeeper for more facilities to open, with
input on locations and timing. Ms. Clarke affirmed, saying
that the Department would prefer planning that involves
local communities, and Native health corporations in order
to gain 100% federal Indian Health Service funding, rather
than having the General Fund pick up the cost.
Representative Croft asked if there are enough people to
fill the beds. Ms. Clarke replied that there are over 700
kids, many out of state, with severe emotional problems.
Parents or guardians have placed the children, and 75% are
kids not in state custody but the Department pays the
Medicaid bill for them.
Representative Croft had heard arguments in defense of CON
that the state doesn't want facilities half full or
expensive medical equipment half used. He had expected Ms.
Clarke to express that the Department doesn't want the
increased cost to the system of several psychiatric
treatment facilities that are not filled and he asked for
clarification. Ms. Clarke replied that the State is the
primary payer for nursing homes' long-term care and
psychiatric services. The Department would pay for
overcapacity of psychiatric treatment centers, but it wants
to ensure that it builds the service array for the least
restrictive and closest to home environment to treat the
children. The residential psychiatric treatment costs are
about $300 per day in Alaska, and in-patient psychiatric
services are about $700 per day.
LAURIE HERMAN, DIRECTOR OF GOVERNMENT AFFAIRS, PROVIDENCE
HOSPITAL, VIA TELECONFERENCE, ANCHORAGE, expressed support
for HB 511, and spoke to the part of the bill that addresses
leases. She explained that when a provider leases equipment,
the $1 million threshold requiring a CON is often not
reached. The entire CON process is avoided, creating a
significant loophole in statute prohibiting the state from
performing a vital service. If the CON process is avoided,
the State is unaware of the additional services being
provided and it cannot assess the impact to the community or
the state. Leasing is now being used to avoid the CON, and
she stated that the lease exemption might lead to a
corrosion of Alaska's healthcare system by undermining the
Department's efforts to control costs and improve quality
for all communities. Passage of HB 511 would serve to level
the playing field, and she encouraged the committee's
support.
ROB GOULD, ASSISTANT ADMINISTRATOR FOR FINANCE AND
OPERATIONS, FAIRBANKS MEMORIAL HOSPITAL, spoke in support of
HB 511. He stated that it strengthens the current CON
statute and levels the playing field. Current regulations
help to hold down costs by minimizing excess capacity and
redundancy. Mr. Gould discussed how the bill closes two
significant loopholes in the regulations by including
imaging centers and rental equipment.
ROD BETIT, PRESIDENT, ALASKA STATE HOSPITAL & NURSING HOME
ASSOCIATION, referred to his letter (copy on file.) and
stated that the organization members are in support of HB
511 with its technical improvements. He expressed that the
CON is a good tool and it does not keep people out of the
marketplace. The Department reviews the CON application in
an unbiased way and if compelling information is given, the
proposal moves forward. The Association is asking for the
review standard to be applied to everyone equally, which
this bill would accomplish.
SAM KORSMO, ALASKA OPEN IMAGING CENTER, WASILLA, read from
prepared testimony as follows:
Good Afternoon Mr. Chairman and members of the Committee.
I am Sam Korsmo, a partner in Alaska Open Imaging Center in
Wasilla, Alaska. We provide diagnostic imaging and
professional reading services to Alaskans. I am here to
provide you with information that hopefully cause you to
seek additional information of the effects of this bill on
Alaskans and on your long term budget considerations before
you move it out of this Committee. I believe that if you
consider all the ramifications of this new and unwarranted
intrusion of government into the private sector provision of
critical medical services to Alaskans you will see why you
should not move this bill from Committee or why you should
amend the bill to remove independent diagnostic testing
facilities (IDTF's) from the bill.
In the first case, the department has not provided you with
any information showing how certificate of need has resulted
in any cost savings for patients or the state in their
existing jurisdiction over medical facilities. Accordingly.
there is no justification for expanding their bureaucratic
control over other facilities such as IDTF's.
I believe it is a legitimate concern that this bill is a
move to restrain trade and competition by the major
hospitals in Alaska. The bill's sponsor said as much in a
television interview which I have recorded on this CD. This
is similar to the legislation you see each year in which the
telecommunications companies try to use government laws and
regulations to seek a competitive advantage over each other.
When this happens, it is the consumer that is always hurt.
In our own facilities, our prices are regularly 25 to 30%
lower than those provided by the largest hospitals in
Alaska, our business model is predicated on a global billing
method which saves money. Our services are also better in
that we use an open imaging technology, we can accommodate
larger patients so they do not have to be shipped outside,
saving them money. These cost savings have ramifications for
your budgeting process in that the higher costs of medical
care for Medicaid patients are paid for by general fund
dollars. I am aware of the struggle you have had in meeting
these increased Medicaid costs. The department should be
required to provide with an estimate of the impact this bill
will have on future Medicaid payment by the State of Alaska.
The Department claims in its fiscal note that vastly
expanding the certificate of need program as proposed in
this bill will not cost the department any more money. To do
a real analysis of whether new services are required and
what impact they will have on quality of outcomes and costs
would require substantial analysis. If it is just to be done
on a cursory level, it confirms out worst fears that this
could be a politically driven process, which I am sure all
of you would agree would lead to bad outcomes. If they have
the time to do these analyses, which I seriously doubt, you
have to ask yourself what they are supposed to be doing in
their current jobs. [End of Mr. Korsmo's testimony]
Representative Croft asked if the bill would affect Mr.
Korsmo's current facility by revoking its license. Mr.
Korsmo replied that the bill would require a CON on the
replacement of equipment. He asserted that there is no level
playing field.
HB 511 was heard and HELD in Committee for further
consideration.
ADJOURNMENT
The meeting was adjourned at 4:45 P.M.
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