Legislature(2015 - 2016)HOUSE FINANCE 519
04/13/2015 01:30 PM House FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| HB190 | |
| HB123 | |
| HB154 | |
| HB105 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 190 | TELECONFERENCED | |
| + | HB 105 | TELECONFERENCED | |
| + | HB 154 | TELECONFERENCED | |
| += | HB 123 | TELECONFERENCED | |
| + | SB 26 | TELECONFERENCED | |
| + | TELECONFERENCED |
HOUSE FINANCE COMMITTEE
April 13, 2015
1:34 p.m.
1:34:58 PM
CALL TO ORDER
Co-Chair Thompson called the House Finance Committee
meeting to order at 1:34 p.m.
MEMBERS PRESENT
Representative Steve Thompson, Co-Chair
Representative Dan Saddler, Vice-Chair
Representative Bryce Edgmon
Representative Les Gara
Representative Lynn Gattis
Representative David Guttenberg
Representative Scott Kawasaki
Representative Cathy Munoz
Representative Lance Pruitt
Representative Tammie Wilson
MEMBERS ABSENT
Representative Mark Neuman, Co-Chair
ALSO PRESENT
Heather Shadduck, Staff, Senator Pete Kelly; Joe Michel,
Staff, Representative Steve Thompson; Cynthia Franklin,
Director, Alcoholic Beverage Control Board, Department of
Commerce, Community and Economic Development; Nancy Meade,
General Counsel, Alaska Court System; Denise Daniello,
Executive Director, Alaska Commission on Aging; Tim Clark,
Staff, Representative Bryce Edgmon; Jane Pierson, Staff,
Representative Steve Thompson; Fred Parady, Deputy
Commissioner, Department of Commerce, Community, and
Economic Development; Nick Szymoniak, Finance Officer,
Energy Development, Alaska Industrial Development and
Export Authority; Gene Therriault, Deputy Director,
Statewide Energy Policy Development, Alaska Energy
Authority, Department of Commerce, Community and Economic
Development.
PRESENT VIA TELECONFERENCE
Leif Able, Self, Kasilof; Patrick Reinhart, Governor's
Council on Disabilities and Special Education, Anchorage;
Nikole Nelson, Executive Director, Alaska Legal Services,
Anchorage; Patrice Lee, Self, Fairbanks; Merrick Peirce,
Self, Fairbanks; Pamela Throop, Self, Fairbanks; Jim
Dodson, Fairbanks Economic Development Corporation,
Fairbanks; Jomo Stewart, Fairbanks Economic Development
Corporation, Fairbanks; Lisa Herbert, Executive Director,
Greater Fairbanks Chamber of Commerce, Fairbanks; Derek
Miller, Fairbanks Chamber of Commerce, Fairbanks; Luke
Hopkins, Mayor, Fairbanks Northstar Borough.
SUMMARY
HB 105 AIDEA: BONDS;PROGRAMS;LOANS;LNG PROJECT
HB 105 was HEARD and HELD in committee for
further consideration.
HB 123 ESTABLISH MARIJUANA CONTROL BOARD
CSHB 123(JUD) was REPORTED out of committee with
a "do pass" recommendation and with two
previously published fiscal impact notes: FN2
(ADM) and FN3 (CED).
HB 154 CIVIL LEGAL SERVICES FUND
HB 154 was REPORTED out of committee with a "do
pass" recommendation and with one previously
published zero fiscal note: FN1 (AJS).
HB 190 MEDICAID REFORM/FRAUD/ER USE/STUDIES
HB 190 was HEARD and HELD in committee for
further consideration.
SB 26 BUDGET: CAPITAL
SB 26 was HEARD and HELD in committee for further
consideration.
1:35:13 PM
HOUSE BILL NO. 190
"An Act relating to a medical assistance reform
program; relating to the duties of the Department of
Health and Social Services; establishing medical
assistance demonstration projects; relating to civil
penalties for medical assistance fraud; relating to
studies by the Department of Health and Social
Services; relating to cost-containment measures for
medical assistance; and providing for an effective
date."
1:36:20 PM
HEATHER SHADDUCK, STAFF, SENATOR PETE KELLY, read from a
prepared statement:
HB 190 begins the process of reform and cost
containment needed to slow the growth of the Alaska
Medicaid program. Medicaid has grown to $1.8 Billion
of the annual operating budget, and has accounted for
22% of the total UGF increases over the last ten
years. The current and former administrations have
testified the Medicaid program, as it stands, is not
sustainable. Low oil prices and billions of dollars
in revenue shortfalls have forced us to change how we
do business. In July 2013, the Medicaid Budget Group
of the Department of Health and Social Services
reported the total spending on Medicaid services will
reach $6.3 billion in 2032, including $2.8 billion in
state matching funds. If we don't act now to bend the
growth curve of Medicaid, many of our most venerable
Alaskans will be without critical health care services
they need.
Ms. Shadduck provided a sectional analysis (copy on file)
of the bill. She read from the document:
Section 1: Adds new sections establishing civil
penalties for false claims for medical assistance and
authorizing the Department of Health and Social
Services (the department) to asses civil penalties
against medical assistance providers.
Ms. Shadduck noted that Section 1 was found on page 1, line
7 of the bill and commented that every dollar averted from
fraud translated into more money available to serve the
"most vulnerable" citizens.
Ms. Shadduck turned to Section 2 that began on page 3, line
5 of the legislation:
Section 2: Requires the Department of Health and
Social Services (the department) to design, adopt, and
implement a medical assistance (Medicaid) reform
program. Requires the department to prepare and submit
a report about reforms, savings, and costs related to
the Medicaid program. Provides for a definition of
"telemedicine."
Ms. Shadduck explained that subsection (a) mandated that
the reform program must include ten items. She read number
one from the legislation:
(1) referrals to community and social support
services, including career and education training
services available through the Department of Labor and
Workforce Development under AS 23.15, the University
of Alaska, or other sources;
Ms. Shadduck related that the state had a multitude of job
training available through its job centers, vocational
rehabilitation offices, Workforce Investment Act programs,
vocational training programs, and support from non-profits.
Ms. Shadduck continued beginning with item two:
(2) distribution of an explanation of medical
assistance benefits to recipients for health care
services received under the program;
(3) expanding the use of telemedicine for primary
care, behavioral health, and urgent care;
(4) enhancing fraud prevention, detection, and
enforcement;
(5) reducing the cost of behavioral health, senior,
and disabilities services provided to recipients of
medical assistance under the state's home and
community-based services waiver under AS 47.07.045;
Ms. Shadduck detailed that number five related to a 1915
"K" or "I" option [federal regulation related to the
Community Choice Act] which was a way to enhance the
current federal match from 50 percent to 56 percent for
option "K" and no federal match to a match of 50 percent
for option "I". The options were eligible for telemedicine
for individuals receiving home care.
Ms. Shadduck continued to read:
(6) pharmacy initiatives;
(7) enhanced care management;
Ms. Shadduck defined that enhanced care management were
methods that taught individuals how to use the healthcare
system. She noted that Medicaide recipients often needed
guidance on how to approach healthcare. She added that
enhanced care management did not detract from preventative
care and included primary healthcare, vaccines, flu shots
and all other appropriate care.
Ms. Shadduck moved to the next item on line 22:
(8) redesigning the payment process by implementing
fee agreements based on performance measures that
include premium payments for centers of excellence
according to nationally acceptable criteria and
penalties for hospital acquired infections,
readmissions, and failures of outcomes;
Ms. Shadduck related that the Department of Health and
Social Services (DHSS) would study the use of bundled rates
for physicians and diagnosis related groups for hospitals.
She exemplified that the provision would foster a
streamlined approach instead of the fee for service model
resulting in one bundled rate for a procedure such as a
knee replacement. Alaska was one of the only states not
currently using the practice in its Medicaid program.
Ms. Shadduck turned to the following items:
(9) stakeholder involvement in setting annual targets
for quality and cost-effectiveness;
(10) to the extent consistent with federal law,
reducing travel costs by requiring a recipient to
obtain medical services in the recipient's home
community, to the extent appropriate services are
available in the recipient's home community.
Ms. Shadduck stated that travel costs needed to be reduced
where possible. She pointed to incidences of consolidating
different needs within one family to make one trip to cover
various appointments as one example. She addressed
subsection (b) beginning on page 3, line 31 that related to
the department's improvements in access to telemedicine.
She related that the state's willingness to collaborate
with the Alaska Native Tribal Health Consortium (ANTHC),
which had an "extensive" network for telemedicine
throughout the state to increase access. She moved to
subsection c on page 7 of the bill. The subsection required
that DHSS submit a report to the legislature on or before
October 15 of each year that contained everything that
legislators needed to monitor for continuing reform of the
Medicaid system. She listed some of the required
information: realized cost savings related to reform;
realized cost savings undertaken by the department; a
statement of whether DHSS had met annual targets for
quality and cost-effectiveness; recommendations for
legislative or budgetary changes: impacts from federal
laws; and the results of demonstration projects. She noted
that subsection (d) [page 5, line 10] provided a definition
for telemedicine.
Ms. Shadduck cited Section 3 located on page 5, line 15 and
read:
Section 3: Requires the department to design and
implement a demonstration project to reduce nonurgent
use of emergency departments by Medicaid recipients.
Ms. Shadduck remarked that the provision enhanced what the
department had already done with its "super-utilizer
program" for individuals using the ER for primary care. The
program directed individuals to the appropriate type of
care or provider. She noted that subsection (5)on page 6,
line 1 delineated a process for referring a frequent
emergency room user (or super-utilizer) to a primary care
provider within 96 hours after an emergency room (ER) visit
directed at. The program included strict guidelines for
prescribing narcotics and a prescription drug monitoring
program. She continued with Section 4 on page 6, line 12
and read:
Section 4: Requires the department and the attorney
general to annually prepare a report regarding fraud
prevention, abuse, prosecution, and vulnerabilities in
the Medicaid program.
Ms. Shadduck directed attention to Section 5 on page 7,
line 6:
Section 5: Requires the department to develop one or
more managed care or case management demonstration
projects through a contract with a third party. The
managed care program would be for individuals enrolled
in all Medicaid programs.
Ms. Shadduck examined subsection (a) [page 7, line 9]. She
shared that Alaska was one of seven states that did not
utilize a "managed health plan" within Medicaid. Recipients
would be managed by traditional insurance carriers, i.e.
Aetna or Premera. Improved outcomes and more "one on one"
care were cited as benefits of the managed health care
model. The provision included comprehensive care management
and care coordination. She exemplified a pregnant woman
enrolled in the Denali Kidcare Program who would be
assigned a primary care case manager and would check-in
regularly with the manager, in order to build relationship
and trust. The relationship enabled the manager to
encourage healthy behavior for the most positive outcome.
The program was focused on the whole person and also
required individual and family support and referral to
community and social support services, including career
training.
1:49:23 PM
Ms. Shadduck noted subsection (b) starting on page 7, line
29 that required the department to enter into contracts
with one or more third-party administrators for the managed
care program. Subsection (c), on page 8, line 5 outlined
the requirements for services and fees between the
department and the third party administrator. She added
that Subsection (d) [on page 8 line 12] mandated the
department to include additional cost-saving measures that
included innovations through a demonstration project by
reducing travel through the expanded use of telemedicine
for primary care. The subsection also "simplified
administrative procedures for providers, including
streamlined audit, payment, and stakeholder engagement
procedures." She turned to Section 6 on page 8, line 20:
Section 6: Requires the department to conduct a study
analyzing the feasibility of privatizing certain
services.
Ms. Shadduck reminded the committee that before any state
service can be privatized a feasibility study must be
performed. The provision was aimed at the Alaska Pioneers'
Homes, the Alaska Psychiatric Institute, and select
facilities of the Division of Juvenile Justice (DJJ). She
expounded that the studies would be tailored for the
specific service. She exemplified that the division had an
underutilized facility in Nome where the Norton Sound
Health Corporation also operated. The state's facility
could be handed over to Norton Sound to run as a
residential psychiatric treatment center, thus avoiding
forcing juveniles to leave their community and receive
"culturally relevant care" paid for with a 50 percent
Medicaid funding match instead of the 100 percent general
fund costs incurred at DJJ facilities. She remarked that
the three entities listed employed 1,192 state employees.
Ms. Shadduck continued with Sections 7, beginning on page 8
line 30:
Section 7: Requires the department to amend the state
Medicaid plan and apply for any waivers necessary to
implement the projects and programs described in the
bill. Requires the Commissioner of Health and Social
Services to certify to the reviser of statutes federal
approval of specified measures.
Ms. Shadduck moved to Section 8 [page 9 line 10]:
Section 8: Allows the department to adopt regulations
necessary to implement the changes made by the Act.
The regulations may not take effect before the dates
the relevant provision of the Act takes effect.
Ms. Shadduck cited Section 9 located on page 9, line 18:
Section 9: Conditional effects.
Ms. Shadduck explained that conditional effects protected
the department from having to follow a law in the event
that the federal government did not authorize a specific
state plan or amendments or waiver needed for
implementation. She identified Sections 10 through 14
[beginning on page 10, line 7] and read:
Sections 10 - 14: Provides for effective dates for
provisos that require waiver and state plan amendment
approvals from the United States Department of Health
and Human Services.
Ms. Shadduck cited the final section [page 10, line 22]:
Section 15: Provides an immediate effective date for
sections 6, 7, and 8.
HB 190 was HEARD and HELD in committee for further
consideration.
CSSB 26(FIN)
"An Act making and amending appropriations, including
capital appropriations, supplemental appropriations,
reappropriations, and other appropriations; making
appropriations to capitalize funds; making
appropriations under art. IX, sec. 17(c), Constitution
of the State of Alaska, from the constitutional budget
reserve fund; and providing for an effective date."
JOE MICHEL, STAFF, REPRESENTATIVE STEVE THOMPSON, provided
a brief summary of SB 26. He relayed that the bill included
$113.331 million in unrestricted general funds, $56.325
million in designated general funds, $62.733 million of
other state funds, and $1.275.642 billion in federal
receipts.
SB 26 was HEARD and HELD in committee for further
consideration.
HOUSE BILL NO. 123
"An Act establishing the Marijuana Control Board;
relating to the powers and duties of the Marijuana
Control Board; relating to the appointment, removal,
and duties of the director of the Marijuana Control
Board; relating to the Alcoholic Beverage Control
Board; and providing for an effective date."
CYNTHIA FRANKLIN, DIRECTOR, ALCOHOLIC BEVERAGE CONTROL
BOARD, DEPARTMENT OF COMMERCE, COMMUNITY AND ECONOMIC
DEVELOPMENT, discussed the legislation. She reported that
HB 123 created a five member volunteer board that would be
housed under the same agency as the Alcoholic Beverage
Control Board (ABC). Both boards would share one director
and a staff of 16 employees statewide who were tasked with
licensing, enforcement, and administrative duties.
Co-Chair Thompson OPENED public testimony.
Co-Chair Thompson CLOSED public testimony.
Representative Wilson questioned the fiscal note. She cited
the $756.4 thousand appropriation for services and wondered
what services were included.
Ms. Franklin replied that the budget included an initial
outlay of $500,000 for technology to track both licensees
and marijuana. She detailed that the services category
included a database for licensees and software to track
marijuana. Software called "Seed to Sale" was available and
was designed to track marijuana sold in retail outlets to
ensure it was legally grown. Once the software and required
technology was implemented the costs in the out-years would
be reduced.
Representative Wilson inquired about the remaining $256
thousand.
Ms. Franklin answered that the remainder included expenses
for enforcement vehicles, office lease costs, and costs
associated with additional employees.
Representative Wilson asked whether eventually the board
costs would be divided by the number of licensees and
included in the licensing fees in 2017.
Ms. Franklin replied in the affirmative. She expected that
the board costs would be "receipt supported."
Representative Wilson wondered what the estimated cost of a
license would be based on other states with legalized
marijuana.
Ms. Franklin answered that the closest comparison was the
city of Denver, Colorado with a population of 650 thousand.
The city issued approximately 900 marijuana licenses. The
city had 37 full-time employees at a total cost of $5.9
million to regulate marijuana. The city had made $14
million in tax revenue in 2014.
2:03:11 PM
Co-Chair Thompson OPENED public testimony.
LEIF ABLE, SELF, KASILOF (via teleconference), supported
the bill. He believed that the regulatory structure set up
in HB 123 was a "good idea" for regulating marijuana and
associated costs to the state. He felt Ms. Franklin had
done a good job educating herself about the topic and would
perform her duties as Chair well.
Co-Chair Thompson CLOSED public testimony.
Representative Kawasaki related that the bill delineated
the required background of potential Marijuana Control
Board members and noted that the requirements for board
membership were more extensive than the ABC board and asked
why the difference existed.
Ms. Franklin answered that the composition of the ABC board
was designated under Title 4 rules and was limited to two
members from industry and three public member; one of whom
must be from a rural area. A Title 4 stakeholders group met
and discussed composition of the ABC board and recommended
revisions that ABC board members reflected the composition
and requirement of the Marijuana Control Board. The group
responded to concerns from the public safety and public
health partners of the ABC board to expand the requirements
of board members. She noted that SB 99 (ALCOHOLIC BEVERAGE
CONTROL; ALCOHOL REG) contained the revised ABC board
designee requirements.
Vice-Chair Saddler asked how the board would determine the
license fees.
Ms. Franklin answered that the bill contained a $5000 cap
on licensing fees. She added that other fee provisions
required that half of the licensing fees must be be
refunded to municipalities if a licensed premise was
located within a municipality. She detailed that fees for
alcohol licensing varied from approximately $1,250 to
$3500. on a biennial (renewed every other year) basis and
increases were recommended by the Title 4 group to reflect
the work and time associated with regulation. She
anticipated that the marijuana fees would cost close to the
$5000 cap based on sister states (Colorado and Washington)
that had legalized marijuana, the state's alcohol liquor
license, and the work involved in licensing and regulation
in order for the board to be properly funded by program
receipts.
Representative Guttenberg wondered about the ability to
track marijuana as a new legal industry. He wondered how it
was possible to track an industry that was not able to
bank. He referred to a National Conference of State
Legislatures (NCSL) conference that invited representatives
from the banking industry and the state of Colorado that
concluded that the marijuana industry was prohibited from
banking. He wondered how the legalized states dealt with
receiving money from an industry that the federal
government considered an illegal source.
Ms. Franklin agreed that the banking industry issue was
challenging. She shared that initially, the marijuana
industry in the state would be "unbanked." She noted that
Colorado had come up with banking solutions for 40 percent
of the industry and was considered "underbanked." The state
would analyze the Colorado solutions for possible
resolutions in Alaska. The "Cole Memorandum" [federal
guidance on marijuana enforcement issues] required a
"strict enforcement scheme that lessens or minimizes
criminal activity" for states with legal recreational or
medical marijuana. The states of Washington and Colorado
had dealt with the banking issue by collecting taxes in
cash. The state was working with the tax division to ensure
that if taxes were missed on growing operations the state
had the statutory authority to collect taxes from any
licensed establishment that obtained marijuana that had not
been taxed. She conveyed that the statute prevented a black
market or criminality in the "downstream" marijuana
industry (retail shops). She indicated that the Seed to
Sale software tracking system was an essential tool in
Washington and Colorado to ensure that the marijuana sold
was legally grown. She believed the task was formidable,
but could be achieved.
Representative Guttenberg asked whether specific tracking
software existed to meet Alaska's needs.
Ms. Franklin answered that there were several options for
the software. She referred to software in use by Washington
and Colorado called "Biotrack." Twenty-two other states had
medical marijuana and used tracking systems. The board
intended to research software best suited for Alaska's
needs.
Representative Gattis wondered why dealing in cash was
legal since cash money was issued by the federal
government.
Ms. Franklin answered that the issue of using cash had not
been legally challenged for use in the marijuana industry.
Vice-Chair Saddler wondered how other states tracked the
sale of marijuana.
Ms. Franklin replied that other states utilized an ID
tagging system. She explained that in legal states,
marijuana was grown from cuttings from mother plants. When
the plant reached 8 inches tall the plant was tagged. The
tag remained with the product from bud, leaf, trim, and
even THC extraction and followed it throughout its product
life in any form via sales.
2:15:35 PM
Representative Pruitt referred to the license fees
contained in the bill. He acknowledged that license fees
were determined by the board but felt that the state should
benefit from the value of the licenses.
Ms. Franklin responded that the ABC board had the statutory
authority under AS 1738 to determine how to issue licenses
or whether to issue population limits. The Marijuana
Control Board would have the same authority. Alcohol
regulation contained a population limited system with
transferability. Discussion among the ABC board on the
"concept of a secondary market value" had taken place. The
board had considered the concept of going with a high-
quality merit based matrix system where an applicant would
receive points for meeting qualifications. Licenses would
be issued to the highest quality applicants as opposed to a
minimum qualification system chosen by lottery as employed
in Washington State. The minimum qualification system
potentially lead to businesses least likely to succeed or
comply with regulations. The merit based matrix system did
not limit licenses on the front end. However, AS 17.38
clearly established municipalities' authority to set
numerical limits on licenses. The combination of no
population limits and a merit based system without
transferability so that the licenses would transfer back to
the state in the event of a business failure was being
discussed among the preliminary regulations team and would
be openly and publically debated in the actual regulation
process.
Representative Pruitt wondered if the board had the
authority to increase licensing fees based on the board's
expenses if a merit based system was adopted.
Ms. Franklin replied that the license selection process and
fee rate were intended to be set by regulation. She added
that the $5 thousand limit on license fees was placed in
the referendum to limit the ability of the legislature or
regulatory entity to institute extremely high fees as a way
to discourage licensure.
Representative Pruitt asked for a definition of high fees.
Ms. Franklin indicated that in one state the initial fee
was $25 thousand and naturally limited the ability of
applicants from entering the industry. She believed if fees
were set "logically" reflecting the board's workload and
services, the fee would be deemed reasonable. She believed
the fee approach was supportable versus setting an
arbitrarily high fee structure.
Representative Pruitt did not want a barrier to recovering
licensing and regulatory costs because of the cap.
Ms. Franklin answered that the initiative stated that a
regulatory body shall implement "reasonable" fees not to
exceed $5 thousand. She communicated that once the board
and licensure was established and it became apparent that
$5 thousand would not cover the services required to issue
the licenses the board would take appropriate action. She
expressed confidence that a legal solution could be reached
if the cap was inadequate to cover costs and the board
maintained proof of insufficient funds. The division did
not know the cost of regulation because marijuana licensure
was entirely new. The fiscal note costs to establish the
board were initially much higher and had been trimmed
because of the state's fiscal situation. The division
attempted to implement the voter initiative in the safest
way possible for the least amount of money and keep the
second and third year costs conservative while implementing
the will of the voter in a fiscally conservative way.
Representative Pruitt asked the division to keep the
legislature apprised if the fee was not sufficient to cover
costs.
Representative Wilson MOVED to REPORT CSHB 123(JUD) out of
committee with individual recommendations and the
accompanying fiscal notes. There being NO OBJECTION, it was
so ordered.
CSHB 123(JUD) was REPORTED out of committee with a "do
pass" recommendation and with two previously published
fiscal impact notes: FN2 (ADM) and FN3 (CED).
2:27:03 PM
AT EASE
2:29:23 PM
RECONVENED
HOUSE BILL NO. 154
"An Act allowing appropriations to the civil legal
services fund from court filing fees."
2:29:38 PM
REPRESENTATIVE BRYCE EDGMON, SPONSOR, explained that the
bill created a stable funding mechanism for the Alaska
Legal Services Corporation (ALSC). He stated that the bill
allowed up to 25 percent of the filing fees paid to the
Alaska Court System from the previous fiscal year to be
appropriated into the existing Civil Legal Services Fund.
The corporation provided legal services to a growing number
eligible applicants; the number doubled from 41,000 to over
100,000 within 30 years. The funding sources for ALSC was
comprised of state funds, local funds, federal funds, from
private donations, and native organizations. He noted that
the bill established a stable source of state funding.
Representative Pruitt wondered how much money would be
appropriated to the fund.
Representative Edgmon replied that in the past year, court
filing fees amounted to $2.2 million and 25 percent equated
to $563 thousand. He noted that the current year's budget
for the corporation was cut to $450 thousand.
Representative Wilson clarified that the legislation did
not appropriate money it only authorized the appropriation
into the fund.
Representative Edgmon replied in the affirmative. He
offered that HB 154 created the receipt authority.
Vice-Chair Saddler asked how often court filing fees were
adjusted or changed.
NANCY MEADE, GENERAL COUNSEL, ALASKA COURT SYSTEM, replied
that the court system had not increased its filing fees in
the past 10 to 12 years; the court system was in the
process of implementing much higher fees effective July 1,
2015. She noted that last year's filing fees were $2.2
million and would increase an additional $1.2 million,
which totaled $3.4 million.
Co-Chair Thompson OPENED public testimony.
DENISE DANIELLO, EXECUTIVE DIRECTOR, ALASKA COMMISSION ON
AGING, spoke in support of the legislation. She shared that
the corporation served 850 seniors in the past year.
PATRICK REINHART, GOVERNOR'S COUNCIL ON DISABILITIES AND
SPECIAL EDUCATION, ANCHORAGE (via teleconference),
testified in support of the legislation. He believed the
legislation would positively impact low income individuals
with disabilities. He relayed that approximately 40 percent
of the corporation's clients were disabled individuals.
Typical services were provided for illegal eviction due to
disability, assistance with civil protective orders to stop
abuse, denial of federal healthcare coverage or benefits,
and family caregivers in securing healthcare and other
domestic services. He remarked that some clients had to be
turned away due to lack of funds.
Vice-Chair Saddler understood that many of the council's
clients used Alaska Legal Services and wondered whether it
would be helpful if the legislature implemented a similar
funding source for the Alaska Disability Law Center.
Mr. Reinhart responded that the agencies provided different
types of legal services for the disabled. The Alaska
Disability Law Center had a different revenue source and he
did not know the answer.
NIKOLE NELSON, EXECUTIVE DIRECTOR, ALASKA LEGAL SERVICES,
ANCHORAGE (via teleconference), spoke in favor of the
legislation. She shared that the agency was a non-profit
agency that provided free legal services to low income
individuals for 45 years. The critical civil legal services
provided helped to stabilize families, secure safety and
self-sufficiency and provided access to the civil justice
system. The agency assisted parents who had been in abusive
relationships, families with domestic paperwork such as
enrolling children in school, and veterans denied benefits
for disabilities. She expounded that the corporation
operated with staff attorneys, a network of pro bono
attorney's, and its self-help and community education
network. The corporation served over 2,500 Alaskans in 162
communities. Last year ALSC turned away hundreds of
families due to lack of resources. Eight-six percent of
ALSC client's cases had positive results and the
corporation was remarkably cost efficient. Each case
averaged $600 due to resolving cases out of court 80
percent of the time. She furthered that ALSC attorneys were
paid well below the market rate. Resources and services
were leveraged in the amount of $500 million. She voiced
that ALSC helped achieve justice for all and urged support
for the legislation.
Co-Chair Thompson CLOSED public testimony.
Representative Edgmon corrected that the bill did not
create program receipt authority; it established language
to authorize the appropriation of funds from the court
filing fees from the previous year.
Representative Wilson thought the testimony was confusing.
She believed that the legislature could appropriate as much
money into the fund as the legislature wanted.
Representative Edgmon replied that the bill created a
funding mechanism for 25 percent of court filing fees to be
appropriated to the corporation. The legislature did not
guarantee the money. It provided the legislature with the
authority to appropriate the money into the fund.
Representative Wilson clarified that the bill did not limit
the amount of money that could be appropriated into the
fund above the 25 percent of court fees.
Representative Edgmon replied in the affirmative.
Representative Wilson clarified that the bill did not
appropriate any money.
Vice-Chair Saddler asked whether the sponsor was aware of
the court systems intent to increase its fees.
Representative Edgmon replied in the affirmative.
Co-Chair Thompson clarified that there was no guarantee
that the court system would actually increase the fees.
Representative Pruitt declared that currently AS
09.17.020(j) required that 50 percent of awarded punitive
damages were deposited into the general fund for use for
the Civil Legal Services Fund. He wondered why the sponsor
was creating another fund.
Representative Edgmon replied that the intent of the bill
was to provide a more solid, stable funding source in the
future given the state's current fiscal difficulties than
the general fund appropriation. He expressed uncertainty
regarding the level of future funding for the corporation
from the general fund. He noted that ALSC received over $1
million from the state in the 1980s and had to turn away
hundreds of families due to the decline in state revenues.
TIM CLARK, STAFF, REPRESENTATIVE BRYCE EDGMON, elaborated
that at the time the Alaska Legal Services Fund had been
established the capitalization was designed to come from
punitive damages. In the last three years, the state had
collected zero punitive funds and the fund was empty.
Representative Pruitt identified that the legislation
allowed for appropriations from both the punitive damages
fund and the Civil Legal Services Fund. He wondered when
the last deposit from punitive money was appropriated into
the fund.
Mr. Clark replied in the affirmative to the first question.
He elaborated that the legislation did not "concretely"
appropriate money into the fund and only provided an
authorization to appropriate. He felt that the existence of
the funds and appropriation authorization acknowledged the
importance of the services the corporation provided to
Alaskans.
Vice-Chair Saddler wondered whether there was more than one
organization that provided civil legal services to
Alaskans.
Mr. Clark was not aware of any other providers. He deferred
the question to Alaska Legal Services.
Ms. Nelson addressed whether there had been any
appropriations from the punitive damages fund
authorization. She answered that there had been one
appropriation of $110,000 in 2011 from the years 2007 to
2011. Secondly, she replied that there were other
organizations that provided free legal services in Alaska;
however, Alaska Legal Services was the only statewide
provider of comprehensive free legal services. She shared
that other legal services providers delivered niche or
restricted legal services.
2:55:35 PM
Vice-Chair Saddler asked whether other legal services
providers received money from the legal services fund.
Ms. Nelson replied that to her knowledge the only
appropriation was the $110,000 to ALSC.
Representative Gara recalled that the constitution did not
allow dedicated funds but pointed out that the legislature
was inclined to "honor" accounts of this type when money
was available. He though that HB 154 "worked better" than
existing law because determining 25 percent of court filing
fees was easily calculated. He related that even though the
state was entitled to 50 percent of punitive damages; when
parties settled cases most of the awarded settlement was
described as compensatory rather than punitive damages. The
current mechanism was designed to incentivize
underreporting of punitive damages. He stated that the bill
provided a quantifiable amount of money for deposit into
the fund.
Representative Wilson MOVED to REPORT HB 154 out of
committee with individual recommendations and the
accompanying fiscal note.
HB 154 was REPORTED out of committee with a "do pass"
recommendation and with one previously published zero
fiscal note: FN1 (AJS).
2:58:30 PM
AT EASE
3:02:03 PM
RECONVENED
HOUSE BILL NO. 105
"An Act relating to the programs and bonds of the
Alaska Industrial Development and Export Authority;
related to the financing authorization through the
Alaska Industrial Development and Export Authority of
a liquefied natural gas production plant and natural
gas energy projects and distribution systems in the
state; amending and repealing bond authorizations
granted to the Alaska Industrial Development and
Export Authority; and providing for an effective
date."
3:02:03 PM
Representative Wilson MOVED to ADOPT the proposed committee
substitute for HB 105, Work Draft 29-GH1019\N (Shutts,
4/12/15). There being NO OBJECTION, it was so ordered.
JANE PIERSON, STAFF, REPRESENTATIVE STEVE THOMPSON,
explained the changes in the Committee Substitute (CS). She
read from an explanation of changes:
Sec 1: No change
Sec 2: Inserts new language into allowing an Interior
Alaska utility that is owned and operated by a
political subdivision of the state and receives
financing from the sustainable energy transmission and
supply development fund to exempt the utility from
rate regulation, under AS 44.88.660, by resolution.
Sec 3: No change
Sec 4: No change
Sec 5: No change
Sec 6: No change
Sec 7: Removes subsection (1) regarding the AIDEA
acquisition of gas reserves (discussion moved to
section 8). Language in subsection (2) is incorporated
into (c) and modified. The words "negotiate or" are
removed. Language "to provide natural gas to the
Interior Alaska as a primary market" are added on page
6, lines 29-30. The words "uses to serve customers in
Interior Alaska" are added on page 7, lines 2-3.
Sec 8: Inserts new Section 8, amending AS
44.88.690(a), regarding the AIDEA sustainable energy
transmission and supply development fund, to require
AIDEA to obtain legislative approval before using the
fund to purchase or acquire gas reserves or a gas
lease or become a working interest owner of a natural
gas lease.
Sec 9: Version E Section 8 renumbered as Section 9 in
Version N.
Sec 10: New Section 10 inserted, providing AIDEA
bonding authorization up to $50,000,000 to finance the
acquisition, design, and construction of a port
facility and equipment related to the development and
operation of a bulk commodity loading and shipping
terminal, to be located at Point MacKenzie.
Sec 11: Version E Section 9 renumbered as Section 11
in Version N and "prepares a project plan and receives
legislative approval of the plan" is replaced with
"approves a project plan" on page 7, line 16.
Sec 12: Version E Section 10 renumbered as Section 12
in Version N.
Sec 13: Version E Section 11 renumbered as Section 13
in Version N is modified to remove the repeal of
"Section 2, ch. 27, SLA 1993, as amended by sec. 19,
ch. 111" pertaining to the Point MacKenzie bonding
authorization.
Sec 14: Inserts a new Section 14 providing legislative
authority for AIDEA to issue up to $120,000,000 of
bonds to finance the infrastructure and construction
costs of Sweetheart Lake hydroelectric project.
Sec 15: Inserts a new Section 15 providing legislative
authority for the Alaska Energy Authority to loan an
amount up to $3,000,000 from the power project fund to
the City of King Cove for the Waterfall Creek
hydroelectric project.
Sec 16: Version E Section 12 renumbered as Section 16
in Version N.
Sec 17: Inserts new Section 17 repealing Sections 14
and 15 of this act June 30, 2019.
Sec 18: Version E Section 13 renumbered as Section 18
in Version N.
FRED PARADY, DEPUTY COMMISSIONER, DEPARTMENT OF COMMERCE,
COMMUNITY, AND ECONOMIC DEVELOPMENT, provided a PowerPoint
presentation titled "Interior Energy Project" dated April
13, 2015 (copy on file). He addressed slide 2:
IEP: GOALS UNDER SB23
Supply natural gas to Interior Alaska:
-At the lowest cost possible
-As many Alaska customers as possible
-As soon as possible
IEP investments compliment eventual sources of gas
supply from a natural gas pipe line
Lower PM2.5 in nonattainment areas of Interior
Mr. Parady emphasized that the Interior Energy Project
(IEP) lowered the PM2.5 in nonattainment areas of the
Interior, which was among the highest level of pollution in
the United States. He reviewed slides 3:
IEP: OVERVIEW
Meet the goals set by the legislature to supply
affordable energy to Interior Alaska
Project is complex, which is why the legislature took
action
Now evaluating infrastructure to deliver natural gas
from any source, including Cook Inlet
AIDEA financing the buildout of natural gas
distribution in Fairbanks and North Pole
Mr. Parady moved to slide 4:
IEP: HB 105
HB 105 gives AIDEA flexibility to use SB 23 financing
tools with a non-North Slope liquefaction location
-Current version of HB 105 also authorizes financing
propane and small diameter pipeline (under 12"
diameter) projects to meet the goals of the IEP
Mr. Parady highlighted slide 5, "North Slope Project Map"
and slide 6, "Cook Inlet Project Map." He explained that
the only project authorized under SB 23 (AIDEA: LNG
PROJECT; DIVIDENDS; FINANCING) [Adopted May 30, 2013] was
the North Slope Natural Gas Supply and Liquefied Natural
Gas (LNG) Production plant. The legislation allowed the
project to "flip" from north to south and consider a
natural gas supply from Cook Inlet instead of the North
Slope. He turned to the chart on slide 7, "Cook Inlet,
North Slope, And Other Alternatives" that outlined the
options for the project. He reviewed that the supply of
natural gas from Cook Inlet was currently uncertain but
indications for increased supply were 'positive." On the
North Slope, where some existing contracts were in place,
natural gas was "abundant" and at low cost. Other
alternatives that were considered for the project were
propane from Canada or a small pipeline from Cook Inlet,
which might be preferred over a rail or truck option. He
relayed that in consideration of LNG plant costs, a Cook
Inlet plant was cheaper to construct and operate as opposed
to designing and constructing an LNG plant on the North
Slope, which was expensive due to conditions. He added that
construction and operation of an LNG plant was not
necessary for Canadian Propane or a small pipeline from
Cook Inlet.
Mr. Parady examined the LNG "transportation logistics of
trucking and rail and concluded that Cook Inlet had lower
trucking costs, large trailer potential, and rail options
as opposed to the North Slope where trucking was feasible,
but more expensive. He pointed to the recent closure of the
Dalton Highway due to an ice jam as a drawback. He reported
that a combination of "marine, rail, and trucking" were
possible for propane. He indicated that storage and
distribution was inherent to either Cook Inlet, North
Slope, or alternative options.
NICK SZYMONIAK, FINANCE OFFICER, ENERGY DEVELOPMENT, ALASKA
INDUSTRIAL DEVELOPMENT AND EXPORT AUTHORITY, addressed
slide 8, "North Slope LNG Project" and slide 9,"Cook Inlet
LNG Alternative" and explained that the graphics on each
slide compared the "value chain" for each option and the
evaluative approach employed by the IEP team. He discussed
slide 8 and delineated that the North Slope project (SB 23)
began with two existing gas supply agreements with North
Slope producers and interior utilities. The LNG production
plant third party developer had not been selected
(subsequently a Concession Agreement with MWH Global was
chosen) and a plan was in place to contract with a private
trucking company for transportation needs. The LNG storage
and regasification distribution systems were being
negotiated with the Interior Gas Utility (IGU) and
Fairbanks Natural Gas (FNG) entities with talks still
continuing. He remarked that the LNG costs for a North
Slope project under the concession agreement was deemed too
high and subsequently terminated. The current legislation
authorized the flexibility for consideration of alternative
options.
Mr. Syzmoniak discussed slide 9 relating to the Cook Inlet
alternative. He relayed that the difference in gas supply
between both projects was an absence of existing agreements
between Interior utility companies and Cook Inlet producers
other than an existing .95/bcf agreement between FNG and
Hilcorp. An LNG developer had not been chosen. The
transportation plan remained the same but the project was
also exploring Alaska Railroad options. The current version
of HB 105 also allowed for a small diameter pipeline, which
eliminated the need for an LNG plant or other
transportation needs. A propane option was also under
examination.
He moved to slide 10:
Project Execution Plan
Natural Gas supply: Facilitate commercial discussions
between producers and utilities
Liquefaction: Competitive solicitation to select
private partner to develop LNG capacity
Transportation: Private trucking, Alaska railroad,
small diameter pipeline, propane
Storage, Regasification, and Distribution: Buildout of
system continues Summer 2015PROJECT
Mr. Syzmoniak indicated that the Department of Commerce,
Community and Economic Development DCCED) was taking the
lead on discussions between producers and utilities. He
added that Alaska Industrial Development and Export
Authority (AIDEA) would not sign any contracts, buy
reserves or retain any interests in a natural gas field in
Cook Inlet nor enter into a contractual relationship in the
LNG plant. He conveyed that the team was "open to and
encouraging" alternatives to Cook Inlet.
3:16:20 PM
GENE THERRIAULT, DEPUTY DIRECTOR, STATEWIDE ENERGY POLICY
DEVELOPMENT, ALASKA ENERGY AUTHORITY, DEPARTMENT OF
COMMERCE, COMMUNITY AND ECONOMIC DEVELOPMENT, spoke to
slide 11:
IEP SUMMARY
The goals remain as established by SB23
HB 105 authorizes the tool kit to best achieve
goals of IEP
Market driven process
-Accomplishing IEP goals requires adaptation
to current market and operating realities
Representative Gara related that he supported the original
plan established in SB 23. He wondered whether the
legislation allowed the IEP to revert to a North Slope
natural gas supply if the supply became cheaper or more
abundant than a Cook Inlet option.
Mr. Therriault answered that the language in the bill did
not preclude a North Slope producer from submitting a
completive bid and might even entice a bid from a North
Slope entity.
Vice-Chair Saddler asked whether AIDEA would become a gas
utility under the IEP.
Mr. Therriault replied that currently AIDEA was considering
a purchase of Pentex [FNG parent company] assets that
included a FNG distribution system. He elaborated that
AIDEA intended to contractually operate the distribution
system. Ownership by AIDEA facilitated the integration of
FNG and the developing IGU distribution systems with the
future possibility of morphing into one system. The goal
was to ultimately sell the asset to the IGU or a private
utility.
Vice-Chair Saddler referred to the use of the term "market
driven solution" related to the project. He deduced that
the AIDEA involvement made the project a less market driven
and more government driven solution.
Representative Munoz wondered what the fiscal note had been
for the original gas trucking proposal [SB 23] and what the
remaining balance of the fund was.
Mr. Parady answered that the original funding contained
approximately $150 million in bonds, $125 million in the
Sustainable Energy Transmission and Supply Fund (SETS)
loans and $57.5 million in grants. He shared that
approximately $55 million from the loan program was
committed to the distribution systems.
Mr. Therriault interjected that the $150 million bonding
authorization and $125 million in SETS funding was
designated for loans expected to be "ultimately" repaid.
Representative Munoz requested further clarification.
Mr. Parady reported that out of the $57.5 million in grants
$12.4 million was expended for the North Slope plant
construction, design, engineering, and storage study. He
added that $52.78 million of the SETS funds were committed
to two loans for the distribution system; a $15 million
loan to FNG and a $37.78 million loan to IGU. He noted that
$72.2 million remained in the SETS fund.
Representative Pruitt asked what the project's expected
daily volume of gas was.
Mr. Parady answered that at peak build out the Interior
Alaska demand was expected to be 9.5/bcf per year and on a
daily average was 26 million cubic feet (mcf) per day.
Representative Pruitt asked what impact the amount would
have on the overall reserves in Cook Inlet.
Mr. Parady answered that demand was approximately less than
10 percent of Cook Inlet reserves. He shared that ten years
of Interior demand amounted to 80/bcf and Cook Inlet
reserves were estimated in trillion board feet.
Representative Pruitt observed that there was a complex web
of ownership throughout Cook Inlet and wondered whether the
amount of Cook Inlet reserves were "realistically
recoverable."
Mr. Szymoniak replied in the affirmative. He assured the
committee that the figure represented developed reserves.
Representative Pruitt asked for verification that the
agency felt comfortable going forward with a Cook Inlet gas
supply. He maintained that the Cook Inlet gas supply until
recently, was thought to be dwindling. He alluded to other
demands on the Cook Inlet supply. He did not want the
Southcentral energy crisis to turn into a Fairbanks crisis
if Cook Inlet gas supply was not sustainable over the long-
term.
Mr. Parady believed the question was germane and the amount
of available Cook Inlet gas reserves were being assessed
further by the Department of Natural Resources (DNR) and
the IEP gas supply team. He expounded that the indications
were favorable and pointed to "ample reserves." However,
more analysis was needed. He engaged in a conversation with
Enstar, who reported that its gas supply was firm through
the first quarter of 2018. Enstar serviced 134,000
customers in Southcentral, Alaska. He disclosed that
current data from DNR reported .4tcf [trillion cubic feet]
increase in gas supply in Cook Inlet since 2009.
3:28:06 PM
Representative Pruitt queried whether HB 105 maintained the
legislature's approval authority over AIDEA's decision on
which gas supply to move the project forward with.
Mr. Therriault cited the CS, on page 7, lines 18 through
20:
(1) identify the source of the natural gas or propane;
2 (2) include the estimated cost of the project; and
3 (3) include the estimated price of natural gas
supplied to natural gas utilities…
Mr. Therriault communicated that the bill required the
AIDEA board to approve a plan that included the required
information. He voiced that the AIDEA board had the
authority to make the determination like any other project
AIDEA undertook.
Representative Pruitt asked for verification that approval
authority was "out of the legislature's hands."
Mr. Therriault replied in the affirmative.
Representative Pruitt worried that the legislature would
lose control over a "policy decision."
Vice-Chair Saddler asked what the Cook Inlet estimated
reserve figure was based on.
Mr. Parady answered that the figure was based on a DNR
evaluation and was "proven plus probable."
Vice-Chair Saddler asked how recent the figure was. He
requested a copy of the report.
Mr. Parady responded that the data was from February 2015.
Mr. Therriault noted that the CS contained other
hydroelectric projects. He delineated that a hydro project
through AIDEA was subjected to the same "due diligence"
process as the process the supply of natural gas will be
based on. When AIDEA was "empowered" to make the decision
it was based on whether the project had a sales agreement
that "supported or "underpinned the financing.
PATRICE LEE, SELF, FAIRBANKS (via teleconference), spoke in
favor of the legislation. She thanked AIDEA for recognizing
the severity of the air pollution problem in Fairbanks. She
shared two concerns on the CS version of the legislation.
She believed that Section 8 restricted the options for a
"free market" source of gas. She worried that the price of
gas seemed high. She hoped the project would be expedited
to serve the 100,000 citizens of the Interior. She felt
that the project could be an asset to the Anchorage area if
the Cook Inlet option was chosen by increasing the market
share and bargaining power.
MERRICK PEIRCE, SELF, FAIRBANKS (via teleconference),
supported the legislation. He stated concerns over the
health risks of the high particulate matter leading to poor
air quality of Fairbanks. He referenced a study from the
British Medical Journal that concluded exposure to high
particulate matter was linked to mortality from strokes. He
appreciated the various options being considered and
thought a "phased approach" might be a part of the
solution. He stated that propane had many advantages over
LNG and stored well. He wanted affordable energy for the
Interior for residential purposes and to attract new
industry and job creation. He was troubled by Section 8
that prohibited AIDEA from directly entering into contracts
with Cook Inlet suppliers.
PAMELA THROOP, SELF, FAIRBANKS (via teleconference),
supported the legislation. She related that she worked as a
commercial real estate broker and her biggest concern was
the cost of living and doing business in Fairbanks directly
related to high utility costs. She discerned that in the
event the IEP initially utilized a Cook Inlet Source of gas
via pipeline to Fairbanks and subsequently consumed natural
gas via pipeline from the North Slope the two pipelines
could be connected and natural gas could flow to Anchorage.
She urged AIDEA and IEP to consider any kind of energy
source for Fairbanks.
JIM DODSON, FAIRBANKS ECONOMIC DEVELOPMENT CORPORATION,
FAIRBANKS (via teleconference), spoke in support of the
legislation. He stressed that clean air was vital to the
health of the community's children. He spoke to the need to
build a "road map" starting in Fairbanks, to providing
affordable energy to the entire state. He urged the
legislature to support the legislation.
JOMO STEWART, FAIRBANKS ECONOMIC DEVELOPMENT CORPORATION,
FAIRBANKS (via teleconference), echoed the testimony from
Mr. Dodson. He urged the legislature to act "expeditiously"
with passage of the bill to move the project forward.
3:42:01 PM
LISA HERBERT, EXECUTIVE DIRECTOR, GREATER FAIRBANKS CHAMBER
OF COMMERCE, FAIRBANKS (via teleconference), spoke in favor
of the legislation. She represented approximately 700
businesses as executive director and maintained that
reducing the high cost of energy was the chambers highest
priority. She specifically supported the CS. She supported
the goals of the IEP to serve the greatest number of people
as possible, as affordable as possible, and as quickly as
possible. She encouraged the legislature to remain
committed to the goals.
DEREK MILLER, FAIRBANKS CHAMBER OF COMMERCE, FAIRBANKS (via
teleconference), spoke in support of the legislation. He
noted his previous work as a legislative aide and for the
University of Alaska, Fairbanks. He stated his support for
the original bill, SB 23 and the three major goals
previously stated. He was opposed to various restrictive
provisions in the House Resources Committee version. He
appreciated the concerns raised about the Cook Inlet supply
and expressed confidence that the CS accomplished the goals
of the IEP.
LUKE HOPKINS, MAYOR, FAIRBANKS NORTHSTAR BOROUGH (via
teleconference), favored the legislation. He believed the
amendments in the CS addressed the three area mayors
concerns and advanced the project without restricting
AIDEA's decision making authority. He felt that the
greatest issues were providing low cost energy for the
community and businesses as quickly as possible.
Co-Chair Thompson CLOSED public testimony.
Representative Wilson reminded the committee that the gas
industry in Cook Inlet received generous credits and
subsidies from the state and that the gas belonged to
everyone.
HB 105 was HEARD and HELD in committee for further
consideration.
Co-Chair Thompson addressed the agenda for the following
day.
ADJOURNMENT
3:49:31 PM
The meeting was adjourned at 3:49 p.m.