Legislature(2019 - 2020)ADAMS 519
03/12/2020 09:00 AM House FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| HB268 | |
| HB181 | |
| Consideration of Governor's Appointee: Lucinda Mahoney, Commissioner, Department of Revenue | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 268 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| + | TELECONFERENCED | ||
| + | HB 181 | TELECONFERENCED | |
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
None
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.
SUMMARY
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
Authority."
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
million.
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
financing.
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
expected.
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
bond.
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
others.
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
organization.
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
organizations.
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
services.
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
RECONVENED
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
consideration.
10:09:11 AM
AT EASE
10:09:32 AM
RECONVENED
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
statement:
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
districts.
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
standards.
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
Johnston.
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
stakeholders.
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
training.
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
affirmative.
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
consideration.
11:13:15 AM
AT EASE
11:23:36 AM
RECONVENED
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
estate.
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
questions.
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
confirmed.
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
position.
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
information.
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
negative.
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.
ADJOURNMENT
11:52:11 AM
The meeting was adjourned at 11:52 a.m.