Legislature(2003 - 2004)

03/02/2004 03:07 PM HES

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                    ALASKA STATE LEGISLATURE                                                                                  
          HOUSE HEALTH, EDUCATION AND SOCIAL SERVICES                                                                         
                       STANDING COMMITTEE                                                                                     
                         March 2, 2004                                                                                          
                           3:07 p.m.                                                                                            
MEMBERS PRESENT                                                                                                               
Representative Peggy Wilson, Chair                                                                                              
Representative Carl Gatto, Vice Chair                                                                                           
Representative John Coghill                                                                                                     
Representative Paul Seaton                                                                                                      
Representative Kelly Wolf                                                                                                       
Representative Sharon Cissna                                                                                                    
MEMBERS ABSENT                                                                                                                
Representative Mary Kapsner                                                                                                     
COMMITTEE CALENDAR                                                                                                            
HOUSE BILL NO. 471                                                                                                              
"An Act relating to the funding of public education; and                                                                        
providing for an effective date."                                                                                               
     - MOVED CSHB 471(EDU) OUT OF COMMITTEE                                                                                     
HOUSE BILL NO. 511                                                                                                              
"An Act relating to the certificate of need program for health                                                                  
care facilities; and providing for an effective date."                                                                          
     - HEARD AND HELD                                                                                                           
HOUSE BILL NO. 338                                                                                                              
"An Act relating to attendance at public school; and providing                                                                  
for an effective date."                                                                                                         
     - SCHEDULED BUT NOT HEARD                                                                                                  
PREVIOUS COMMITTEE ACTION                                                                                                     
BILL: HB 471                                                                                                                  
SHORT TITLE: INCREASE AMT OF BASE STUDENT ALLOCATION                                                                            
SPONSOR(S): EDUCATION                                                                                                           
02/16/04       (H)       READ THE FIRST TIME - REFERRALS                                                                        
02/16/04       (H)       EDU, HES, FIN                                                                                          
02/17/04       (H)       EDU AT 11:00 AM CAPITOL 124                                                                            
02/17/04       (H)       Heard & Held                                                                                           
02/17/04       (H)       MINUTE(EDU)                                                                                            
02/19/04       (H)       EDU AT 11:00 AM CAPITOL 124                                                                            
02/19/04       (H)       Moved CSHB 471(EDU) Out of Committee                                                                   
02/19/04       (H)       MINUTE(EDU)                                                                                            
02/23/04       (H)       EDU RPT CS(EDU) 7DP                                                                                    
02/23/04       (H)       DP: WILSON, SEATON, WOLF, GARA,                                                                        
02/23/04       (H)       KAPSNER, OGG, GATTO                                                                                    
03/02/04       (H)       HES AT 3:00 PM CAPITOL 106                                                                             
BILL: HB 511                                                                                                                  
SHORT TITLE: CERTIFICATE OF NEED PROGRAM                                                                                        
SPONSOR(S): REPRESENTATIVE(S) SAMUELS                                                                                           
02/16/04       (H)       READ THE FIRST TIME - REFERRALS                                                                        
02/16/04       (H)       HES, FIN                                                                                               
03/02/04       (H)       HES AT 3:00 PM CAPITOL 106                                                                             
WITNESS REGISTER                                                                                                              
KRIS MOORE, Member                                                                                                              
Valley Voices for Children (VVFC)                                                                                               
Wasilla, Alaska                                                                                                                 
POSITION STATEMENT:  Testified on HB 471.                                                                                       
DEBRA GERMANO, School Board Member                                                                                              
Kenai Peninsula Borough School District                                                                                         
Homer, Alaska                                                                                                                   
POSITION STATEMENT:  Testified on HB 471.                                                                                       
TIM STEELE, School Board Member                                                                                                 
Anchorage School District                                                                                                       
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Testified on HB 471.                                                                                       
JENNIE HAMMOND                                                                                                                  
Nikiski, Alaska                                                                                                                 
POSITION STATEMENT:  Testified on HB 471.                                                                                       
MELODY DOUGLAS, Chief Financial Officer                                                                                         
Kenai Peninsula School District                                                                                                 
Soldotna, Alaska                                                                                                                
POSITION STATEMENT:  Testified on HB 471.                                                                                       
AMY LUJAN, Business Manager                                                                                                     
Nome Public School District                                                                                                     
Nome, Alaska                                                                                                                    
POSITION STATEMENT:  Testified on HB 471.                                                                                       
MARY FRANCIS, Ph.D., Executive Director                                                                                         
Council of School Administrators                                                                                                
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Testified on HB 471.                                                                                       
MARY HAKALA, Coordinator                                                                                                        
Alaska Kids Count                                                                                                               
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Testified on HB 471.                                                                                       
CARL ROSE, Executive Director                                                                                                   
Association of Alaska School Boards                                                                                             
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Testified on HB 471.                                                                                       
CATHERINE REARDON                                                                                                               
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Testified on HB 471.                                                                                       
REPRESENTATIVE RALPH SAMUELS                                                                                                    
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Testified as sponsor of HB 511.                                                                            
LISA WOLF, Director of Planning                                                                                                 
Providence Health System                                                                                                        
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Testified on HB 511.                                                                                       
ROBERT BRIDGES, M.D.                                                                                                            
Medical Director                                                                                                                
Alaska Open Imaging Center                                                                                                      
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Testified in opposition to HB 511.                                                                         
SAM KORSMO, Chief Operating Officer                                                                                             
Alaska Open Imaging Center                                                                                                      
Wasilla, Alaska                                                                                                                 
POSITION STATEMENT:  Testified in opposition to HB 511 and                                                                      
answered questions from the members.                                                                                            
DAVID McGUIRE, M.D.                                                                                                             
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Testified on HB 511.                                                                                       
MIKE POWERS, Hospital Administrator                                                                                             
Fairbanks Memorial Hospital                                                                                                     
Fairbanks, Alaska                                                                                                               
POSITION STATEMENT:  Testified in support of HB 511.                                                                            
CHARLIE FRANZ, Administrator                                                                                                    
South Peninsula Hospital;                                                                                                       
Chairman of the Board                                                                                                           
Alaska State Hospital Association,                                                                                              
Homer, Alaska                                                                                                                   
POSITION STATEMENT:  Testified in  support of HB 511 and answered                                                               
questions from the members.                                                                                                     
STEVE GONZALES, Owner                                                                                                           
Gonzales Marketing                                                                                                              
Chugiak, Alaska                                                                                                                 
POSITION STATEMENT:  Testified on HB 511.                                                                                       
BRIAN SLOCUM, Administrator                                                                                                     
Tanana Valley Clinic                                                                                                            
Fairbanks, Alaska                                                                                                               
POSITION STATEMENT:   Testified on HB 511  and answered questions                                                               
from the members.                                                                                                               
EDDIE JEANS, Finance Manager                                                                                                    
School Finance and Facilities Section                                                                                           
Department of Education and Early Development                                                                                   
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:   Testified on HB 471  and answered questions                                                               
from the members.                                                                                                               
ACTION NARRATIVE                                                                                                              
TAPE 04-16, SIDE A                                                                                                            
Number 0001                                                                                                                     
CHAIR PEGGY WILSON called the  House Health, Education and Social                                                             
Services  Standing  Committee  meeting  to  order  at  3:07  p.m.                                                               
Representatives Wilson,  Gatto, Coghill, and Seaton  were present                                                               
at the  call to order.   Representatives Wolf and  Cissna arrived                                                               
as the meeting was in progress.                                                                                                 
HB 471-INCREASE AMT OF BASE STUDENT ALLOCATION                                                                                
Number 0050                                                                                                                     
CHAIR WILSON announced that the  first order of business would be                                                               
HOUSE BILL  NO. 471, "An  Act relating  to the funding  of public                                                               
education; and providing for an effective date."                                                                                
CHAIR WILSON  announced for the  record that  Representative Wolf                                                               
has joined the meeting.                                                                                                         
Number 0100                                                                                                                     
REPRESENTATIVE  GATTO  moved  to  adopt  CSHB  471,  version  23-                                                               
LS1645\I, as  the working  document.   There being  no objection,                                                               
version I is before the committee as the working document.                                                                      
REPRESENTATIVE GATTO  summarized the CSHB 471  increases the base                                                               
student allocation from $4,169 to  $4,379 this year, and provides                                                               
for a 2 percent annual increase  beginning July 1, 2005.  He told                                                               
the  members that  as Chair  of  the House  Special Committee  on                                                               
Education,  he  appointed  three  members to  a  subcommittee  on                                                               
education funding.   The subcommittee  took public  testimony and                                                               
asked each  individual school district  what its  shortfall would                                                               
be and what  funding would be necessary to  return the districts'                                                               
funding levels to that of the  previous year.  The conclusion was                                                               
that there  needed to  be a  $210 increase  [to the  base student                                                               
allocation] to  keep the districts  at the previous  year's level                                                               
of funding.   Representative Gatto  pointed out that  this figure                                                               
does  not include  the PERS/TRS  shortfall.   It  was decided  to                                                               
address that issue in a separate bill, he commented.                                                                            
Number 0281                                                                                                                     
REPRESENTATIVE  COGHILL  asked  whether  there  would  be  public                                                               
testimony before  or after  the presentation  of amendments.   He                                                               
told  the members  that he  plans  to propose  an amendment  that                                                               
removes the language  which provides for a 2  percent increase in                                                               
funding annually.                                                                                                               
CHAIR  WILSON  announced  that the  committee  will  hear  public                                                               
testimony before the amendments are presented.                                                                                  
Number 0359                                                                                                                     
KRIS  MOORE,  Member,  Valley Voices  for  Children  (VVFC),  and                                                               
parent of  four children in the  Matanuska-Susitna Borough School                                                               
District, testified  in support of HB  471.  She said  that basic                                                               
needs are  not being  met and  that the  quality of  education is                                                               
suffering.  She urged the committee  to not only address the cuts                                                               
from this year, but also repair  the damage done to the education                                                               
system in prior years.                                                                                                          
Number 0559                                                                                                                     
DEBRA  GERMANO,  School  Board Member,  Kenai  Peninsula  Borough                                                               
School District, testified in support  of education funding.  She                                                               
told  the  members that  she  is  disappointed  to hear  about  a                                                               
suggested amendment  which would  take funds away  from education                                                               
funding.   Ms. Germano commented  that while she  appreciates the                                                               
efforts of  the committee, the  only thing the proposed  level of                                                               
education funding does is provide  for education to almost remain                                                               
at the  present level.   She explained  that last year  the Kenai                                                               
Peninsula  Borough  School  District  lost  56  teachers  and  14                                                               
custodians.   Ms. Germano shared  that at a school  board meeting                                                               
she  attended the  previous  night she  heard  about more  people                                                               
leaving  the   community  because  of  the   uncertainty  in  the                                                               
direction of public  education.  She said she believes  this is a                                                               
big   contributor  in   declining   enrollment   that  is   being                                                               
experienced in school  districts.  Ms. Germano  urged the members                                                               
to do  more than provide for  a $210 increase and  support a cost                                                               
of living increase.                                                                                                             
Number 0718                                                                                                                     
REPRESENTATIVE   GATTO   commented   that  he   understands   the                                                               
disappointment that  education funding has decreased  for several                                                               
years.   He pointed  out that the  retirement shortfall  has been                                                               
separated from  the base student  allocation.  He said  he agrees                                                               
that  $210   is  not   enough,  but   it  does   prevent  further                                                               
deterioration from the previous year.                                                                                           
MS. GERMANO  responded that  she appreciates  the efforts  of the                                                               
members.   In the Kenai  Peninsula Borough School  District there                                                               
are losses  of programs,  she said.   For instance,  the district                                                               
does not have a foreign language  program or a gifted program any                                                               
Number 0859                                                                                                                     
REPRESENTATIVE  WOLF  agreed  with  Ms. Germano  that  the  Kenai                                                               
Peninsula  Borough School  District  has been  dealing with  this                                                               
issue for  a long  time, and  now the issue  has spread  to other                                                               
parts of the state and is now being addressed.                                                                                  
Number 0904                                                                                                                     
REPRESENTATIVE SEATON told Ms. Germano  that he is concerned that                                                               
the 2  percent increase in  the base student allocation  could be                                                               
viewed  as  "the deal."    Basically,  this  could mean  the  $86                                                               
increase in following years could  be considered both the maximum                                                               
and minimum amount  of an escalator by the legislature.   He said                                                               
he believes  that could  present problems for  the district.   He                                                               
asked  if  Ms.  Germano  has   any  comments  on  the  2  percent                                                               
MS.  GERMANO  replied that  the  2  percent  increase is  only  a                                                               
beginning, but  at least it  is something the districts  can plan                                                               
on when developing a budget.                                                                                                    
Number 0943                                                                                                                     
TIM  STEELE,  School  Board Member,  Anchorage  School  District,                                                               
testified on  HB 471.   He  told the  members he  appreciates the                                                               
work done in funding education;  however, there have been serious                                                               
cuts in  Anchorage including  332 jobs and  cuts to  programs and                                                               
activities.    He  agreed  with  Debra  Germano's  comments  that                                                               
Kenai's  school  district  has  been hurting  for  a  long  time.                                                               
Anchorage School  District has also had  cuts, but since it  is a                                                               
much  larger district,  it has  been possible  to absorb  some of                                                               
those cuts.                                                                                                                     
MR. STEELE said now the  district, like everyone else, is feeling                                                               
the pain, and the  pain is a result of a failure  to fund cost of                                                               
living allowances  (COLA) for decades.   Since 1999  the district                                                               
has  lost $253  in  purchasing  power, he  explained.   The  $210                                                               
increase  almost gets  the district  to where  it was  last year,                                                               
which  was  almost  to  point  the  year  before.    There  is  a                                                               
cumulative effect,  he said.   Mr. Steele  told the  members that                                                               
districts  need a  significant increase  to  the funding  formula                                                               
this  year to  make  progress  toward adequacy.    The 2  percent                                                               
increase  would be  progress toward  sustainability.   Without it                                                               
the districts will be much worse off in five years.                                                                             
MR. STEELE  told the members that  last night there was  a school                                                               
board  meeting which  focused  on  a six-year  plan.   There  was                                                               
overriding  gloom that  dominated the  discussion that  the goals                                                               
could  not be  met.   He  stated that  he  wants to  get back  to                                                               
focusing  on  educating kids  and  spend  less time  begging  for                                                               
Number 1166                                                                                                                     
JENNIE HAMMOND  testified on HB 471.   She told the  members that                                                               
the quality of  education provided to students in  Kenai is going                                                               
down,   and  that   failure  is   not  based   on  the   lack  of                                                               
professionalism of the  teachers, but due to the  lack of funding                                                               
being received  from the state.   Ms.  Hammond said she  does not                                                               
believe $4,600  per student is a  small price to pay  compared to                                                               
what is being done to the children.                                                                                             
CHAIR WILSON  agreed with Ms. Hammond.   She shared that  she has                                                               
had parents who  were educated in the same  school district their                                                               
children  are  attending now,  and  who  have  come to  her  with                                                               
concerns  that  there were  better  course  offerings and  better                                                               
educational  opportunities  afforded  to  them  many  years  ago.                                                               
Chair Wilson stated that she believes that is a sad statement.                                                                  
Number 1249                                                                                                                     
MELODY DOUGLAS,  Chief Financial Officer, Kenai  Peninsula School                                                               
District,  testified in  support of  HB 471.   She  commended the                                                               
members  in  taking the  lead  in  providing increased  education                                                               
funding.  She said that the  increase of $210 in the base student                                                               
allocation is  significant and  does not want  to take  away from                                                               
that, but echoed the earlier comments by Kenai residents.                                                                       
MS. DOUGLAS told  the members she opposes  the proposed amendment                                                               
that would remove the 2  percent incremental increase in funding.                                                               
She said that  while she understands why it might  be removed, an                                                               
incremental increase of 2 percent  annually is an important place                                                               
to  start.     Ms.  Douglas  told  the  members   that  Kenai  is                                                               
experiencing significant facilities  increases, such as utilities                                                               
costs.   She  urged  the members  to keep  the  2 percent  annual                                                               
increases in education funding.                                                                                                 
Number 1363                                                                                                                     
AMY  LUJAN,  Business  Manager,   Nome  Public  School  District,                                                               
testified  on HB  471.   She  stated that  she  is supportive  of                                                               
increases of  the base  student allocation  so that  the district                                                               
can  maintain  parity with  the  current  year.   This  would  be                                                               
especially  true if  PERS/TRS is  addressed in  a separate  bill.                                                               
Ms. Lujan explained that while this  helps, it does not help with                                                               
the programs  that have been  cut over the  past two years.   For                                                               
example,  there are  fewer junior  and  senior course  offerings,                                                               
larger class sizes which is  problematic at the elementary level,                                                               
no school nurse, no social  worker, and no assistant principal at                                                               
the elementary  level, fewer aides, growing  deferred maintenance                                                               
needs,  and no  professional  development.   Ms.  Lujan said  she                                                               
appreciates the increase in the base student allocation and                                                                     
urged the members to maintain the 2 percent annual increase as a                                                                
starting point.                                                                                                                 
Number 1449                                                                                                                     
MARY FRANCIS, Ph.D., Executive Director, Council of School                                                                      
Administrators, testified on HB 471.  She provided the following                                                                
     The school  administrators are  strongly in  support of                                                                    
     an increased  base student allocation.   We prefer that                                                                    
     the  amount  be  sufficient to  include  the  increased                                                                    
     TRS/PERS  costs, so  that this  ongoing  cost of  doing                                                                    
     business  doesn't  have to  be  fought  for each  year.                                                                    
     Provided,  of  course,  that   the  districts  have  an                                                                    
     eroding funding  floor would be  equally taken  care of                                                                    
     with the other districts.   We also think including the                                                                    
     TRS/PERS  costs in  the formula  will then  allow those                                                                    
     communities with  taxing powers  to contribute  more to                                                                    
     schools, should they choose to do so.                                                                                      
     That  said,  it  is  our wish  that  the  base  student                                                                    
     funding  also be  adequate to  provide a  comprehensive                                                                    
     educational  program  for  all   kids.    As  a  school                                                                    
     administrator  of  over  20  years,  I've  watched  the                                                                    
     steady erosion  of educational  programs.   Starting in                                                                    
     1986,  when  a  10%  across  the  board  reduction  was                                                                    
     imposed,  school  districts  have reduced  services  to                                                                    
     balance  budgets   year  after  year.     Watching  the                                                                    
     schoolhouse crumble is not what  I thought I'd spend my                                                                    
     career doing!                                                                                                              
     Recently I  heard that a philanthropic  organization is                                                                    
     planning  to provide  funding for  the  arts in  public                                                                    
     schools.   This is terrific  news!   But how sad  is it                                                                    
     that  a  critical  component of  educating  the  "whole                                                                    
     child"  is  now   dependent  on  someone's  generosity?                                                                    
     Isn't  it  the  State's  responsibility  to  provide  a                                                                    
     comprehensive educational program?   Shall we next turn                                                                    
     to   the    National   Basketball   League    to   fund                                                                    
     extracurricular programs?   Shall we turn  to Microsoft                                                                    
     to  fund workplace  preparation  programs?   Vocational                                                                    
     programs,  the arts  and music,  are some  of the  many                                                                    
     programs  falling by  the wayside  as school  districts                                                                    
     prepare budgets on inadequate funding.                                                                                     
     Alaska's  students  deserve   a  quality  comprehensive                                                                    
     educational  program.    Please  help get  us  back  on                                                                    
     course  by supporting  a  substantial  increase to  the                                                                    
     base student allocation.                                                                                                   
     Thank you for your time.                                                                                                   
Number 1559                                                                                                                     
REPRESENTATIVE WOLF asked why the  state should not ask Microsoft                                                               
to contribute.   Alaska owns $240 million worth of  stock in that                                                               
Number 1591                                                                                                                     
MARY  HAKALA, Coordinator,  Alaska  Kids Count,  testified on  HB
471.   She  told the  members that  Alaska Kids  Count is  a non-                                                               
partisan   group  of   parents,   grandparents,  educators,   and                                                               
community  members  who  have joined  together  to  advocate  for                                                               
schools  and  safeguard  children's  education.    She  told  the                                                               
members that about a month ago a  few of us got together to start                                                               
the initiative, and now there are  over 400 in a statewide e-mail                                                               
network.  She  pointed out that the growth reflects  the level of                                                               
concern out there.  The group  works along side Valley Voices for                                                               
Children, other  parent groups, and  PTAs, she added.   She asked                                                               
the members  to remember  that each  time a  Representative hears                                                               
from  one of  them, it  often  reflects the  perspective of  many                                                               
people.   It is tough for  a parent to approach  the legislature;                                                               
it is not a common day experience for most people.                                                                              
MS.  HAKALA  explained that  the  group  she represents  are  the                                                               
volunteers in  the school, the ones  who set up bake  sales, help                                                               
with the  valentine parties, and  increasingly raise funds.   For                                                               
example, in  Juneau it is  the PTA  that funds the  art supplies,                                                               
and field biology,  which is a long  way from what it  use to do.                                                               
She  emphasized that  this funding  is  for core  subjects.   Ms.                                                               
Hakala reiterated  that the current  funding is adequate  and the                                                               
additional cuts are  unacceptable.  She said that this  bill is a                                                               
step forward in the right  direction, but believes that much more                                                               
is needed.                                                                                                                      
MS. HAKALA commented that between  the PERS/TRS solution and this                                                               
bill  would be  about  $78 million.   She  urged  the members  to                                                               
invest $100 million in education.                                                                                               
Number 1719                                                                                                                     
CARL  ROSE,  Executive  Director, Association  of  Alaska  School                                                               
Boards, testified on HB 471.   He told the members that this past                                                               
weekend  he  had the  opportunity  to  revisit the  Molly  Hootch                                                               
decision  made  30 years  ago  which  provided that  people  were                                                               
allowed to  educate their children  at home, rather  than sending                                                               
them  away to  boarding schools.    Much of  the discussion  that                                                               
surrounded  the gathering  he attended  focused on  the kinds  of                                                               
education options  available given the  shortage of funding.   He                                                               
added that  the people in  attendance do not  want to go  back to                                                               
the pre-Molly Hootch days.   Mr. Rose explained that although the                                                               
people  support boarding  schools as  an option  for many  of the                                                               
students,  it  was  clear  there  was  no  support  for  mandated                                                               
boarding schools.                                                                                                               
MR. ROSE  told the members  that in  rural areas of  Alaska there                                                               
have been tremendous reductions in  services across the state due                                                               
to the lack  of funding.  He pointed out  that six state senators                                                               
represent the  entire landmass  of Alaska  with the  exception of                                                               
the  Railbelt,  and  28 representatives  represent  the  Railbelt                                                               
proper, while the other 12 represent  the rest of the state.  Mr.                                                               
Rose told the members there is  a tremendous crisis with the lack                                                               
of capacity to deal with the issues being presented.                                                                            
Number 1831                                                                                                                     
MR.  ROSE  explained  that  the decision  for  Molly  Hootch  and                                                               
Bullock vs. Lind  was largely due to what many  people felt was a                                                               
preponderance  of  evidence that  suggested  that  the state  was                                                               
operating two systems of education that  were not equal.  He told                                                               
the members  that he believes  that can  be said about  the state                                                               
today.   He  urged the  members  to look  at the  state of  rural                                                               
education  and  how  the  state  addresses  the  needs  of  those                                                               
children.  There  is serious need for increased  investments.  He                                                               
added that there is a serious  need for water and sewer and other                                                               
amenities that  many of  us take  for granted.   Mr.  Rose stated                                                               
that everyone is covered by the  same constitution.  That is just                                                               
a backdrop to what is involved, he added.                                                                                       
MR. ROSE told the members that for  the last 17 years he has been                                                               
involved  in managing  the decline  of public  education.   Every                                                               
year  education has  been provided  with  less money.   Now  that                                                               
shortages in funding  is being felt in the Railbelt,  there is an                                                               
awareness of the  problem in the state.  He  urged the members to                                                               
look at the  entire system with a sense of  conscience of what is                                                               
being done  for and to our  kids.  He summarized  his comments by                                                               
saying "if  we do not model  what we teach, then  we are teaching                                                               
something else."   Mr. Rose  suggested that  if it is  being said                                                               
that  educating our  youth is  our highest  priority, then  it is                                                               
important to take every step to do that.                                                                                        
Number 1907                                                                                                                     
MR.  ROSE   said  the  association   supports  this  bill.     He                                                               
understands  the hard  work that  was involved  in producing  the                                                               
increase  in funding,  and urged  the  members to  support the  2                                                               
percent annual  increase as well.   It is a good  place to start,                                                               
he commented.  Mr. Rose told  the members that everywhere that he                                                               
goes  he hears  people say  they are  willing to  pay for  better                                                               
education for their  children.  He said even  though his children                                                               
finished their  education, he would  be willing  to pay a  tax to                                                               
educate children for the future of the state of Alaska.                                                                         
Number 1911                                                                                                                     
REPRESENTATIVE  GATTO  commented  that  the  total  base  student                                                               
allocation  in the  bill is  $4,379 or  close to  $4,400.   The 2                                                               
percent annual  increase would mean  an additional $88  more next                                                               
year.   Neither he nor Mr.  Rose will be satisfied  with $88 next                                                               
year, he  said.   Representative Gatto  said he  understands that                                                               
there  could be  some thought  that next  year someone  could say                                                               
that  education  funding has  already  been  addressed with  a  2                                                               
percent  increase,  and  would  question why  there  would  be  a                                                               
request for more  funds.  Representative Gatto asked  Mr. Rose to                                                               
comment on this.                                                                                                                
MR. ROSE replied that he believes  2 percent is a starting point.                                                               
Often there are supplementals that  will add funds later as needs                                                               
are identified.   He suggested  that since all the  testimony has                                                               
addressed the loss  in buying power, there is  no addressing that                                                               
unless there is a step increase  in funds.  He reiterated that he                                                               
is  willing to  start at  2 percent,  but guaranteed  the members                                                               
that  2 percent  will be  inadequate this  year, and  it will  be                                                               
inadequate next year as well.                                                                                                   
REPRESENTATIVE  SEATON pointed  out  that this  bill states  that                                                               
there will  be a 2  percent increase,  not that an  increase will                                                               
start  at 2  percent.   He  asked Mr.  Rose  if he  is really  in                                                               
support of the language that says  funding will be increased by 2                                                               
MR.  ROSE  responded  that  he is  supportive  of  that  language                                                               
because he has never known the  legislative body to be limited by                                                               
what a  previous legislature had  passed.  The language  giving 2                                                               
percent is  better than  nothing.  He  encouraged the  members to                                                               
work for  progress.  The door  is not closed on  this subject, he                                                               
Number 2020                                                                                                                     
CATHERINE REARDON testified  as a parent of  a kindergartener and                                                               
a four-year  old.  She  asked for  a significant increase  in the                                                               
base  student  allocation  and  an  annual  inflation  factor  to                                                               
address the loss in purchasing power.   She told the members that                                                               
she believes  strongly that it is  important to put money  in the                                                               
education system  that can allow it  to help all the  children of                                                               
the state.   She said  her testimony represents many  parents who                                                               
find it difficult  to testify.  Most parents would  be willing to                                                               
pay  taxes  to  fund  education.    She  stated  that  she  finds                                                               
education more important than the permanent fund dividend.                                                                      
MS. REARDON  told the  members that  the Juneau  School District,                                                               
like many  other school  districts, has been  looking at  ways to                                                               
cut its  budget.  The  Charter School where her  daughter attends                                                               
will be  cut to  the statutory minimum  which really  brings into                                                               
question the  existence of  the school.   This  is an  example of                                                               
what is happening statewide, she said.                                                                                          
REPRESENTATIVE GATTO  commented that  it would  be nice  to index                                                               
education funding as the permanent fund  is indexed.  He asked if                                                               
Ms. Reardon knows what it  takes to inflation proof the permanent                                                               
MS. REARDON replied 3 to 3.5 percent.                                                                                           
REPRESENTATIVE GATTO  asked if  Ms. Reardon  would be  happy with                                                               
only a 2 percent increase per year.                                                                                             
MS. REARDON  responded that  she would  guess that  the inflation                                                               
costs  for some  things in  education, such  as PERS/TRS,  have a                                                               
higher  escalation in  inflation.   Inflation goes  up and  down.                                                               
While it is low at this time, next  year it could be higher.  Ms.                                                               
Reardon said she  would be more comfortable with  indexing than 2                                                               
percent, but appreciates what has been done.                                                                                    
CHAIR WILSON announced that public testimony is now closed.                                                                     
Number 2233                                                                                                                     
REPRESENTATIVE  COGHILL moved  to  adopt  Amendment 1,  [original                                                               
punctuation provided] which read as follows:                                                                                    
     Page 1, Line 6:                                                                                                            
     Delete:  "However, the department shall, on July 1 of                                                                      
      each year, beginning July 1, 2005 increase the base                                                                       
     student allocation by two percent"                                                                                         
Number 2241                                                                                                                     
REPRESENTATIVE GATTO objected.                                                                                                  
Number 2245                                                                                                                     
REPRESENTATIVE COGHILL told the members  that there are two sides                                                               
to  the question  of a  2  percent annual  increase to  education                                                               
funding.   Is this  a sufficient  amount, he asked.   He  said he                                                               
believes the answer is "no",  so the starting point should always                                                               
be  the  formula.    This  is  a  very  complex  formula.    When                                                               
discussing adequate  funding it is  clear that the issue  must be                                                               
addressed   and   funded   by   the   legislature   every   year,                                                               
Representative Coghill added.                                                                                                   
REPRESENTATIVE  COGHILL said  that  he believes  there are  other                                                               
important issues  that must be  addressed as well.   For example,                                                               
he told the  members he believes public safety rises  to the same                                                               
level of  importance as  education, and  there are  no escalating                                                               
clauses in legislation for funding  that.  Representative Coghill                                                               
acknowledged that  he has a  bill that requests more  funding for                                                               
education and is working to find more funds.                                                                                    
REPRESENTATIVE COGHILL  agreed that Mr.  Rose makes a  good point                                                               
that it  is an interesting  time where there is  declining income                                                               
and increased  expenses.   He told  the members  that there  is a                                                               
bigger debate going  on and that is to use  some of the permanent                                                               
fund  to fund  state government.   He  told the  members that  he                                                               
would not  support indexing education  funding and is not  even a                                                               
big fan of  inflation proofing the permanent fund  even though it                                                               
is statutorily required.  The  growth factor is market driven and                                                               
an  income that  is revenue  driven  from royalty  oil and  lease                                                               
sales.    He added  that  he  would  rather  see the  [funds  for                                                               
inflation proofing] be placed in  education funding.  If indexing                                                               
were included  for education funding,  it could then  be included                                                               
in every  budget because each  one is important.   Representative                                                               
Coghill summarized  that since  he has  been in  the legislature,                                                               
the  education funding  issue has  risen to  the top  every year.                                                               
This amount is  not enough for education funding,  he stated, and                                                               
is  surprised that  there is  not  an amendment  to increase  the                                                               
funding.  The question is where can the money be found.                                                                         
TAPE 04-16, SIDE B                                                                                                            
Number 2364                                                                                                                     
REPRESENTATIVE  COGHILL  explained that  this  is  just one  more                                                               
layer the House Finance Committee  must go over to determine what                                                               
is adequate  educational funding.  He  told the members if  it is                                                               
believed that the  amount for the base  student allocation should                                                               
be higher,  then raise the  amount.  He  stated no one  is fooled                                                               
that the 2 percent annual increase will do anything.                                                                            
Number 2351                                                                                                                     
CHAIR WILSON announced for the  record that Representative Cissna                                                               
joined the meeting some time ago.                                                                                               
CHAIR WILSON commented  that she has been in  the legislature for                                                               
four years and has been  fighting for increased education funding                                                               
all  that  time.     The  schools  in  her   district  have  been                                                               
experiencing  serious  shortfalls  in  funding  long  before  the                                                               
larger schools districts  felt the pain, she said.   Chair Wilson                                                               
told the  members that she agrees  with what has been  said about                                                               
the 2  percent increase  being only  a start.   The  schools have                                                               
been expected  to provide  everything that  is requested  of them                                                               
even though  there has  been a  steady erosion  in funding.   She                                                               
stated that  she believes the  inclusion of a 2  percent increase                                                               
may be  viewed by some  as a  conclusive solution to  the funding                                                               
Number 2291                                                                                                                     
REPRESENTATIVE GATTO  said that  every year  about this  time the                                                               
school  districts  try  to  issue contracts  and  right  now  the                                                               
schools do not know how much  money will be funded for education.                                                               
The districts expect that it will  be less than what was received                                                               
last  year.   He  said  he hopes  this  2  percent increase  will                                                               
provide  the districts  with the  assurance that  it will  not be                                                               
necessary to  issue so many pink  slips.  This kind  of assurance                                                               
for the  previous year's allocation,  plus a 2  percent increase,                                                               
may  make  it  easier  for   the  districts'  to  issue  teaching                                                               
contracts, plan on insurance and  utility increases, and plan for                                                               
maintenance costs.   Representative  Gatto told the  members that                                                               
he hopes the  percentage will be 4 percent, but  at least it will                                                               
be  2 percent  under  Alaska  statute rather  than  nothing.   He                                                               
agreed with Mr.  Rose's statement that over the  last seven years                                                               
all that  has been  done is  to "manage the  decline."   The $210                                                               
increase is only  arresting the decline and is  not repairing the                                                               
damage.  He summarized his comments  by saying that the 2 percent                                                               
annual increase provides the districts  with some hope that there                                                               
will not be further decline.                                                                                                    
Number 2207                                                                                                                     
REPRESENTATIVE  SEATON  told the  members  that  he is  concerned                                                               
about  the  2 percent  increase  language  in  the bill  for  two                                                               
reasons.   The  first is  that  it may  be a  magnet for  drawing                                                               
negative votes for the bill because  there are a number of people                                                               
who  are opposed  to inflation  proofing  any budgets.   So  this                                                               
language  would provide  a good  excuse for  some members  not to                                                               
support  the bill,  he  said.   The second  concern  is that  the                                                               
language says  "by 2 percent."   He told the member  that if this                                                               
amendment fails, he will be  offering an amendment that would say                                                               
"by at least 2 percent" so that  the mind set is changed that the                                                               
increase will be 2 percent.                                                                                                     
REPRESENTATIVE   SEATON  said   he   would  like   to  get   some                                                               
clarification  from  the administration  on  the  effect of  this                                                               
language on the base student  allocation.  The committee has been                                                               
told that fully funding education  means meeting the base student                                                               
allocation.    Representative   Seaton  questioned  whether  this                                                               
change would mean that fully  funding education means meeting the                                                               
base student  allocation last year  or the previous year,  plus 2                                                               
Number 2140                                                                                                                     
EDDIE  JEANS,  Finance  Manager, School  Finance  and  Facilities                                                               
Section,   Department  of   Education   and  Early   Development,                                                               
testified on HB 471 and answered  questions from the members.  He                                                               
responded that  the department's interpretation of  the 2 percent                                                               
provision would be to build that  2 percent into the budget which                                                               
would be  submitted to the  legislature in December.   That would                                                               
be the full funding amount, he said.                                                                                            
REPRESENTATIVE GATTO said  he believes that if  steps and columns                                                               
didn't change, there were no  raises, no insurance increases, and                                                               
no  PERS/TRS  shortfall  then education  funding  could  probably                                                               
manage  with the  2 percent  annual increase.   He  asked if  Mr.                                                               
Jeans would agree with that statement.                                                                                          
Number 2110                                                                                                                     
MR. JEANS  replied that he could  not answer that questions.   He                                                               
added  that he  did look  at the  Anchorage Consumer  Price Index                                                               
(CPI) over the last five years,  and over that period the CPI has                                                               
averaged about  2 percent.   Mr. Jeans  commented that  2 percent                                                               
seems like a reasonable number at this point.                                                                                   
CHAIR  WILSON said  she  is sure  that for  some  schools that  2                                                               
percent would not be enough.                                                                                                    
REPRESENTATIVE SEATON explained to the  members that based on Mr.                                                               
Jeans'  response  to  questions,  he will  not  be  offering  the                                                               
amendment  he mentioned  earlier  because the  2  percent can  be                                                               
built into the formula.  He  said that if he changed the language                                                               
to "at least 2 percent" he  does not believe it would be possible                                                               
for the department to build it into the formula.                                                                                
REPRESENTATIVE  COGHILL  questioned  how  this  will  affect  the                                                               
hiring practices  that Representative  Gatto mentioned.   He said                                                               
that  he was  under  the assumption  that  hiring decisions  were                                                               
based  on student  count.   The committee  has discussed  forward                                                               
funding of  education and  there has always  been a  snag because                                                               
the  student count  needed  to be  taken  into consideration,  he                                                               
CHAIR  WILSON said  that it  has always  been very  difficult for                                                               
schools  to  know  how  many  teachers to  hire  because  of  the                                                               
uncertainty of  funding.   Tenured teachers  must be  notified by                                                               
March 15  if there is a  possibility of a layoff.   She explained                                                               
that for many of the schools  where funding has been severely cut                                                               
all that remains are tenured teachers.                                                                                          
REPRESENTATIVE COGHILL said  that he does not believe  that the 2                                                               
percent annual  increase would make  a difference  in determining                                                               
how many teachers may be retained.                                                                                              
Number 2000                                                                                                                     
CHAIR WILSON  clarified that the  schools also must  determine if                                                               
there will  be the same number  of students.  If  there are fewer                                                               
students, the  schools will  receive less  money.   She commented                                                               
that when  the schools do not  have enough money to  provide good                                                               
educational opportunities, people move away.                                                                                    
MR. JEANS commented  that the members know  the budgeting process                                                               
is  a difficult  one.   He explained  that school  districts base                                                               
there budgets on the base student  dollar amount in statute.  The                                                               
districts assume  that is what  will be  received.  He  said most                                                               
districts  will  not  budget  based on  a  higher  dollar  amount                                                               
because that  is the element  that is unknown.   If there is  a 2                                                               
percent increase automatically built  into the foundation program                                                               
the school districts will budget  for it, expect it, and pressure                                                               
will be put  on the legislature to  fund it, Mr. Jeans  said.  He                                                               
added that  the foundation  program has  been fully  funded since                                                               
1987.  There was a huge decline  in oil revenue that year and the                                                               
state  took a  10  percent  cut across  the  board including  the                                                               
foundation  program.   He clarified  that was  after the  budgets                                                               
were approved and appropriated by the legislature.                                                                              
Number 1961                                                                                                                     
MR. JEANS  told the  members that the  2 percent  annual increase                                                               
would help  the school  districts determine  how many  pink slips                                                               
need to be issued.  For  example, if a school district knew today                                                               
that it  could count on $4,010  then pink slips would  need to be                                                               
issued because it  could not assume there would  be more funding.                                                               
If there  is a 2 percent  increase, then it is  likely that fewer                                                               
pink slips would be issued, he said.                                                                                            
REPRESENTATIVE WOLF  said he  agrees with  Representative Gatto's                                                               
statement.   He  explained that  he had  the opportunity  to work                                                               
with  the superintendent  of schools  while decisions  were being                                                               
made  about the  issuance  of pink  slips.   Representative  Wolf                                                               
commented  that  the   2  percent  increase  could   make  a  big                                                               
difference in some people's lives.                                                                                              
REPRESENTATIVE COGHILL  commented that he does  not disagree with                                                               
Representative Wolf's statement.   He said, however,  that if the                                                               
base  student  allocation were  set  at  an adequate  level  then                                                               
school  districts  could   plan  appropriately.    Representative                                                               
Coghill pointed  out that there could  be an argument that  if an                                                               
annual  percentage   increase  is  placed  in   statute  for  the                                                               
foundation  formula, then  there are  other areas  of the  budget                                                               
where annual budgeting  processes also impact people's  jobs.  He                                                               
commented that if this is  something the legislature really wants                                                               
to do, then perhaps there should  be a 2 percent escalator on the                                                               
budget bill as a whole.                                                                                                         
REPRESENTATIVE COGHILL stated that he  believes the better way to                                                               
approach the  problem is to look  at the formula to  see what the                                                               
real number is and if it really  works.  Every two years there is                                                               
an election process where the people  of Alaska tell us what they                                                               
want.    He commented  that  he  rides  the breaks  on  education                                                               
funding even  though he has a  bill which asks for  more funding.                                                               
Representative Coghill commented that  he will likely get slapped                                                               
around for that.  In summary, he  said that if the funding is not                                                               
accurate it  is because the  people who elect legislators  do not                                                               
reflect that increased funding is necessary.                                                                                    
Number 1800                                                                                                                     
REPRESENTATIVE GATTO  commented that  as the  chair of  the House                                                               
Special Committee on Education if he  could be king for a day and                                                               
come up with  a number that meets the needs  for education, there                                                               
would  be no  need for  a 2  percent escalator.   He  stated that                                                               
there was a great deal of  time and effort from committee members                                                               
this year  to come up with  an additional $210, exclusive  of the                                                               
PERS/TRS  shortfall  which  is  addressed  in  a  separate  bill.                                                               
Representative Gatto  explained that  the committee came  up with                                                               
the right number  which does nothing more than  stop the decline.                                                               
It  is for  this reason  that he  is opposing  the amendment,  he                                                               
A  roll call  vote was  taken.   Representative Coghill  voted in                                                               
favor  of Amendment  1.   Representatives  Wilson, Wolf,  Seaton,                                                               
Cissna,  and Gatto  voted  against it.    Therefore, Amendment  1                                                               
failed to be adopted by a vote of 1-5.                                                                                          
REPRESENTATIVES SEATON proposed that a  memorandum be drawn up to                                                               
accompany  the  bill  which  would say  that  the  House  Health,                                                               
Education and  Social Services Standing Committee  recognizes the                                                               
need  to  identify  sources  of  available  funds  to  cover  the                                                               
increase in  education funding.  It  would go on to  say that the                                                               
committee has  identified the remaining  authorized CBR  draw for                                                               
2004 and the  Alaska Permanent Fund earnings as  sources that can                                                               
be used for the education funding increase.                                                                                     
REPRESENTATIVE COGHILL  objected for  purposes of  discussion and                                                               
REPRESENTATIVE SEATON  read the following text  which he suggests                                                               
be included in a memorandum which would accompany HB 471:                                                                       
     The  House   Health,  Education  and   Social  Services                                                                    
     Standing  Committee  recognizes  the need  to  identify                                                                    
     sources  of  available  funds   for  this  increase  in                                                                    
     education   funding.     We   identify  the   remaining                                                                    
     authorized  CBR draw  for 2004  and the  permanent fund                                                                    
     earnings reserve as  sources that can be  used for this                                                                    
     educational funding increase.                                                                                              
REPRESENTATIVE SEATON  added that the language  is conceptual and                                                               
would not object to the language being slightly modified.                                                                       
CHAIR WILSON  commented that this  language was developed  in the                                                               
House Special Committee  on Education, but did not  come with the                                                               
bill in error.                                                                                                                  
Number 1657                                                                                                                     
REPRESENTATIVE GATTO  explained that the letter  should accompany                                                               
the bill when it goes to  the House Finance Committee so that the                                                               
members there are not faced with  a bill that has a $42.3 million                                                               
fiscal note  without identifying some available  funding sources.                                                               
He clarified  that the  letter was written  by the  House Special                                                               
Committee on Education  to accompany the bill, but not  be a part                                                               
of the bill.                                                                                                                    
CHAIR WILSON asked what the  committee wishes with respect to the                                                               
letter to accompany the bill.                                                                                                   
REPRESENTATIVE  COGHILL  said  that he  maintains  his  objection                                                               
because it narrows  down the sources of funding  from last year's                                                               
CBR draw.  He said he is open to a suggestion.                                                                                  
REPRESENTATIVE SEATON clarified that  the only reason this letter                                                               
specifies the CBR draw and the  permanent fund earnings is due to                                                               
the fact  that these  are the only  funds currently  available to                                                               
this legislature that  can be appropriated.  He  said that future                                                               
tax sources  require another bill  to pass  which may or  may not                                                               
pass.    He  said  that  he believes  it  is  important  for  the                                                               
committee to say that this  education funding is important enough                                                               
to us that sources have been identified to fund this bill.                                                                      
REPRESENTATIVE COGHILL suggested that  the language including the                                                               
CBR draw  for 2004 be  removed and  just have the  permanent fund                                                               
earnings reserve in the letter.   He commented that House Health,                                                               
Education and Social Services Standing  Committee is not going to                                                               
be  advising  the House  Finance  Committee  of any  new  revenue                                                               
sources.  He  commented that if the committee really  wants to be                                                               
daring why not insert an income tax as a source of revenue.                                                                     
REPRESENTATIVE SEATON explained that  the reason he is suggesting                                                               
this letter and  the language in it  is due to the  fact that the                                                               
committee was  told that  if it  put forth  a bill  that included                                                               
increased funding,  the House Finance Committee  would like those                                                               
sources of funding  to be identified.  This  letter would reflect                                                               
the members' commitment to education funding, he added.                                                                         
Number 1490                                                                                                                     
REPRESENTATIVE COGHILL  commented that  while he is  the majority                                                               
leader, nine  times out of  ten he is in  the minority.   He told                                                               
the members  he maintains his objection.   Representative Coghill                                                               
said  he  believes the  committee  chair's  statement before  the                                                               
House Finance  Committee would be adequate,  unless the committee                                                               
wants to promote a head tax or income tax.                                                                                      
A  roll call  vote was  taken.   Representatives Wilson,  Seaton,                                                               
Cissna,  and Gatto  voted in  favor  of including  the letter  of                                                               
intent  with HB  471.   Representatives  Coghill  and Wolf  voted                                                               
against it.   Therefore, the  letter of intent was  included with                                                               
HB 471 by a vote of 4-2.                                                                                                        
Number 1399                                                                                                                     
REPRESENTATIVE GATTO moved to  report CSHB 471(EDU), 23-LS1645\I,                                                               
out   of   committee   with   individual   recommendations,   the                                                               
accompanying fiscal notes, and an  accompanying letter of intent.                                                               
There  being no  objection,  CSHB 471(EDU)  was  reported out  of                                                               
House Health, Education and Social Services Standing Committee.                                                                 
HB 511-CERTIFICATE OF NEED PROGRAM                                                                                            
Number 1300                                                                                                                     
CHAIR WILSON announced  that the next order of  business would be                                                               
HOUSE BILL NO.  511, "An Act relating to the  certificate of need                                                               
program  for  health  care  facilities;   and  providing  for  an                                                               
effective date."                                                                                                                
Number 1310                                                                                                                     
REPRESENTATIVE   RALPH   SAMUELS,   Alaska   State   Legislature,                                                               
testified as sponsor of HB 511.   He told the members that HB 511                                                               
closes some loopholes  in the certificate of  need (CON) language                                                               
in  the  statutes  and it  allows  the  state  to  use CON  as  a                                                               
management  tool for  residential psychiatric  facilities.   This                                                               
bill  would enable  the state  to  addresses the  problem of  the                                                               
large number of  youths who are in facilities  outside of Alaska,                                                               
would ensure  that there are the  right number of beds,  and that                                                               
Medicaid costs are kept under control.                                                                                          
Number 1219                                                                                                                     
LISA  WOLF,  Director  of  Planning,  Providence  Health  System,                                                               
testified in  support of HB 511.   She told the  members that she                                                               
has been involved  in the CON law for over  20 years, has written                                                               
over 20  CON applications,  and has been  involved in  the review                                                               
process on far more that.   The CON law was established to ensure                                                               
that  the state  of  Alaska and  individual  communities are  not                                                               
financially  burdened  with  excess  health  care  equipment  and                                                               
facilities.  The  premise is that having more  than the community                                                               
needs would  increase the cost  of care, as providers  would need                                                               
to increase charges  to cover the additional  expenses that would                                                               
not be  covered by adequate  volume [of  patients].  The  CON law                                                               
was designed  to ensure a high  quality of care by  ensuring that                                                               
there would  be adequate volume  so that the  practitioners would                                                               
be proficient in performing the procedure or exam.                                                                              
Number 1050                                                                                                                     
MS. WOLF  told the members that  in recent years there  have been                                                               
studies done in  other states to see if the  CON law was actually                                                               
achieving its purpose.  For  example, one study compared the cost                                                               
and quality of  heart procedures done in a state  which had a CON                                                               
law  with  the  cost  and  quality of  another  state  which  had                                                               
eliminated the  law a few years  earlier.  It was  found that the                                                               
clinical outcome was  better in the state with the  CON law, than                                                               
the non-CON state.   The outcome was linked to  higher volumes in                                                               
facilities with CON approval.                                                                                                   
MS.  WOLF explained  that  leasing  has become  a  common way  of                                                               
getting around  the CON process.   If  a health care  facility or                                                               
provider wants  to add a  piece of  equipment that costs  over $1                                                               
million, a CON is required.   However, if the equipment is leased                                                               
the  $1 million  threshold  is  not reached  and  the entire  CON                                                               
process is avoided.  Often  when this happens the local providers                                                               
and the state are unaware of  the overall impact to the community                                                               
or the  state as  a whole, she  said.  Ms.  Wolf added  that this                                                               
also makes it difficult for the  state to make an adequate review                                                               
on a  CON application.   The question  is then whether  the state                                                               
rewards those who  go around the CON process  or potentially adds                                                               
unneeded services by approving CONs.                                                                                            
MS. WOLF Summarized that the  CON process levels the paying field                                                               
for  all providers  and provides  the oversight  that is  needed.                                                               
She encouraged the members to support HB 511.                                                                                   
Number 0940                                                                                                                     
ROBERT  BRIDGES,  M.D.,  Medical Director,  Alaska  Open  Imaging                                                               
Center (AOIC),  testified in opposition to  HB 511.  He  told the                                                               
members that  it has  imaging centers  in Wasilla,  Soldotna, and                                                               
Anchorage.   Dr.  Bridges emphasized  that presently  Alaska Open                                                               
Imaging  Center  is  the   only  independent  diagnostic  testing                                                               
facility in Alaska.   He told the members that  he graduated from                                                               
the University of  Washington School of Medicine in  1980 and has                                                               
degrees  in  chemistry  and nuclear  engineering,  and  has  been                                                               
awarded medical  specialties in diagnostic radiology  and nuclear                                                               
DR. BRIDGES said that for over  two years the Alaska Open Imaging                                                               
Center  has   provided  quality,   affordable  health   care  for                                                               
Alaskans.    He told  the  members  of  the advances  in  medical                                                               
technology the center  has brought to Alaska.   While others have                                                               
talked about  advances, the center  has brought that  vision into                                                               
reality.    The  center  has  given patients  a  choice  and  has                                                               
provided  these services  efficiently and  at a  lower cost  than                                                               
other providers.  Dr. Bridges emphasized  that this is a story of                                                               
success,  not   of  elitist  medical  groups   or  large  medical                                                               
conglomerates, but  Alaskans who  are technologists  and hospital                                                               
employees who  saw the need for  a new and better  form of health                                                               
care.   The  market  place determines  the  center's success.  he                                                               
commented.   It is  earned by taking  personalized care  of every                                                               
patient, one at  a time.  Since opening its  doors the center has                                                               
taken care  of Medicare and  Medicaid patients, and  patients who                                                               
have  been  abandoned  by the  hospitals  because  the  patient's                                                               
problems seemed too complicated or too time consuming.                                                                          
DR.  BRIDGES summarized  his comments  that HB  511 is  not about                                                               
health  care,  but  about  health control.    This  bill  stifles                                                               
competition  and does  not confront  the challenges  of cost  and                                                               
quality medicine.  The bill  favors those with offices of lawyers                                                               
and lobbyists  with large bank  accounts to ensure they  get what                                                               
they want, he stated.                                                                                                           
Number 0785                                                                                                                     
DR. BRIDGES  commented that the bill  strikes on one of  the true                                                               
major cost  challenges in medicine  today, and that is  the abuse                                                               
of unfettered  and uncontrolled  self-referral which  has created                                                               
over-utilization of services  nationwide by up to  250 percent in                                                               
some specialties.   He said  he believes this over  regulation is                                                               
an abuse of  the people's time and resources.   Dr. Bridges asked                                                               
the members to give AOIC the freedom to grow.                                                                                   
Number 0720                                                                                                                     
SAM KORSMO, Chief Operating Officer,  Alaska Open Imaging Center,                                                               
testified in  opposition to  HB 511.   He  told the  members that                                                               
several  years  ago it  embarked  on  a  venture to  provide  the                                                               
largest independent  radiology businesses  in Alaska.   There are                                                               
36 employees, 3  doctors, and an array  of technological advances                                                               
that have  set new levels in  quality.  Mr. Korsmo  said that the                                                               
business  has  prospered  and  grown  based  on  core  values  of                                                               
service.  The physicians there  place care and compassion for the                                                               
patients' benefit  first and  foremost.   He explained  that AOIC                                                               
has brought a  large array of new technology  to Alaska including                                                               
the open  MRI, virtual  colonoscopy and  cardiac scoring  for the                                                               
comfort of patients.                                                                                                            
MR. KORSMO urged the committee to  ensure that any changes to the                                                               
CON  laws be  warranted.   The mission  statement on  CON was  to                                                               
promote  responsive   health  facilities,   service  development,                                                               
rational planning and cost containment;  and to ensure that these                                                               
services  would be  of good  quality, acceptable  to the  public,                                                               
promote  access,  choice,  and  meet  the  public's  needs  while                                                               
preventing  excessive  unnecessary   duplicative  facilities  and                                                               
services.  Mr.  Korsmo told the members that AOIC  has met all of                                                               
the CON mission  statement goals and has done it  better and more                                                               
cost effectively  than any  other provider could  do in  the last                                                               
three years.  There has been  more duplication of AOIC's model by                                                               
other  providers than  any other  period  before, he  said.   The                                                               
mentality of  "staying up  with the Jones"  has created  a burden                                                               
which has been  thrown on the backs of patients  and families, he                                                               
Number 0555                                                                                                                     
MR. KORSMO  asked the  members to  reconsider the  language which                                                               
defines a health care facility on page 3, line 21, which says:                                                                  
    independent   diagnostic   testing   facility,   secure                                                                 
     residential psychiatric treatment center,                                                                              
MR. KORSMO  told the members  that currently  AOIC is one  of the                                                               
few if  not the  only, independent diagnostic  testing facilities                                                               
in Alaska.   He suggested  that this definition is  directed only                                                               
at  AOIC.   Mr. Korsmo  urged the  members to  eliminate the  CON                                                               
process and allow  free market forces to provide  a better health                                                               
care system.                                                                                                                    
Number 0508                                                                                                                     
CHAIR WILSON asked if this bill will affect AOIC now.                                                                           
MR. KORSMO said yes.  The bill  will impact AOIC if it chooses to                                                               
upgrade equipment  or expand services.   It would be  required to                                                               
request a CON.                                                                                                                  
CHAIR WILSON  asked if the cost  of services are lower  than that                                                               
which is provided at a hospital.                                                                                                
MR. KORSMO said yes.                                                                                                            
Number 0449                                                                                                                     
REPRESENTATIVE GATTO  expressed concern for the  consumer.  While                                                               
it is  clear that  a patient  could go to  AOIC and  get services                                                               
provided  for less  money, a  week  later that  same patient  may                                                               
require  services that  are  only provided  at  the hospital,  he                                                               
said.  Because the hospital has  lost business it will now charge                                                               
the patient  more money  to compensate and  the consumer  ends up                                                               
paying  more.    Representative   Gatto  questioned  whether  the                                                               
consumer  will  get a  better  deal  with  the services  AOIC  is                                                               
providing or not.                                                                                                               
MR. KORSMO said yes.                                                                                                            
REPRESENTATIVE GATTO clarified that what  Mr. Korsmo is saying is                                                               
that the hospital  will not have to change its  rates even though                                                               
AOIC is taking some of the  business away from it.  The hospitals                                                               
have said that  the most important patients are the  ones who can                                                               
pay.   He added  that he would  bet that AOIC  is not  taking too                                                               
many patients who do  not have the ability to pay.   He asked Mr.                                                               
Korsmo to comment.                                                                                                              
MR. KORSMO  told the members  that AOIC  takes all patients.   It                                                               
has  an  equal  percentage  of  those  that  cannot  pay  as  the                                                               
hospital.   It  also  takes Medicare  and  Medicaid patients,  he                                                               
Number 0330                                                                                                                     
REPRESENTATIVE COGHILL  asked Mr.  Korsmo what is  an independent                                                               
diagnostic testing facility.                                                                                                    
Number 0306                                                                                                                     
MR.  KORSMO  replied   that  AOIC  was  formed  by   a  group  of                                                               
individuals who  have come  together to  build an  imaging center                                                               
REPRESENTATIVE  COGHILL  asked  for  clarification  on  the  term                                                               
MR. KORSMO  responded that independent was  the designation under                                                               
which it applied [for a license].                                                                                               
Number 0192                                                                                                                     
DAVID McGUIRE,  M.D., testified on HB  511.  He told  the members                                                               
that he has testified on more  than one occasion that he believes                                                               
the CON law does  not work; and he added that  he has not changed                                                               
his  opinion.   However, in  the current  application he  said he                                                               
believes it  is worse than it  was intended to be.   He explained                                                               
that the  reason leasing has become  an issue is due  to the fact                                                               
that one  large institution  was granted  the ability  to install                                                               
radiology and oncology treatment facilities  that cost as much as                                                               
$10 million  and were not able  to circumvent the CON  process by                                                               
the precise language  that is before the  members.  Specifically,                                                               
what was  said is that  as health  care providers it  was leasing                                                               
the  equipment  and  space,  while  someone  else  owned  it  and                                                               
therefore  it was  not  necessary  to comply  with  a  CON.   Dr.                                                               
McGuire told the members that no  matter how one views a CON, the                                                               
process should  be the  same for  everyone.  It  should not  be a                                                               
situation where some get special  treatment over others which was                                                               
the end result, he added.                                                                                                       
DR. McGUIRE  commented that  it was requested  a number  of years                                                               
ago to  allow a facility to  move to another site  without having                                                               
to go  through the CON  process again.   The department  chose to                                                               
include language that  is only clear to  itself, that effectively                                                               
limited  the options  of the  site from  which this  facility was                                                               
moved.   He said he believes  that if there is  any limitation on                                                               
anyone, it  should be on  the person with  the CON.   Dr. McGuire                                                               
told the members the CON allows  a facility to move once, but not                                                               
twice.   It does not deal  directly with the facility  from which                                                               
the CON moved.   Dr. McGuire summarized that there  could be many                                                               
battles about whether  or not the CON process  works; however, it                                                               
should be fair to everyone.                                                                                                     
TAPE 04-17, SIDE A                                                                                                            
Number 0029                                                                                                                     
REPRESENTATIVE  GATTO told  the  members that  he  served on  the                                                               
Valley Hospital board during the  time the hospital was trying to                                                               
get a CON.  It  took well over a year to do it.   He asked if Dr.                                                               
McGuire would agree that if  fairness is to prevail all providers                                                               
should be subject to the same rules.                                                                                            
DR. McGUIRE agreed  that all providers should have  to go through                                                               
the same process.  He told the members  that is the way it use to                                                               
be before the hospital got an oncology department.                                                                              
Number 0133                                                                                                                     
MIKE   POWERS,   Hospital   Administrator,   Fairbanks   Memorial                                                               
Hospital, testified  in support of HB  511.  He told  the members                                                               
that he agrees with Dr.  McGuire's comments that HB 511 addresses                                                               
some weakness in the current CON  law.  Mr. Powers took exception                                                               
to some  comments in  that he  believes the  CON process  is very                                                               
valuable  to communities.    The weaknesses  in  the CON  statute                                                               
provides tremendous exposure to community hospitals.                                                                            
MR.  POWERS said  that  there are  three areas  that  need to  be                                                               
     One  is  the  matter  of  the  freestanding  diagnostic                                                                    
     imaging  centers.    He  pointed   out  that  the  bill                                                                    
     recognizes that  there should be a  level playing field                                                                    
     for all.   Two, the  (indisc.)...  Three, the  issue of                                                                    
     the cost of leases for space [needs to be addressed].                                                                      
MR.  POWERS  told  the  members   it  is  his  opinion  that  the                                                               
department will ensure  that the CON law is applied  equally.  It                                                               
won't be  possible to avoid  CON review  by leasing space  and it                                                               
does  require that  everyone plays  by the  rules.   He explained                                                               
that  he believes  it is  important that  the diagnostic  imaging                                                               
centers be  subject to CON  because without  it, it tears  at the                                                               
fabric of those services that do  not pay for themselves, such as                                                               
burns, mental  health, neo-natal care, emergency  visits, chronic                                                               
inebriants, Medicare,  et cetera.   Mr. Powers urged  the members                                                               
to pass  HB 511 because it  is an important step  in leveling the                                                               
playing field.                                                                                                                  
Number 0255                                                                                                                     
CHARLIE  FRANZ,  Administrator,  South  Peninsula  Hospital,  and                                                               
Chairman  of  the  Board,   Alaska  State  Hospital  Association,                                                               
testified in  support of HB  511 and answered questions  from the                                                               
members.   He  told the  members  that both  the South  Peninsula                                                               
Hospital and  the hospital association  strongly supports  HB 511                                                               
and the  changes that are proposed.   The changes will  provide a                                                               
level  playing field  for community  hospitals and  entrepreneurs                                                               
such as the independent  testing facilities whose representatives                                                               
testified earlier.  Mr. Franz  emphasize that it is important the                                                               
members think  about the  community hospitals  as a  resource for                                                               
the communities.   He suggested that those who  are familiar with                                                               
the fishing industry  in Alaska think of the  analogy between the                                                               
CON  bill and  the limited  entry permits.   There  are resources                                                               
that need to be used appropriately.   Fishing and health care are                                                               
probably the  only two business  in the  state where there  is an                                                               
effort  to  provide  quality  services or  products,  in  a  cost                                                               
effective manner, and then someone  else decides how much will be                                                               
paid for that service or product.   He pointed out that it is not                                                               
like the  free market place  and he does  not believe that  is an                                                               
appropriate way  to consider  health care.   Mr.  Franz encourage                                                               
the members  to support  HB 511 because  it is a  good bill.   It                                                               
does  not   cost  the  state  anything   and  protects  community                                                               
resources, he added.                                                                                                            
Number 0414                                                                                                                     
REPRESENTATIVE    GATTO   commented    that   [Valley    Hospital                                                               
Association] merged with Triad and  is in the process of building                                                               
a much larger  hospital, up to 70 beds, in  another location.  He                                                               
asked Mr. Franz  how this bill would affect the  hospital that is                                                               
going  to  be  constructed  and  in general  how  it  affect  the                                                               
hospital in the valley.                                                                                                         
MR.  FRANZ responded  that  the  new hospital  would  have to  go                                                               
through the CON process, just as  it does now.  However, he said,                                                               
there would  be an  impact on the  competitor across  the street,                                                               
Open  Imaging Center  would have  to go  through the  CON process                                                               
before adding services or upgrading its equipment.                                                                              
Number 0481                                                                                                                     
CHAIR GATTO asked  if he understands correctly that  Mr. Franz is                                                               
saying that Open Imaging Center  has a grandfather right, but the                                                               
new hospital  does not because  it is  expanding and moving  to a                                                               
new location.                                                                                                                   
MR. FRANZ replied that if HB  511 is not enacted, Valley Hospital                                                               
will  be  at a  serious  disadvantage  when Open  Imaging  Center                                                               
decides to add a new service and  does not have to go through the                                                               
CON process.   It will  allow Open Imaging Center  to cherry-pick                                                               
services away from the hospital.                                                                                                
Number 0547                                                                                                                     
STEVE GONZALES,  Owner, Gonzales Marketing, testified  on HB 511.                                                               
He told the members that  in addition to representing Alaska Open                                                               
Imaging  Center,  he is  a  supporter  of  consumer rights.    He                                                               
commented  that he  does  not  agree with  comments  by the  non-                                                               
profit's  that  this  bill  levels  the  playing  field.    As  a                                                               
consumer,  when  a non-profit  provides  a  service that  is  not                                                               
required by the public or cannot  be paid for by the public, then                                                               
it is  leveled on the shoulders  of the consumers who  pay taxes.                                                               
Mr.  Gonzales pointed  out that  Alaska Open  Imaging Center  has                                                               
based its services on the  needs of the community; and therefore,                                                               
either thrives or does not based  on how that service is provided                                                               
and  how it  competes  with other  providers.   The  stockholders                                                               
carry  the  burden, not  taxpayers.    He  asked the  members  to                                                               
recognized  that  this   bill  is  being  pushed   forward  as  a                                                               
competitive impediment  by non-profit hospitals who  compete with                                                               
this  particular service.   Mr.  Gonzales said  he believes  that                                                               
consumers should not  be forced to pay higher  and higher medical                                                               
bills and hundreds of dollars  for minimal treatment because this                                                               
is a  grandfathered organization.   He urged  the members  not to                                                               
buy the  smoke screen that is  being put forth here  because this                                                               
bill is  simply a competitive  strategy to eliminate  Alaska Open                                                               
Imaging Center.                                                                                                                 
Number 0670                                                                                                                     
BRIAN SLOCUM,  Administrator, Tanana Valley Clinic,  testified on                                                               
HB 511  and answered  questions from the  members.   He explained                                                               
that Tanana Valley  Clinic was established in  1959 and currently                                                               
has about 35  providers, employs about 225  people, and one-third                                                               
of its patients  are Medicare or Medicaid recipients,  or have no                                                               
insurance.   In 2003  the clinic provided  just under  $7 million                                                               
worth of unreimbursed  care to community members.   He added that                                                               
while  the  clinic  is  a  private  business,  it  does  serve  a                                                               
community need and offers some community benefit.                                                                               
MR. SLOCUM  spoke against the inclusion  of diagnostic facilities                                                               
and  a  blanket  prohibition  of   using  leases  for  space  and                                                               
equipment.  He opposes the carving  out of another area of health                                                               
care delivery as  the exclusive realm of hospitals.   A couple of                                                               
years ago there was debate  about ambulatory surgical centers and                                                               
it  was  determined that  ambulatory  surgical  centers would  be                                                               
subject to  CON.  He said  he understands that is  a "dead issue"                                                               
at  this point;  however, he  is  concerned that  once again  the                                                               
hospital industry is asking the  legislature to take a portion of                                                               
the  services  delivered  to patients  and  make  it  exclusively                                                               
available to hospitals.  If the  members do not agree with him on                                                               
this  point, he  asked if  it would  be possible  to work  on the                                                               
definition of some of these terms.                                                                                              
Number 0825                                                                                                                     
MR. SLOCUM  said for instance, that  today was the first  time he                                                               
had  heard  the  definition of  "independent  diagnostic  testing                                                               
facility."  As HB 511 is drafted  it does not refer to a Medicare                                                               
or state  definition of independent diagnostic  testing facility.                                                               
He commented that it  might be wise to tie it  to a very specific                                                               
definition.   Mr.  Slocum said  his  fear is  that if  it is  not                                                               
clearly articulated, then it would fall  to the CON office in the                                                               
Department   of  Health   and  Social   Services  to   make  that                                                               
determination without guidance from the  legislature.  He said he                                                               
believes that clinics  such has Tanana Valley  Clinic, because it                                                               
is  not  affiliated   with  a  hospital,  could   be  defined  an                                                               
independent  diagnostic  testing  facility.    For  example,  the                                                               
clinic has a laboratory and  some imaging facilities scattered on                                                               
four  different floors  of the  five-story building  where it  is                                                               
located.   It is inconvenient and  there will be a  time when the                                                               
clinic will want to try to  consolidate all these services in one                                                               
space.   There  isn't  space  in the  existing  building, so  the                                                               
clinic has  purchased a lot  across the  street, and it  has been                                                               
thought that  the clinic would  put all these  testing facilities                                                               
in one building.  This current  lack of clarity in the definition                                                               
may require  the clinic  to go  through the  CON process  just to                                                               
move existing services to a better building, he said.                                                                           
Number 0918                                                                                                                     
MR. SLOCUM said he is concerned  with the leasing portion of this                                                               
bill.   He told the members  that he finds it  highly ironic that                                                               
some of the  organizations that are supporting this  bill are the                                                               
very  organizations  who used  that  loophole  to build  its  $10                                                               
million  facility.   Once an  organization has  its own  facility                                                               
then it wants to "slam the door  in the face of others."  He said                                                               
he doubted  that those who  are urging  the support of  this bill                                                               
have  thought  through  all  the   implications.    For  example,                                                               
currently medical space  in Fairbanks rents for  $2.50 per square                                                               
foot per  month for  fully serviced  space.   That means  that if                                                               
there  were  2,500 square  feet  of  medical space  that  someone                                                               
wanted  to lease  for ten  years with  two five  year options  to                                                               
renew, the  total of those  payments for  20 years would  be $1.5                                                               
million.  Even  using the net present value  calculation to bring                                                               
that back to  today's dollars, that would be over  $1 million and                                                               
would required  a company to go  through the CON process  just to                                                               
rent the space.                                                                                                                 
MR.  SLOCUM explained  that  the  old law  does  not require  the                                                               
addition of  adding the value  of telephones and computers.   The                                                               
new language  suggests strongly that  the value of the  space and                                                               
any equipment required  to operate the facility be  included.  He                                                               
told the members that he believes  that language is too broad and                                                               
urged the elimination of the "lease  of space" language.  If not,                                                               
then  any  minor project  for  clinics  like Tanana  Valley  will                                                               
trigger that CON process and it  will result in the inability for                                                               
the clinic  to ever go  forward.   Mr. Slocum summarized  that he                                                               
does not  believe this  was the  intent of  the sponsor  or other                                                               
groups who support the bill.                                                                                                    
Number 1056                                                                                                                     
REPRESENTATIVE GATTO asked  how much it would cost  the clinic to                                                               
obtain a CON on the most minimal of expenditures.                                                                               
MR.  SLOCUM responded  that he  does not  know, because  it would                                                               
depend on  whether or not  the CON  request was contested  or how                                                               
much information the  department requested.  He  told the members                                                               
that a  couple of  years ago  when the  clinic was  exploring the                                                               
idea of building an ambulatory  surgery center, it was determined                                                               
that  it would  require a  change  to the  law, and  it cost  the                                                               
clinic  over   $100,000  in  direct   costs.    In   response  to                                                               
Representative  Gatto's  question,  he  responded  that  the  CON                                                               
process took 18 months.                                                                                                         
Number 1114                                                                                                                     
CHAIR WILSON announced the HB 511 will be held in committee.                                                                    
There being no  further business before the  committee, the House                                                               
Health, Education and Social  Services Standing Committee meeting                                                               
was adjourned at 5:00 p.m.                                                                                                      

Document Name Date/Time Subjects