Legislature(1993 - 1994)
03/31/1994 08:05 AM Senate FIN
| Audio | Topic |
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
MINUTES
SENATE FINANCE COMMITTEE
March 31, 1994
8:05 a.m.
TAPES
SFC-94, #48, Side 1 (000-end)
SFC-94, #48, Side 2 (000-end)
SFC-94, #50, Side 1 (000-end)
SFC-94, #50, Side 2 (575-517)
CALL TO ORDER
Co-chair Drue Pearce convened the meeting at approximately
8:05 a.m.
PRESENT
In addition to Co-chair Pearce, Senators Kelly, Rieger, and
Sharp were present. Co-chair Frank and Senator Kerttula
arrived soon after the meeting began. Senator Jacko arrived
as it was in progress.
ALSO ATTENDING: Senator Mike Miller; Bruce Botelho,
Attorney General, Dept. of Law; Harry Noah, Commissioner,
Dept. of Natural Resources; McKie Campbell, Deputy
Commissioner, Dept. of Fish and Game; Kevin Brooks, Finance
Officer, Dept. of Fish and Game; Dave Williams, Division of
Medical Assistance, Dept. of Health & Social Services;
Harlan Knudson, Alaska State Hospital & Nursing Home
Association; Garrey Peska, Alaska State Hospital & Nursing
Home Association; Tom Koester, Contract Attorney, Dept. of
Law; Fred Fisher, fiscal analyst, Legislative Finance
Division; Dave Skidmore, aide to Senator Frank; and aides to
committee members and other members of the legislature.
SUMMARY INFORMATION
SB 67 - MENTAL HEALTH TRUST AMENDMENTS
Lengthy discussion and subsequent executive
session discussion was had with Attorney General
Bruce Botelho, Commissioner Noah, and Tom Koester.
CSSB 67 (2dFin) "Q" version was adopted as a
working document. The bill was HELD in committee
for further consideration and an April 11 update
from the Dept. of Law.
SB 312 - SCHOOL CONSTRUCTION GRANT REVIEW
CSSB 312 (HES) was REPORTED OUT of committee with
individual recommendations and a zero fiscal note
from the Dept. of Education.
SB 363 - APPROP: FY 95 CAPITAL PROJECTS AND GRANTS
Capital budget overview was presented by McKie
Campbell and Kevin Brooks for:
Department of Fish and Game
SB 366 - MEDICAID AND MEDICAL SUPPORT ORDERS
Testimony was presented by David Skidmore, Harlan
Knudson, and Garrey Peska. Amendments 1 and 2, by
Senator Frank, were adopted. The bill was HELD in
committee with Amendments 3 and 4 pending.
SENATE BILL NO. 67
An Act amending provisions of ch. 66, SLA 1991, that
relate to reconstitution of the corpus of the mental
health trust, the management of trust assets, and to
the manner of enforcement of the obligation to
compensate the trust; and providing for an effective
date.
Co-chair Pearce directed attention to a work draft (8-
LS0409\Q, Chenoweth, 3/22/94) CSSB 67 (2d Fin); zero fiscal
notes from the Dept. of Law, Dept. of Fish and Game, and the
Alaska Court System; correspondence from Cordova United
Fishermen United; and the committee report from passage of
CSSB 67 (Fin) on May 6, 1993.
Senator Rieger MOVED for adoption of CSSB 67 (2d Fin) "Q"
version for discussion purposes. No objection having been
raised, CSSB 67 (2d Fin) was ADOPTED. Co-chair Pearce
advised that the attorney general and commissioner of
natural resources would provide an overview of changes
incorporated within the bill. No public testimony will be
taken at this time. The legislation will then be brought
back before committee for further discussion "sometime
around the 11th of April . . . ."
HARRY NOAH, Commissioner, Dept. of Natural Resources, told
members that the attorney general would first review the
legal background and the fundamental basis upon which the
"Q" version was drafted. The commissioner said that he
would then speak to "How we've gotten to where we've gotten
on the specifics of the bill."
ATTORNEY GENERAL BRUCE BOTELHO came before committee. He
explained that he would be speaking from typewritten text in
an attempt to build a record for review by both the superior
and supreme court. (A copy of the Attorney General's typed
remarks is appended to these minutes as Attachment A.)
Senator Kerttula referenced comments that the state must
return to the trust fair market value equivalents for trust
land sold or otherwise disposed of, and asked "as of what
time?" The Attorney General responded, "as of 1978, the
time that the trust was dissolved." He further noted that
the supreme court provided the following directive for
reconstituting the trust:
1. Those general grant lands which were once mental
health lands will return to former trust status.
2. In the event exchanges of lands have been made,
those
properties which can be traced to an exchange
involving mental health lands will also be
included in the trust.
3. To the extent that former mental health lands have
been
sold since the date of conveyance, the trust must
be reimbursed for the fair market value at the
time of the sale.
4. In calculating the total amount owed, the trial
court
should grant a set-off for mental health
expenditures made by the state during the same
period.
5. In the event that expenditures exceeded the value
of
land sold, the state need not furnish cash as part
of the reconstitution.
Mr. Botelho next spoke to three legislative attempts to
reconstitute the trust (page 4 of Attachment A). The most
recent proposal, Ch. 66, SLA 91, was found to be
constitutional, but preliminary approval was denied because:
1. The settlement agreement did not provide security
to
guarantee the state's performance.
2. Both the state and plaintiffs could terminate the
settlement at any time, without court approval.
Judge Greene made clear in her ruling that the adequacy of
mental health funding and services provided by the
legislature were not at issue. All parties to the action
have come to the conclusion that the mental health community
will remain dependent on annual appropriations by the
legislature to pay for most of the state's mental health
program.
Senator Kerttula asked if the state had a cause of action
against those who profited from transfer of mental health
lands from the original trust. Mr. Botelho responded that
since no illegal activity was involved, there is no cause
for action. He attested to the fact that litigation has
cast a cloud on resource development of original mental
health lands. He further spoke to need to clear title (page
7, Attachment A).
In response to questions from Senator Kerttula and Senator
Kelly regarding the cloud upon title to former mental health
lands now held by private individuals, Mr. Botelho explained
that the proposal to return to trust original lands that
have not otherwise been disposed of, return of substitute
lands, and provision of compensation ($225 million) for the
gap between original and substitute lands is intended to
immediately lift the lis pendens and clear title to
privately held lands. Private land holders are innocent
third parties since they purchased the land under the
assumption that the state had full authority to make the
transfers. Many purchases predate the filing of the lawsuit.
Senator Kelly asked if the $225 million payout of $15
million a year for 15 years involves general funds. Mr.
Botelho responded affirmatively.
Senator Kelly next asked if lands proposed for substitution
have been generating revenues. Would the state sustain a
loss in general fund revenues from these lands while at the
same time paying out the $15 million? Commissioner Noah
acknowledged that a portion of the land is generating "some
income at this point in time." He said he would provide a
specific number.
Senator Sharp inquired concerning the reasoning and
justification behind the $225 million payout. Commissioner
Noah explained that the total was calculated as a result of
having "pulled a certain number of properties off the table
. . . in terms of . . . the land list." Removed properties
include agricultural lands at Point MacKenzie. Some of the
lands were previously mental health lands, and some are
substitute lands.
Commissioner Noah next directed attention to a series of
charts (Attachment B). He explained that on December 30,
1993, the judge denied preliminary approval of Ch. 66.
However, Ch. 66 remains the basis upon which CSSB 67 (2d
Fin) is constructed. There are two means of achieving
finalization of the mental health issue. The first is
through legislative resolution. That is contained within
the above-reference bill. The alternative is true
settlement. Settlement means that all parties to the
litigation come to the table and agree. The state is
presently dealing with different sets of mental health
attorneys. Some represent the environmental community,
some represent resource companies, some represent
municipalities and third-party landowners, and others
represent members of the mental health community. Meetings
will be ongoing next week in an attempt to reach settlement.
That is the best alternative. Absent full settlement, the
proposed legislation has been submitted for resolution of
the issue. Commissioner Noah stressed that if the
legislature takes no action, the status quo will remain.
Gridlock will continue, title to lands will remain clouded,
and resource development will remain limited.
Directing attention to page 2 of his handout (Attachment B),
Commissioner Noah advised that the six items set forth
thereon constitute the logic behind the present proposal for
finalizing mental health trust issues.
The Commissioner next referenced pages 3 and 4 of the
handout and noted concerns raised by each group and
provisions within CSSB 67 (2d Fin) which address those
concerns. Senator Kerttula questioned DNR versus trust
authority management of trust lands. He noted assertions
that the trust authority might obtain considerably more from
management of its lands than DNR would generate from the
same lands. Commissioner Noah said that the trust would be
managed consistent with the mental health enabling act.
That means that greater emphasis would be placed on deriving
economic value. Senator Kerttula asked if the trust
authority would have oversight on leasing. The Commissioner
responded affirmatively. Speaking to concerns raised by
each group, Commissioner Noah noted that "no one can have
everything they want because it's not physically possible to
do that."
Both Senator Sharp and Co-chair Frank inquired concerning
the grounds upon which environmental interests became
involved in mental health litigation. Attorney General
Botelho responded that lands from the original mental health
trust had been transferred into state parks and refuges.
The environmental community is concerned that as a
consequence of return of park lands or areas such as the
Haines eagle reserve to the trust, they might become
available for development. Mr. Botelho referenced a U.S.
Supreme Court decision which concluded that citizens could
defend "trees and spotted owls, and the like in court . . .
." That doctrine lives on.
End: SFC-94, #48, Side 1
Begin: SFC-94, #48, Side 2
Senator Kerttula referenced the fourth page of the handout
and inquired concerning the meaning of:
DNR management with current regulatory scheme used
to the extent possible under the Mental Health
Enabling Act.
Commissioner Noah explained that part of the problem
encountered in dealing with the Mental Health Enabling Act
relates to the fact that means of dealing with the "public
process and that type of thing" are not clear. The state
proposes that specific regulations be prepared and adopted
to carefully outline the process. The process of setting
the regulations will allow everyone to have a say in the
issue.
Commissioner Noah advised that the state proposal would
require some municipalities to reconvey original mental
health trust lands back to the trust. They have expressed a
willingness to do that but requested an extension of time to
select other lands, hence the two-year extension. They also
want clear title in order to allow land selections to be
completed. The proposed bill will accomplish that. It will
also clear title for third-party landholders.
Co-chair Frank inquired concerning the basis of resource
development group involvement in mental health trust
litigation. Attorney General Botelho explained that ongoing
development would be directly impacted by return of lands to
the trust. Concern arose that the lands might be subject to
a different landlord who might impose more onerous royalty
or lease payments. These parties have a right to protect
their interests and ensure that they are not subjected to
potential harm.
Commissioner Noah stressed that Judge Greene found that she
could approve resolution of the issue without all parties in
agreement. That is an important point.
Discussion of standing needed to become involved in the
litigation followed between Attorney General Botelho and Co-
chair Frank.
Co-chair Pearce directed that the meeting be recessed for
the Senate Floor session and scheduled to reconvene
approximately ten minutes after adjournment of the session.
RECESS - 9:00 A.M.
RECONVENE - 9:32 A.M.
The meeting was reconvened with Co-chair Pearce and Senators
Kelly, Kerttula, and Rieger in attendance. Senator Mike
Miller was also present.
HARRY NOAH, Commissioner, Dept. of Natural Resources,
commenced a sectional review of CSSB 67 (2d Fin). He first
asked that members consider five specific points:
1. Findings
2. Trust Authority Concept
3. Monetary Payments to the Trust
4. Reconstruction of the Trust
5. Management
An additional provision of the bill says that if the court
action is not dismissed by December 15, 1994, provisions
relating to the trust authority and cash payments would be
repealed.
Speaking to the findings, Commissioner Noah specifically
noted language providing the legislature power to remove
land from trust status if the trust is compensated for the
land. The reason for such findings is to make the record
very clear as to the legislature's understanding of what is
specifically occurring in the legislation.
An additional finding states that the land did not in the
past and will not in the future generate enough revenue to
fully fund mental health programs.
A further finding calls for ratification of lands that have
been sold.
The full purpose of the findings is to lay out the
legislature's understanding of "where we are at this point
in this case and the rationale . . . of the underpinnings of
this particular bill."
Commissioner Noah next spoke to the trust authority concept.
He explained that it derives from Ch. 66. The trust
authority would be a public corporation of the Dept. of
Revenue. The purpose of the authority would be to ensure an
integrated, comprehensive mental health program. The trust
would be governed by a board of trustees made up of seven
members appointed by the governor, based on their financial
and land management experience. The authority would be
responsible for managing the cash assets of the trust,
coordinating state agencies, and providing services to the
trust. The authority would have the ability to make budget
recommendations to both the governor and legislature as to
how "the revenue that's in the trust would be paid." The
governor and the legislature would have the ability to
modify those recommendations but only based upon specific
findings. The trust authority would also be responsible for
overseeing DNR administration in terms of "their land
management decisions." Commissioner Noah called specific
attention to that provision, advising that it is "very
important to the mental health community." Provisions
relating to the trust authority would be repealed if
litigation is not dismissed by midnight, December 15, 1994.
Commissioner Noah next addressed specific monetary payments.
He explained that the administration has proposed to pay
$225 million to the trust. The total would be paid in
annual payments of $15 million for 15 years. The state
proposes to do that by attaching an overriding royalty to
existing leases. Those leases have not yet been
specifically identified. For a royalty of $10, the state
may attach an overriding $5 royalty to flow to the mental
health trust.
Co-chair Frank asked if the funding as proposed in the
preceding paragraph would incur dedication of funds
problems. Attorney General Botelho responded negatively.
He explained that the mental health trust is a pre-existing
trust established at statehood. The constitutional
prohibition against dedicated funds creates a specific
exception. In response to a further question from the Co-
chair concerning the specific amount, Commission Noah
advised, "We were trying to balance this on curing of a
breach. So the base of this is the value of work that's
been done over the last eighteen months."
Speaking to reconstruction of the trust, Commissioner Noah
said the administration is proposing that approximately
550,000 acres of original mental health trust lands be
redesignated as mental health lands, and that approximately
400,000 acres of substitute lands be considered for
redesignation as part of the trust. The proposal here is
slightly different from the proposal in Ch. 66 wherein lands
would actually have been transferred to the trust. Under
that arrangement, lands would have to be surveyed, and costs
associated with surveys were estimated at $15 million. It
is more fiscally responsible to simply redesignate the land
for mental health purposes. The department is completing a
specific land list for attachment to CSSB 67 (2d Fin). It
would specifically outline each ADL number associated with
the mental health trust. The department will submit the
proposed list during the week of April 11. Commissioner
Noah reiterated that it will be the subject of "some very
detailed discussions between a whole group of
municipalities, resource companies, the environmental
community, and the mental health community. He then voiced
his hope that the legislature would consider the bill and
list as a package since it will be difficult to break down
into individual pieces. Senator Kerttula noted the
responsibilities of the three separate branches of
government and questioned legislative consideration of a
package into which the legislature has had no input.
Commissioner Noah acknowledged that the ultimate decision
making rests with the legislature.
Directing attention to land management aspects of the
proposal, Commissioner Noah explained that language within
the bill strives to strike a compromise. It suggests that
management of the lands be undertaken by DNR, and that
statutes under Title 38 be utilized to the extent possible
under the mental health enabling act. Because the act
itself is "fairly quiet" on this particular issue, the
department has proposed that regulations be used as the
defining vehicle. Management would be in concert between
the Commissioner and trust authority. Senator Kerttula said
that he viewed mental health lands as an interesting
comparative vehicle to state development of the same type of
lands. That comparison is eliminated under proposed
management. Commissioner Noah suggested that the
marketplace would drive development. Transfer of the land
to the mental health trust will not change the marketplace
or desire for development of the lands. Attorney General
Botelho advised that concerns raised by Senator Kerttula
mirror internal debate over land management. The choices
were either DNR or the trust authority. The intent was to
devise a method that was acceptable to the greatest majority
of the litigants. Concerns from many directions were raised
over vesting direct management of the lands in the trust
authority. Environmental interests feared that the
authority would attempt to maximize short-term development
without restraint or regard for longer-term stewardship.
Resource development interests were concerned they would see
development restricted because the trust authority would
attempt to maximize the kinds of revenue it might be able to
extract from industry by tampering with lease payments or
royalty rates. Senator Kerttula countered that such
"tampering" is purely business. The Attorney General added
that in an attempt to find a vehicle which would most likely
lead to final conclusion, DNR management was proposed under
a revised set of standards that takes into account trust
obligations of the authority. Senator Kerttula suggested
that the proposal represents "further lazy law heaped on
lazy law." Commissioner Noah advised that he could foresee
"a best interest determination" being made so that it would
be clear as to what is being done with the lands. Senator
Kerttula asked if the trust authority would have veto power
over proposed use of lands. Commissioner Noah said that DNR
would need authority concurrence. In response to additional
comments by Senator Kerttula asking if there would be
objection to language absolutely requiring concurrence, the
Commissioner voiced concern over creation of a system that
would ultimately "bog itself down."
Senator Sharp raised concern over DNR management subject to
Title 38 public process which has not proven to be effective
for development of land. He asked if trust use of the land
would be subject to intervention by special interest groups
through the court system and suggested that co-management
would invite litigation. He remarked that if the trust is
going to have the land, it should be able to manage the land
the way it wants to. Commissioner Noah stressed the
complexity of the issue. He focused specifically upon the
taking of public lands and placement of those lands in
trust. Interested parties are concerned over that action.
The administration has attempted to find middle ground.
That is the reason for the current proposal. Co-chair Frank
observed that the court appears to have said that the state
must reconstitute the trust for the benefit of mental health
beneficiaries, but the trust does not have to be managed in
a manner consistent with maximum benefit to that group.
Co-chair Frank next asked how the $225 million would show on
state books. Will it be shown as a liability, contingent
liability, etc.? Commissioner Noah said that the
administration is presently working on that issue and will
provide details the week of April 11.
Senator Rieger concurred in concerns raise by Senator Sharp
and Co-chair Frank regarding management of lands for maximum
benefit. He then asked how the proposed settlement would be
ratified by plaintiffs. What power does the court have to
provide finality? Attorney General Botelho explained that
CSSB 67 (2d Fin) would be incorporated within a settlement
presented to the superior court for preliminary approval.
If that approval is granted, the next step is to notify all
members of the class action litigation and allow them to
comment. Once the comment period is closed, the court will
determine whether or not to grant final approval. The court
does not require concurrence by all or even a majority of
the class members to approve the settlement. The judge will
decide whether or not the proposal is a fair and reasonable
outcome and protects the interests of the class. Once the
final decision is rendered, any party to the lawsuit is free
to petition the supreme court for review.
In response to a further question from Senator Rieger asking
if an individual could thereafter bring a second lawsuit and
start the process all over again, the Attorney General
explained that because the litigation is a class action, a
person in the mental health community who is not named as a
party is still considered to be represented. It is the duty
of the court to look out for the interest of class members
whether they are named or not. While the individual has the
right of repeal to the supreme court, once the settlement is
approved, someone who is not part of the class of
individuals involved in the litigation would be barred from
challenging the settlement. Individuals could, however,
raise issues that have never come up before to attack the
trust. Whether or not they would be successful depends on
the issue. Courts are very liberal about allowing a person
to bring an action or intervene in an action without making
a determination of merit. In his concluding remarks the
Attorney General cautioned that just because a settlement is
in place does not mean that mental health lands will not be
the subject of controversy in the future.
Senator Rieger noted earlier comments that the current
proposal is based on provisions of Ch. 66 and inquired
concerning which provisions from earlier law carried
forward. TOM KOESTER, Contract Attorney to the State on the
Mental Health Case, came before committee. He explained
that the proposal takes two approaches:
1. If the parties do not agree to it, it ends the
lawsuit
and repeals Ch. 66.
2. If plaintiffs agree with the bill, and the case is
dismissed by December 15, 1994, then provisions of
Ch. 66 which establish the trust authority,
appropriation process for trust revenue and
income, and improvements to the mental health
program all take effect.
Senator Rieger asked if general fund percentage schedules
within Ch. 66 would remain. Mr. Koester responded
negatively, advising of repeal.
Co-chair Frank asked if the process starts from the
beginning if the settlement does not go forward.
Commissioner Noah explained that the trust would be
reconstructed as laid out by the supreme court. He stressed
that one of the things the state has not brought into play
in reconstruction of the trust is the $1.3 billion set-off.
The court said that the state could deduct from the fair
market value of land, moneys spent since 1978 on mental
health programs. That was included in Ch. 66 and must be
maintained. It ensures that if litigation continues, the
set-off becomes part of the issue that must be considered.
End: SFC-94, #48, Side 2
Begin: SFC-94, #50, Side 1
Co-chair Frank voiced his understanding that Judge Greene
will decide whether lands put back in the trust and the $1.3
billion off-set satisfies the supreme court directive. The
Attorney General concurred and advised of a further feature
of the bill which provides that the legislature would
appropriate up to $100 million, annually, if the court
determines that the $1.3 billion plus reconstitution of
original lands and substitute lands is not enough
compensation. The legislature would commit, under the
proposed bill, to appropriate enough money over time to pay
back the remainder. The Dept. of Law feels it is highly
unlikely that will be needed, but the feature is included
within the bill. The alternative is that if we reach a
settlement with all parties, provisions of Ch. 66 come into
play. Those provisions include the trust authority and
ability to derive a stream of income over which the trust
authority will have fairly exclusive control in deciding
upon expenditure.
Co-chair Pearce announced that Senator Rieger wished to pose
a question for which the committee would have to meet in
executive session. Prior to going into executive session,
Senator Sharp requested copies of maps detailing the
location of lands to be returned to trust as well as
substitute lands. He further requested an itemization of
lands described on page 12, line 31, through page 13, line
3. Commissioner Noah agreed to provide the material.
Senator Kerttula also requested the names of individuals
holding leases on mental health lands. Commissioner Noah
said that 3,700 individuals are involved. Senator Kerttula
asked for names of approximately twenty-five individuals
holding top value parcels. Commissioner Noah advised that
all legislators were provided copies of the February 10
public notice and maps of proposed substitute lands.
Senator Sharp said he had looked at the material but did not
recall that it highlighted items described in the
legislation, specifically: state parks, state forests,
state game refuges, state wildlife refuges, state game
sanctuaries, state recreational areas, state recreational
rivers, state wilderness parks, state marine parks, state
special management areas, state public use areas and
critical habitat areas, bald eagle preserves, bison ranges,
and moose ranges. Commissioner Noah said he would provide
the information.
Co-chair Pearce announced that the meeting would recess for
five minutes to clear the room for the requested executive
session.
RECESS - 10:20 A.M.
RECONVENE - 10:30 A.M.
Senator Rieger MOVED that the committee meet in EXECUTIVE
SESSION for the purpose of discussion of pending litigation
that might affect the finances of the state. No objection
having been raised, the committee met in EXECUTIVE SESSION
from 10:31 a.m. to approximately 11:20 a.m.
EXECUTIVE SESSION - 10:31 A.M.
REGULAR SESSION - 11:20 A.M.
The regular session of the meeting was reconvened at
approximately 11:20 a.m. with Co-chairs Pearce and Frank and
Senator Kerttula, Rieger, and Sharp in attendance.
SENATE BILL NO. 312
An Act relating to school construction grants; and
providing for an effective date.
Co-chair Pearce directed that SB 312 be brought on for
discussion. She said that, due to both lack of support for
changes from both districts and bond counsel, she would
recommend passage of CSSB 312 (HES). The Co-chair
acknowledged earlier adoption of a bond requirement as well
as an amendment intended to assist districts with numerous
portable buildings but reiterated that neither had garnered
sufficient support.
Brief discussion followed between the Co-chairs and Senator
Sharp regarding provisions relating to unhoused students.
Senator Rieger voiced his understanding that the Anchorage
School District and staff at the Dept. of Education are
working out concerns.
Senator Rieger MOVED that CSSB 312 (HES) pass from committee
with individual recommendations. Senator Kerttula voiced
OBJECTION to the bill but said he would not object to
movement from committee. CSSB 312 (HES) was REPORTED OUT of
committee with a zero fiscal note from the Dept. of
Education. Senator Rieger signed the committee report with
a "do pass" recommendation. Co-chair Frank signed "no
recommendation." Co-chair Pearce signed "Do Pass (but I'd
like an amendment!). Senator Kerttula signed "Do not pass
unless amend." Senator Sharp signed "Ditto" to remarks by
Senator Kerttula.
SENATE BILL NO. 366
An Act relating to medical support for children;
allowing a member of the teachers' retirement system or
the public employees' retirement system to assign to a
Medicaid-qualifying trust the member's right to receive
a monetary benefit from the system; relating to the
effect of a Medicaid-qualifying trust on the
eligibility of a person for Medicaid; relating to the
recovery of certain Medicaid payments from estates and
trusts; requiring persons who receive Medicaid services
to be liable for sharing in the cost of those services
to the extent allowed under federal law and
regulations; and providing for an effective date.
Co-chair Pearce directed that SB 366 be brought on for
discussion and referenced Amendments 1 through 4 and a
proposed letter of intent.
DAVE SKIDMORE, aide to Senator Frank, came before committee.
He explained that Amendment No. 1 was drafted in response to
recommendations by the division of insurance. It breaks
health maintenance organizations out onto a separate line
under the part of the bill that defines "insurer," and it
links HMOs with the appropriate citation from Alaska
Statutes. The amendment is technical in nature. Co-chair
Frank MOVED for adoption of Amendment No. 1 and requested
unanimous consent. No objection having been raised,
Amendment No. 1 was ADOPTED.
Mr. Skidmore said that Amendment No. 2 was recommended by
the drafter, Terri Lauterbauch, who felt that the title was
not sufficiently broad to include some insurance language in
Sec. 3 of the bill. Co-chair Frank MOVED for adoption of
Amendment No. 2 and requested unanimous consent. No
objection having been raised, Amendment No. 2 was ADOPTED.
Mr. Skidmore explained that Amendments 3 and 4 were drafted
in response to concerns raised by hospital representatives.
The bill currently directs the state Medicaid plan to
provide the maximum co-payment allowed by federal law. For
in-patient hospital care, the maximum is 50% of the cost
associated with the first day of care. Hospital
representatives indicated that cost can range from $300 to
$20,000, based on what services are provided. When
calculating potential savings from the bill, $100 was used
as the co-payment, since that is the amount set by a number
of other states. Amendment No. 3 is recommended by the
Alaska State Hospital and Nursing Home Association. It
would provide a straight co-payment of $50. Amendment No. 4
was developed by Senator Frank. It would provide for a co-
payment of $25 per day up to a maximum of $100 per
discharge. Co-chair Frank said he did not have a strong
preference for one amendment over the other. He
acknowledged that the hospital and nursing home association
prefers Amendment No. 3 over Amendment No. 4 since the
latter involves more administrative effort. He then advised
that the House envisions a co-payment of $100 a day. The
division of medical assistance is supportive of that
approach. The Co-chair asked that staff from the division
speak to the issue prior to committee action on the
amendments.
DAVE WILLIAMS, Division of Medical Assistance, Dept. of
Health and Social Services, came before committee. Co-chair
Frank asked if the maximum allowable co-payment is $100.
Mr. Williams responded negatively, advising that the maximum
allowable is 50% of the cost of the first day of hospital
stay. That is the controversy. Co-chair Frank noted that
the average stay is approximately four days. He then
advised he was attempting to establish a reasonable co-
payment that would not be too onerous but would achieve cost
sharing. Sharing in the cost and discouraging unnecessary
use are the purposes behind the co-payment. Mr. William
advised that the average stay is three days. Under federal
law, the amount of the co-payment depends on what happens on
the first day. The fiscal note for in-patient hospital care
assumes $200. If the co-payment is reduced to $50, the
savings would be approximately $300.0. Speaking to costs
that might be reasonable for Medicaid eligible clients, Mr.
Williams said it would be unlikely the client would pay any
of the co-pay. Federal law says that if they do not have
it, they do not have to pay. For hospitals that means that
part of the debt would remain unpaid. Other states have
advised that collection efforts on Medicaid eligible
recipients are not productive. That effort, however, would
be up to the hospital.
HARLAN KNUDSON, Alaska State Hospital and Nursing Home
Association, came before committee voicing support for the
$50 co-payment. Co-chair Frank inquired concerning hospital
experience in attempts to collect on co-pays. Mr. Knudson
voiced his understanding that all prepaid health care is
"into deductibles and co-pay." He noted that hospitals
fully expect the co-pay to end up as bad debt. The
individuals will be billed once or twice, and then the
hospital will consider it bad debt. Co-chair Frank stressed
need for individuals to pay their debts, even if the co-pay
must be repaid over time. The service should not be free.
Senator Kerttula stressed that patients must not be turned
away from hospitals because of lack of ability to pay the
co-pay. Mr. Knudson voiced support for the deductible but
concurred that it should not delay entry to a medical
facility.
Senator Rieger voiced need for authorization for the
department to institute a case management service to make
the best use of Medicaid dollars. The present system is
excessively rigid. He attested to problems with priority
ranking of services set in statutes. He then suggested that
if the committee intends to revamp the state Medicaid
program, the proposed bill is the proper vehicle.
Co-chair Frank referenced Amendment No. 4 and explained that
it would apply a $25 co-payment per day up to a maximum of
$100. He then asked why that approach would cause problems.
GARREY PESKA, Alaska Hospital and Nursing Homes Association,
came before committee, advising that hospital finance
officers have indicated the system would be much simplified
if the co-payment is established at a specific amount per
discharge. That eliminates having to calculate the number
of days up to a maximum for each Medicaid patient. Co-chair
Frank then voiced a preference for a $100 co-payment per
discharge. He observed that that is considerably less than
the maximum allowed by the federal government.
In response to a question from Co-chair Frank concerning the
average daily rate, Mr. Peska said, "You will not find an
admission for less than $1,000 a day." The Co-chair then
recommended changing the co-payment amount set forth on
Amendment No. 3 from $50 to $100 per discharge. Mr.
Williams voiced his belief that the current rate for general
relief medical is $50 a day up to $200. Co-chair Frank then
suggested that the Medicaid co-payment should be consistent
with general relief. That could be accomplished by
increasing the $25 co-payment set forth on Amendment No. 4
to $50 and the maximum from $100 to $200.
Co-chair Frank next inquired concerning medical facility
experience in collection of general relief medical co-
payments. Mr. Peska advised that he would have to consult
with hospital finance officers to properly respond. Co-
chair Frank voiced need to understand what the experience
has been in terms of whether people are paying, not paying
because collection is not undertaken, or not paying simply
because they cannot. SB 366 was thus HELD in committee
with Amendments 3 and 4 pending.
SENATE BILL NO. 363
An Act making appropriations for capital project
matching grant funds and for capital projects; and
providing for an effective date.
DEPARTMENT OF FISH AND GAME
Co-chair Pearce directed that SB 363 be brought on for
discussion and acknowledged the presence of staff from the
Dept. of Fish and Game.
McKIE CAMPBELL, Deputy Commissioner, Dept. of Fish and Game,
and KEVIN BROOKS, Finance Officer, Dept. of Fish and Game,
came before committee. Mr. Campbell said that the
department's capital requests relate to maintenance of
facilities and vessels, better management for AYK chum
salmon, stock identification protecting state rights, trail
clearing and habitat enhancement, protection of fur markets,
and matches for federal funds.
The first request for $650.0 is for facilities maintenance.
Mr. Campbell directed attention to a list of items to be
undertaken with reduction of funding from $2.9 million to
$650.0. He acknowledged that there may be minor
substitutions on the list as projects progress.
The second request seeks $300.0 for Arctic-Yukon-Kuskokwim
chum salmon. Mr. Campbell observed that the issue has been
widely publicized and debated. The department does not have
adequate management capabilities throughout Western Alaska.
Funding would install new counting towers, sonar, and other
fish management systems. The original request was for
$595.0. Reduced funding entails deletion of some towers, a
cut back on sonar, and reducing the scale of some projects.
The third request seeks $150.0 to continue the stock
identification program. Mr. Campbell noted ongoing
arguments over who is catching whose salmon and where they
came from. The project will allow the department to
identify salmon coming from a specific stream. Proper use
should settle many political disputes. Reduced funding
would entail smaller samplings and test fisheries.
The fourth request is for $250.0 for vessel maintenance.
Reduced funding will delay overhaul of the main engines on
the MEDEA and SUNDANCE as well as cause the department to
defer replacement of items such as bumper guards.
The fifth item for $500.0 relates to defending the state's
rights in ANILCA litigation, in planning relating to the
Pacific Salmon treaty, the trans-boundary Yukon treaty,
endangered species, etc. Mr. Campbell voiced his
understanding that Deputy Attorney General, Cherie Jacobus
had previous spoken to committee concerning this
undertaking. In response to a question from Senator Sharp,
Mr. Campbell noted that funding for contractual services
includes an RSA to the Dept. of Law. When queried by Co-
chair Pearce concerning what would not be done as a result
of reduced funding from $650.0 to $500.0, Mr. Campbell noted
deletion of some clerical support, reductions in travel and
use of outside attorneys, as well as reductions in citizen
participation.
End: SFC-94, #50 Side 1
Begin: SFC-94, #50 Side 2
Discussion of staff needs in areas relating to access and
use continued between Mr. Campbell and Co-chair Pearce.
Mr. Campbell advised that the $350.0 request for trail and
habitat clearing and enforcement involves use of fish and
game funds primarily in the Fairbanks area. Habitat
manipulation includes controlled burning, crushing, etc.
Convict labor is used extensively in the program.
Senator Rieger asked if the foregoing project involves
expenditure of state moneys to "do what the fire would have
done in the first place." Mr. Campbell acknowledged ongoing
discussion with the federal government in an attempt to
reach agreements to let fires burn in the interior.
Projects undertaken by the proposed bill are in areas most
accessible and used by Fairbanks residents. The risk of
wild fires in those areas might result in a fire that would
imperil "people on the outskirts of Fairbanks."
The $400.0 request for use of fish and game funds relates to
the International Standard Organization. A subgroup of the
European economic community has agreed on an import ban on
all furs "caught in inhumane traps." It is unclear what
"inhumane" traps are. Rural Alaskans heavily depend on cash
derived from trapping. The request seeks to open additional
markets and work with trappers on trapping techniques and
more humane traps.
The last project seeks $200.0 in general funds as a match
for $1.35 million in federal moneys. Funding would allow
for continued construction of boat launch ramps, public
access sites for fishing, etc.--a variety of sport fishing
access projects. Senator Rieger requested a list of
projects to be funded.
Co-chair Pearce announced that continued review of capital
budget requests would be noticed for the following
Wednesday.
ADJOURNMENT
The meeting was adjourned at approximately 12:10 p.m.
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