Legislature(1993 - 1994)
05/05/1994 09:15 AM Senate FIN
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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
May 5, 1994
9:15 a.m.
TAPES
SFC-94, #82, Side 1 (000-end)
SFC-94, #82, Side 2 (575-end)
SFC-94, #84, Side 1 (000-086)
SFC-94, #84, Side 2 (068-123)
SFC-94, #86, Side 1 (000-121)
[Note - Malfunction on Tape 84. No recording on side 1, and
only partial recording on side 2.]
CALL TO ORDER
Co-chair Drue Pearce convened the meeting at approximately
9:15 a.m.
PRESENT
All committee members (Co-chairs Pearce and Frank and
Senators Jacko, Kelly, Kerttula, Rieger, and Sharp) were
present.
ALSO ATTENDING: Representative Hanley; Harry Noah,
Commissioner, Dept. of Natural Resources; Nancy Usera,
Commissioner, Dept. of Administration; Jan Hansen, Director,
Division of Public Assistance, Dept. of Health and Social
Services; Mike Ford, Legal Counsel, Legislative Affairs
Agency; Tom Koester, Legal Counsel, State of Alaska; Dave
Skidmore, aide to Senator Frank; George Dozier, aide to
Representative Kott; aides to committee members and other
members of the legislature; and representatives of the
press.
SUMMARY INFORMATION
SB 372 - ALCOHOLIC BEVERAGES: LOCAL OPTION & MISC.
Work draft "O" was ADOPTED, and Senator Pearce
explained that it removes tax provisions and
former secs. 45, 58, and 59 relating to
municipalities increased taxation. The Senate
Finance version now contains local option
provisions only. CSSB 372 (Fin) was REPORTED OUT
of committee with a $1.06 fiscal note from the
Office of the Governor/Division of Elections and
zero notes from the Dept. of Public Safety and
Dept. of Revenue.
HB 201 - MENTAL HEALTH TRUST AMENDMENTS
Lengthy discussion was had with Harry Noah,
Commissioner of Natural Resources and Tom Koester,
legal counsel for the State of Alaska. The bill
was held in committee for additional discussion.
HB 231 - AGGRAVATING/MITIGATING FACTORS;SEX CRIMES
Brief comments were provided by George Dozier of
Representative Kott's office. CSHB 231(Fin) was
REPORTED OUT of committee with a fiscal note from
Dept. of Corrections showing no operating costs
but $500.0 in capital funding and zero notes from
the Dept. of Law, Dept. of Public Safety, Dept. of
Administration (OPA) and (PDA), and the Court
System.
HB 409 - AFDC DEMO PROJECT AND DECREASE
SCS CSHB 409 version "L" was presented to
committee and ADOPTED. Discussion was had with
Representative Hanley, and a conceptual amendment,
seeking comparison of private sector versus public
workfare and a subsequent report to the
legislature was proposed by Co-chair Frank and
ADOPTED. SCS CSHB 409 (Fin) was REPORTED OUT of
committee. PLEASE NOTE - This SCS CSHB 409 (Fin)
was never finalized. Problems developed in
formulation of the conceptual amendment, and the
bill was returned to committee 5/6/94. An
alternative SCS CSHB 409 (Fin) was adopted and
reported out on that date.
CS FOR HOUSE BILL NO. 409(FIN) am(efd fld)
An Act relating to the maximum amount of assistance
that may be granted under the adult public assistance
program and the program of aid to families with
dependent children; proposing a special demonstration
project within the program of aid to families with
dependent children and directing the Department of
Health and Social Services to seek waivers from the
federal government to implement the project.
Co-chair Pearce directed that CS FOR HOUSE BILL NO. 409(FIN)
am(efd fld) be brought on for discussion and directed
attention to a draft Senate Finance Committee Substitute
(8-LS121\L, Lauterbach, 5/2/94). Co-chair Frank explained
that the draft increases the ratable reduction from 1.7 to
2.2. He then suggested that his staff speak to other
changes. Co-chair Pearce requested that the sponsor of the
legislation first speak to the demonstration project.
REPRESENTATIVE MARK HANLEY, sponsor of the legislation, came
before committee. He explained that the proposed bill
attempts to change the way the state administers Alaska's
welfare program. He suggested that the best way to reduce
welfare costs is to get people off welfare rolls. That
approach is consistent in what is happening in other states.
There are three parts to the proposed bill:
1. It attempts to remove disincentives to work and
provides incentives instead.
2. A workfare program which requires individuals, if
they are able, to do either community service or
to work for
pay in order to receive benefits.
3. A ratable reduction.
At the present time, after an individual is on welfare for
four months and needs to continue to receive benefits, he or
she is only allowed to keep $50 of anything made while
working. The proposed bill increases that amount to $200
and allows an individual to keep one-third of "anything
after that." That removes a disincentive to work and
provides an incentive. It also reduces state costs by
allowing the state to keep the two-thirds. The legislation
also increases the car allowance. At the present time, the
federal government allows an automobile value of only up to
$1,500. That was increased to $7,500 in a version passed
out of Senate HESS. The bill also eliminates the 100-hour
rule which limits certain families to work no more than 100
hours a month.
The workfare program requires that an individual do paid
work for ten hours a week or unpaid community service work
for at least twenty-one hours in order to receive benefits.
The bill requires that the community service work portion be
contracted out where possible.
Representative Hanley acknowledged that the program will
cost money to implement. It requires additional eligibility
workers as well as people to monitor the program. The
ratable reduction in the original bill was intended to cover
the cost of the program, but it was eliminated in the HESS
version. Representative Hanley voiced his understanding
that the ratable reduction was increased to 2.2% in the
proposed Senate Finance draft. In response to a question
from Senator Kerttula, Representative Hanley explained that
the ratable reduction represents a "straight percentage
reduction in the benefits paid to recipients of adult public
assistance and AFDC."
DAVE SKIDMORE, aide to Senator Frank, next came before
committee. He concurred that the proposed draft would
increase the ratable reduction for both AFDC and APD from
1.7% to 2.2% The only other change in the Senate Finance
draft is that the reduction would not be repealed in 1999.
It would remain in effect even when the demonstration
project is repealed.
Mr. Skidmore next directed attention to a Senate Finance
Committee fiscal note for the Alaska Work Program. He
explained that the Dept. of Health and Social Services
initially submitted a note for the bill but when provisions
allowing for the contracting of these services were added,
the fiscal note increased dramatically. The Senate Finance
note returns to original amount since it is believed that
costs should remain the same regardless of whether the state
or private sector provides the service.
Senator Kerttula inquired concerning liability for injuries
that might be sustained as a result of workfare. JAN
HANSEN, Director, Division of Public Assistance, Dept. of
Health and Social Services, came before committee. She
explained that part of the proposal includes purchase of
insurance comparable to worker compensation. Insurance
would thus be covered by the state in a manner similar to
the JOBS program. That is included in the fiscal note for
the Alaska Work program. The cost amounts to a $25 charge
for six-month placement of an individual in workfare.
Senator Kerttula next directed attention to page 4, line 14,
and inquired concerning the issuing of contracts on a
competitive basis. Representative Hanley said that
provisions for contracting workfare to the private sector
were added on the floor of the House. In some areas there
is potentially more than one organization that could do the
work. There is thus need to provide for competitive award.
Further discussion followed between Senator Kerttula and
Representative Hanley regarding the qualifications of
entities to be granted such contracts. Representative
Hanley stressed that the organization would have to have
experience to qualify. Further discussion of the issue
followed with Jan Hansen regarding establishment of criteria
for evaluation of experience.
Representative Hanley explained that while the department
initially intended to conduct workfare on its own, concern
arose in the House that private organizations were available
to provide the service. The Fairbanks Native Association
was cited as an example.
Jan Hansen stressed that the "contract" referenced in the
bill relates to administrative services for workfare rather
than for the individual participant in the program. The
division of public assistance would be the administrative
entity if the program is not contracted to the private
sector.
Discussion followed between Ms. Hansen and Co-chair Pearce
concerning contract arrangements associated with the JOBS
program.
Senator Kerttula expressed concern that private-sector
contracts might, in the end, cost more than state
administration. He then asked if the legislation contained
safeguards to ensure that that was not the end result. Co-
chair Pearce asked if the House would be amenable to a
conceptual amendment requiring that the department first
ascertain whether private-sector contract would be less
rather than more expensive. Representative Hanley advised
that he would have no problem with such a provision. He
noted, however, that the original fiscal note for workfare
was approximately $300.0, but the cost increased to $1.4
million after inclusion of provisions for private-sector
services. The Representative advised he was unsure why
costs are expected to increase so dramatically. Senator
Kerttula voiced support for a conceptual amendment. Co-
chair Frank suggested that the amendment include a report to
the legislature on both costs and avoided costs. The Co-
chair next voiced the following conceptual amendment:
Provide for private sector contracting if, after
having received the bids, the department
determines that the private sector could do it
more effectively and inexpensively than the state.
In determining that, the department must analyze
the avoided costs and report findings to the
legislature, annually.
Jan Hansen voiced concern that assessment of costs after
receipt of bids would be unfair to contractors who devote
substantial time and cost to bid preparation. Both Senator
Kerttula and Co-chair Pearce suggested that the bid proposal
include information to the effect that the state is seeking
to make the above-mentioned evaluation. Jan Hansen
commented that the state should perhaps seek information
rather than a request for bids.
Responding to earlier statements regarding the dramatic
increase in the fiscal note when allowance for private-
sector contracting was included, Ms. Hansen explained that a
portion of the cost was the department assessment that
contracting would cost more. Another part of the increase
resulted from discovery that the cost to the department had
been severely underestimated. The third piece of the cost
relates to review of workfare in other states. The
department could not find another state that was contracting
out the effort. All were performing the service in house.
The department thus reviewed the range of costs in other
states and based its estimate on those numbers.
Co-chair Frank MOVED for adoption of a conceptual amendment
to add language requiring that the department report to the
legislature the avoided costs and the cost of contracted
provision of these services under subsection (b) (page 4,
lines 12 through 21). No objection having been raised, the
conceptual amendment was ADOPTED.
Co-chair Frank then MOVED for adoption of SCS CSHB 409
(Finance) work draft "L." No objection having been raised,
work draft "L" was ADOPTED. Co-chair Frank MOVED that SCS
CSHB 409 (Finance) pass from committee with individual
recommendations together with accompanying fiscal notes. No
objection having been raised, SCS CSHB 409 (Finance) was
*REPORTED OUT of committee with the following fiscal notes:
SFC/ Alaska Workfare 0
DH&SS, AFDC 0
DH&SS, Eligibility Determination 0
DH&SS, PA Administration 200.1
DH&SS, PA Data Processing 631.4
DH&SS, Child Care 0
DH&SS, AFDC (3,080.6)
DH&SS, APA ( 619.2)
DH&SS, PFD ( 423.2)
Co-chair Frank and Senators Jacko and Sharp signed the
committee report with a "do pass" recommendation. Co-chair
Pearce and Senators Rieger and Kelly signed "no rec."
Senator Kerttula signed "do not pass."
*PLEASE NOTE - The SCS CSHB 409 (Finance) containing the
conceptual amendment was never produced due to difficulties
encountered in attempting to develop appropriate language.
The bill was returned to committee 5/6/94, and an
alternative SCS CSHB 409 (Finance) was reported out at that
time.
HOUSE BILL NO. 445 am
Act relating to administrative or court revocation of a
driver's license resulting from operation of a motor
vehicle, commercial motor vehicle, or aircraft;
relating to chemical testing of a person's breath,
urine, or blood if the person is involved in a motor
vehicle accident that causes death or serious physical
injury; relating to definitions applicable to
commercial motor vehicle laws; relating to chemical
testing of a person's breath, urine, or blood without
the person's consent; and relating to the use in a
civil or criminal action of the refusal of a person to
submit to a chemical test.
Co-chair Pearce referenced the scheduling of HB 445 and the
fact that provisions inserted within SCS HB 445 (Jud)
convert a third conviction for driving while intoxicated
into a felony with a one-year prison sentence.
Approximately 650 individuals, annually, would be caught in
that provision. The Dept. of Corrections submitted an $11
million fiscal note because the system cannot accommodate
that number of people. Co-chair Pearce said that staff is
working with the department in an attempt to "try to find
some compromise position that still provides a heavier
penalty but doesn't force the construction of a new $20
million facility." It is hoped that a compromise bill will
be available tomorrow. The bill will also bring the legal
limit down to .08.
Senator Kelly subsequently voiced his understanding that,
during the interim, the Dept. of Corrections, in conjunction
with the Alaska Railroad, would be discussing the option of
using a funding mechanism similar to that proposed for
discovery center bonds to build a facility to be leased by
the railroad to the department, somewhere along the rail
line "toward the Fairbanks area." That represents an
opportunity for construction of an additional correctional
facility without utilizing general fund moneys. Co-chair
Pearce inquired concerning repayment of the bonds, and Co-
chair Frank suggested that use of general obligation bonds
would provide the lowest cost financing.
SENATE BILL NO. 372
Act relating to community local options for control of
alcoholic beverages; relating to the control of
alcoholic beverages; relating to the definition of
`alcoholic beverage'; and providing for an effective
date.
Co-chair Pearce directed that SB 372 be brought back before
committee at this time. She noted that when the bill was
previously before members, it lacked sufficient votes to
pass. She then directed attention the "O" version of CSSB
372 (Finance) and explained that the new draft removes secs.
45, 58, and 59 of the previous "K" version. Sec. 58 would
have prohibited a municipality from levying a property tax
on alcoholic beverages. Some municipalities already have
such a tax. Sec. 45 would have banned ability of a
municipality to apply a sales tax to alcohol unless there
was a general sales tax. Sec. 59 contained the increased
tax on alcoholic beverages. Local option provisions remain
the same as does the definition of "alcoholic beverages."
The title was changed to remove the word "taxation."
Co-chair Frank MOVED for adoption of CSSB 372 (Finance), "O"
version. No objection having been raised, the "O" version
of CSSB 372 (Finance) was ADOPTED. In response to
statements by Co-chair Frank, Co-chair Pearce concurred that
the newly adopted draft now contains only the local option
changes requested by the department.
Senator Sharp directed attention to page 30, lines 10 and 11
and raised questions concerning opt-out provisions. Co-
chair Pearce directed that CSSB 372 (Finance) be held in
committee pending the arrival of the legal drafter to speak
to Senator Sharp's concerns.
CS FOR HOUSE BILL NO. 231(FIN)
An Act relating to when previous conduct constituting a
sexual offense may be used as an aggravating factor at
sentencing.
Co-chair Pearce directed that CSHB 231 (Finance) be brought
on for discussion. She noted that the bill was reported out
of committee on May 1, 1994, and returned from Rules because
it picked up a $500.0 fiscal note from the Dept. of
Corrections. The department contends that the $500.0 fiscal
note would apply with or without mitigating language. She
acknowledged discussion of inserting mitigating factors back
into the bill but questioned whether they would fit under
the title.
GEORGE DOZIER, aide to Representative Kott, came before
committee. He explained that the sentencing commission
initially embraced both aggravating and mitigating portions
of the bill. Mr. Dozier advised that Representative Kott
would not be in favor of reinserting the mitigating factor
at this point since there was considerable opposition in the
House and time is now a concern.
In response to questions from Senator Kerttula, Mr. Dozier
explained that as now structured, previous sexual crimes
constitute an aggravating factor. However, there is a gap
in coverage when an individual is being sentenced for sexual
abuse of a minor and has a previous conviction for sexual
assault of an adult. The proposed bill amends current law
to require that previous sexual crimes, regardless of
whether they were perpetrated against adults or children
constitute aggravating factors for purposes of sentencing
for sexual crimes.
Senator Kelly MOVED that CSHB 231 (Finance) pass from
committee with individual recommendations. No objection
having been raised, CSHB 231 (Finance) was REPORTED OUT of
committee with a fiscal note from the Dept. of Corrections
showing zero operating costs and a capital cost of $500.0.
Previous zero fiscal notes from the Alaska Court System,
Dept. of Law, Dept. of Public Safety, and Dept. of
Administration (one for the Public Defender Agency and one
for the Office of Public Advocacy) also accompanied the
bill. Co-chairs Pearce and Frank and Senators Kelly and
Sharp signed the committee report with a "do pass"
recommendation. Senators Jacko and Rieger signed "no rec."
Senator Kerttula was temporarily away from the committee
table and did not sign the report.
CS FOR SENATE BILL NO. 372(FIN)
An Act relating to community local options for control
of alcoholic beverages; relating to the control of
alcoholic beverages; relating to the definition of
`alcoholic beverage'; relating to purchase and sale of
alcoholic beverages; relating to alcohol server
education courses; and providing for an effective date.
Co-chair Pearce directed that attention revert to earlier
adopted CSSB 372 (Finance). Senator Sharp reiterated
concern regarding language at page 30, lines 8 through 11,
and asked if it would allow a community of 25 people or more
located 50 miles outside of the City of Fairbanks to hold a
local option election, even though the community may be
located within the Fairbanks North Star Borough.
End: SFC-94, #82, Side 1
Begin: SFC-94, #82, Side 2
MIKE FORD, Legal Services, Legislative Affairs Agency, came
before committee. He referenced bill language and noted
that "established village" means an unincorporated
community. Discussion focused on the designation "unified
municipality." Co-chair Frank voiced his understanding that
Anchorage, Juneau, and Sitka are the only unified
municipalities within Alaska. Senator Rieger voiced concern
that, as presently drafted, the language could inadvertently
be construed to allow 25 houses clustered "just outside the
Fairbanks city limits but within the Fairbanks Borough" to
hold a local option election because the group is located
more than 50 miles outside the boundary limits of the
nearest unified municipality which is Anchorage. He
suggested that language speak to a unified municipality
"adjacent" to the organized borough in question. Mr. Ford
said that his reading of bill language would not apply the
interpretation suggested by Senator Rieger. The bill is
intended to focus on unincorporated communities in an
organized borough prior to meeting other bill criteria.
Senator Rieger raised questions concerning application of
the bill to communities within the MatSu Borough and the
Kenai Peninsula Borough. Senator Sharp expressed concern
that the bill does not say that the unified municipality has
to be within the organized borough. Co-chair Pearce asked
if members wished legal services to draft alternative
language. Senator Rieger observed that communities in close
proximity to a unified municipality are often difficult to
identify. Housing flows from one section to another.
Elsewhere in the state, however, communities are more easily
defined. He cautioned that, as drafted, the bill provides a
window for strained application. Co-chair Pearce suggested
that, in the interest of time, the bill pass from committee
with the understanding that Mr. Ford would work on
clarification language that could be offered on the floor of
the Senate. Senator Kerttula asked if the Co-chair's
proposal would be predicated upon Senator Sharp's
satisfaction with the new language. Co-chair Pearce
answered affirmatively. Mr. Ford also concurred.
Co-chair Frank MOVED for passage of CSSB 372 (Finance) with
the understanding that amending language would be prepared
for possible application in second reading on the floor of
the Senate. No objection having been raised, CSSB 372
(Finance) was REPORTED OUT of committee with the noted
caveat. Co-chairs Pearce and Frank and Senators Kelly and
Rieger signed the committee report with a "do pass"
recommendation. Senators Kerttula signed "do not pass."
Senator Sharp signed "do pass if amend." Senator Jacko was
absent from the meeting and did not sign. The bill was
accompanied by a $1.06 fiscal note from the Office of the
Governor/Elections and zero notes from the Dept. of Public
Safety and Dept. of Revenue/ABC Board.
CS FOR HOUSE BILL NO. 201(FIN) am
An Act relating to the mental health land trust and the
mental health land trust litigation, Weiss v. State,
4FA-82-2208 Civil, and amending and repealing other
laws relating to mental health institutions, programs,
and services that are affected by ch. 66, SLA 1991; and
providing for an effective date
Co-chair Pearce directed that CSHB 201 (Fin)am be brought on
for discussion. She noted the presence of David Walker and
teleconference participation by Mr. Gottstein.
The Co-chair asked that the Commissioner of Natural
Resources and Mr. Tom Koester first speak to differences
between CSHB 201 (Fin)am and CSSB 67 (2d Fin)--the bill
reported out of committee last year. HARRY NOAH,
Commissioner, Dept. of Natural Resources, came before
committee with TOM KOESTER, contract attorney for the Dept.
of Law in the Weiss mental health litigation.
Mr. Koester directed attention to May 3, 1994,
correspondence (copy on file in the original Senate Finance
Committee file for HB 201) to Representative Ron Larson and
explained that it provides a section-by-section breakdown of
CSHB 201 (Finance). Mr. Koester acknowledged that the
letter does not address technical House floor amendments to
the bill.
The basic difference between CSHB 201 (Finance) and
legislation passed last year relates to the second component
of the legislation. The mental health bill has two
elements:
1. The reconstitution component
2. The incentive component
The reconstitution component:
1. Reconstitutes the mental health trust as required
by the Alaska Supreme Court.
2. Removes certain original mental health land from
trust status and confirms actions taken with
respect to those lands (conveyances to third-
party purchasers, conveyances to
municipalities, and inclusion of original
mental health land in parks and wildlife
refuges).
3. Compensates the trust for lands removed from trust
status by:
A. Providing additional state land.
B. Identifying and claiming as a set-off against
monetary liability to the trust the $1.3
billion in state mental health funding
between 1978 and 1994.
C. A $100 million a year allocation to a special
account in the general fund for appropriation
by the legislature for mental health
programs. That continues only as long as the
state has conceivable liability remaining to
the trust. Once the annual $100 million is
credited against the liability for a
sufficient time period to discharge the
liability, the authorization terminates.
Senator Kelly asked if the proposed bill extinguishes
liability. Mr. Koester responded, "Yes, it does." Further
responding to questions from committee members, Mr. Koester
said that the $100 million is intended to ensure that a
mechanism is in place to satisfy any state liability to the
mental health trust, no matter how large it is. Liability
will be an amount certain, and it will not go into the
future. The above provision, in effect, takes the current
6% allocation of the unrestricted general fund that flows to
the mental health trust income account and terminates it.
The current 6% arrangement is ad infinitum. The proposals
contained in CSHB 201 (Finance) terminate that arrangement,
limit the authorization to $100 million a year, and allow it
to extend only as long as the state's liability is not
satisfied. Mr. Koester expressed his view that the state's
liability has already been satisfied, and "this provision
will never come into play." Inclusion of the provision
makes clear to the court that the state is determined to
satisfy its liability no matter how long it takes. The
legislation, therefore, contains a mechanism to do that. It
provides a failsafe to ensure that there is a mechanism to
take care of the state's liability.
Senator Kelly referenced $165 million and asked if
appropriation of that amount would satisfy all liabilities.
Commissioner Noah explained that the $165 is part of the
incentive program, the second component of the legislation.
He explained that payment would conclude the issue in that a
settlement would be reached, and the money would only come
into effect when the court has dismissed the case.
Senator Kelly raised questions regarding continuing
liability. Mr. Koester explained that the approach taken by
the state rests in its belief that the reconstitution
portion of the bill will eventually allow the state to
persuade the court to dismiss the case. Judge Greene has
said that the state cannot unilaterally settle the case, but
it can obtain a final judgment that it has satisfied its
obligations. The state believes the reconstitution portion
does that. The state has, in effect, armed itself to
litigate the case to conclusion should agreement not be
reached. It has also included the second component of the
bill--an incentive to the mental health community in return
for an early dismissal and conclusion of the case by
December 15, 1994.
If the mental health community looks at provisions of the
bill and determines that it is not in particular agreement
with the state on reconstitution, but it finds sufficient
impetus to incentive provisions:
1. A total of $200 million up front.
2. Creation of a mental health trust authority that
will
oversee the state's mental health program, make
recommendations with respect to general funding of
mental health programs, and expend discretionary
funds on pieces of the state mental health program
it believes are the most important.
3. Numerous improvements to the state mental health
program.
to agree to dismissal of the lawsuit, the case will be over.
The $200 million is not part of the compensation to the
trust. Reconstitution provisions of the bill accommodate
that. The $200 million is part of the incentive package.
Mr. Koester voiced his understanding that most of the mental
health community believes the $200 million, establishment of
the mental health authority, and other program improvements
represent a fair resolution of the case and will be working
toward that end.
Senator Kelly again raised questions concerning the earlier-
mentioned $165 million figure. Mr. Koester advised of a
$200 million appropriation bill consisting of $45 million in
currently available funding from a variety of sources
(Commissioner Noah interjected: "two mental health trust
accounts") and $155 million (rather than $165 million) from
the permanent fund earnings reserve.
The two-pronged approach in SB 67 is still being followed.
The difference is in the incentive portion. The work draft
for SB 67 included a $225 million staggered approach under
which $15 million a year would be considered a guaranteed
income stream to the trust. CSHB 201 (Finance) provides for
a $200 million up-front appropriation in a lump sum. That
appropriation would flow to a mental health trust permanent
fund, the principal of which would not be spent. The fund
would be invested with net income, after inflation proofing,
to be used by the trust authority for mental health
programs. The difference is that the House bill:
1. Creates a trust authority.
2. Provides a monetary corpus of $200 million for the
mental health permanent fund trust.
3. Authorizes expenditure of the earnings of net
income
of the trust.
4. Provides for management of the $200 million by the
Alaska Permanent Fund Corporation.
Senator Rieger inquired concerning use of the net income of
the $200 million and inflation proofing. He voiced his
understanding of a reading of bill language to be that the
mental health trust authority would enjoy full use of net
income from the $200 million, but inflation proofing would
derive from a draw from the permanent fund earnings reserve.
Mr. Koester responded, "Nothing that's in the permanent fund
earnings reserve will be used to inflation proof the mental
health trust fund." The mental health trust fund would not
be part of the permanent fund. It would be a separate
account. He concurred that the entire net income from the
trust fund would flow to the trust authority, but he
directed attention to page 15, line 14, and noted that once
the income accrues to the authority, one of the purposes for
which it may be used is offsetting the effect of inflation.
In response to a further question from Senator Kelly, Mr.
Koester acknowledged that inflation proofing of the fund is
permissible rather than mandated. He explained that it was
not mandated since the trust authority requires flexibility
in use of the earnings for current or future beneficiaries.
The strong sense of the mental health community, which will
be influencing and speaking through membership on the trust
authority, is that the corpus should be inflation proofed.
The trust authority has statutory responsibility to do that.
Senator Kelly expressed concern that without a mandate to
inflation proof, demands for trust funding will be such that
inflation proofing will fall by the wayside. Mr. Koester
noted that bill provisions were negotiated with members of
the mental health community who are in support of the bill
and will testify to that effect. Senator Kelly stressed
that they are not aware of the pressures that will be
exerted upon the authority to spend trust fund income.
Senator Rieger suggested it would not be difficult to
rewrite bill language to make the "real income" rather than
"net income" available to the trust authority each year. He
concurred with Senator Kelly concerning pressure that will
be brought to bear on authority members to spend rather than
inflation proof the trust and suggested that it should be
"set up right . . . at the start."
In response to a question from Senator Kelly concerning
establishment of the trust authority, Mr. Koester explained
that the concept arose in 1991, the most recent of the
failed settlement attempts. It was included in Ch. 66 of
the 1991 session laws. That law has never taken effect
because, per the effective date clause, it does not take
effect until the case is dismissed. The trust authority was
addressed at that time and has since taken hold in both the
mental health community and elsewhere as an appropriate
"umbrella-kind" of organization.
Senator Kelly asked if already-enacted other legislation
would take effect upon settlement or be overridden by
legislation in the instant bill. Is additional legislation
needed? Mr. Koester explained that the proposed bill amends
earlier legislation. Both bills become effective when CSHB
201 (Finance)am takes effect. Many of the provisions of the
House bill relate directly to provisions of ch. 66 from 1991
session laws.
Senator Kelly questioned whether establishment of the trust
authority would, in effect, establish "another huge
bureaucracy." He then asked if provisions restrict the
types of purposes trust moneys could be expended upon. Mr.
Koester said that there are no explicit provisions that
limit authority ability to hire staff. There are
substantial provisions that require the authority to take
actions in light of obligations to the beneficiaries of the
mental health trust. In response to similar concerns again
expressed by Senator Kelly, Mr. Koester stressed that the
mental health community would receive the benefit of grants
and contracts authorized by the trust authority. That
community will not allow all of its moneys to be used to
fund a bureaucracy. Unlike many state agencies where there
is no direct link between the population being served and
agency expenditure of its dollars, there is a very direct
link between the mental health community and the trust
authority. Funding is to go to programs to benefit the
mental health community. Senator Kelly argued that less and
less would flow into programs as the bureaucracy expands.
Senator Sharp voiced his understanding that the $200 million
would not be transferred until reconstitution of trust lands
and extinguishment of state liabilities have occurred, and
all parties have signed on to the agreement. Commissioner
Noah said that it would not be paid until the judge
dismisses the case. Senator Sharp asked if the $100 million
would be "sunset" at the same time the $200 million is
transferred. Commissioner Noah advised that the 900,000
acres is part of reconstituting the trust, whether or not
the incentive package is exercised. It is the central part
of the bill. Senator Sharp then voiced his understanding
that the 900,000 acres could be reconstituted and "the $100
million still guaranteed." Commissioner Noah said that if
the incentive package is not exercised, and the judge does
not dismiss the case, the state will claim that it has
reconstituted the trust with 900,000 acres plus "the offset
of the $1.3 billion." The $100 million would simply be
there if the judge, for whatever reason, found "that there
was some additional value that had to be paid to the trust."
If the incentive package is accepted, the land remains in
place, the trust authority is established, and the $200
million is placed in the trust. Because the judge would, at
that point, dismiss the case, the $100 million would no
longer come into play.
Senator Sharp sought assurance that with the proposed and
earlier legislation in place and effective, plaintiffs could
not "double back" and file new cases. Mr. Koester responded
affirmatively.
Again referencing concerns earlier voiced by Senator Kelly,
Mr. Koester noted Dept. of Law discussion of making the
authority budget subject to the executive budget act so that
it would have to come before the legislature each year. The
reason it is not is that the mental health community--those
who will be receiving the benefit of grants and contracts--
are worried that the state might use the executive budget
act to thwart ability of the trust authority to work. The
mental health community is convinced it will have sufficient
control and tools available to influence the trust authority
to ensure that the feared bureaucracy will not occur.
Structure of the trust authority as proposed in the bill was
the subject of discussion and negotiations with plaintiffs.
It was an important consideration in the "fragile
construction of this bill."
Senator Kelly asked if the authority would be subject to the
Alaska Procurement Procedures Act, conflict of interest,
law, etc. Mr. Koester said the authority would be subject
to conflict of interest law but not the Administrative
Procedures Act. Senator Kelly voiced dismay over lack of
controls. Co-chair Frank concurred, saying that he wished
to explore the relationship between expenditure of moneys
and the legislative process. He voiced his belief that the
legislature would not back away from its commitment to
mental health. He raised questions, however, over
establishment of a trust authority with a flow of income
while the legislature continues to appropriate moneys for
mental health needs. There are legitimate questions
concerning that relationship.
Co-chair Frank next referenced the original Congressional
grant of a million acres for mental health needs and
questioned whether the state could transfer its public
responsibility to the trust authority. Commissioner Noah
explained that the University trust was used as a model for
the proposed trust.
Senator Rieger directed attention to the bottom of page 9,
top of page 10, and page 12, lines 14 and 15, and noted
requirements for how the legislature crafts its
appropriation measures. He then inquired concerning the
constitutionality of provisions such as the one requiring
that the appropriation for the mental health trust be
contained in a separate measure as well as report
requirements. He asked who would prepare the report and
commented that the requirements appear to bind future
legislatures. Mr. Koester reiterated that much of the
proposed bill is predicated upon ch. 66 from 1991. The
appropriation process in the current House bill differs from
that in ch. 66 in that there is less mental health trust
community influence, under the instant bill, with respect to
the bulk of mental health trust funding. That is the
portion of mental health trust funding that comes from the
state general fund. All the proposed bill requires with
respect to general fund funding of mental health programs is
that trust authority recommendations be considered and a
report issue indicating why actual appropriations by the
legislature differ from those recommendation. That gives
the mental health community a sense that recommendations
will be considered and looked at directly and specifically.
Mr. Koester stressed that the primary purpose of the bill,
from the state's perspective, is to "give us what we believe
to be the best legal chance to get the case dismissed and to
go forward." Other provisions are incentives, negotiated
with the mental health community, which many have said will
allow them to see their way clear to dismissal of the case
by the end of this year.
In response to inquiry from Co-chair Frank concerning the
number of attorneys representing the mental health
community, Mr. Koester advised of four attorneys
representing various groups. At least two others whose
clients are beneficiaries of the trust have not moved to
intervene but have participated in negotiations along with a
"very large group of mental health constituents that have
been actively involved in looking at the package." Co-chair
Frank asked if all six attorney had signed off on the
proposed bill. Commissioner Noah responded negatively.
Responding to further questions from Co-chair Frank,
Commissioner Noah explained that the 1991 approach to
settlement also contained an incentive package. That
package is modified in the proposed bill. Instead of $225
million over a fifteen-year period, the $200 million for the
trust would be provided in one lump-sum payment.
Co-chair Frank voiced his understanding that if all
attorneys do not sign off on the proposed bill, the court
will be left to decide whether the bill, without the
incentives, meets requirements earlier laid out by the
court. He then asked why incentives were included.
Senator Kerttula asked who would manage reconstituted mental
health trust lands under earlier legislation. Commissioner
Noah advised that SB 67 contained the same land management
provisions as CSHB 201 (Finance)am. In both instances, the
lands would be managed by the Dept. of Natural Resources.
Speaking to Co-chair Frank's question regarding need for
incentives, Mr. Koester explained that they encourage both
consent and early dismissal of the lawsuit. The state is,
in effect, paying for an early resolution of the lawsuit.
Senator Kerttula asked if municipalities would be
responsible for returning some land under the proposed bill.
Commissioner Noah noted three specific municipalities:
MatSu, Kenai, and Anchorage. Senator Kerttula asked why
those who benefitted from the land do not bear some
liability. Commission Noah responded that the land list has
been the subject of "tremendous negotiation between a whole
group of parties."
Senator Kerttula spoke to the value of mental health
community management of lands in terms of the competitive
nature of state resources. He voiced concern over
management of mental health trust lands by the Dept. of
Natural Resources and asked if the mental health trust
authority would be involved. The Senator suggested that the
proposed bill allows for money management by the trust
authority but not resource management. Commissioner Noah
noted that regulations for land management would be
developed in concurrence between the department and the
trust authority.
End, SFC-94, #82, Side 2
[Tape malfunction at this point in the meeting. Tape #84
was loaded onto the recorder but failed to record on side 1.
The following minutes reflect transcription of shorthand
noted.]
Mr. Koester concurred that management of mental health trust
lands would be an interactive procedure with members of the
mental health trust authority. Development would come
through regulation. Senator Kerttula advised that he wished
to see more statutory involvement. Senator Kelly said that
he was not interested in legislative involvement but voiced
need for public involvement and oversight. He then asked
who initially brought the mental health lawsuit and who
would comprise the mental health trust authority. Mr.
Koester explained that the authority would be a state agency
with members appointed by the governor. The mental health
community will have input, and prequalifications will be
established. Senator Kelly asked if the mental health board
would be abolished when the trust authority is established.
Mr. Koester answered negatively. He explained that the
mental health lawsuit was brought by the mental health
association. It is not a state agency. Other groups that
felt they should also be covered joined in the suit. Judge
Greene has ruled that at least four groups should benefit:
1. The mentally ill
2. The mentally retarded
3. The developmentally disabled
4. Chronic alcoholics and senile elderly individuals
The trust authority would have umbrella responsibility for
all four groups. Each of the four individual boards would
make recommendations to the authority. At the present time,
that function is performed in part by the mental health
board. The approach taken by the proposed bill, in
conjunction with Ch. 66, is a better approach. The mental
health board would continue to cover the mentally ill.
Senator Kelly inquired regarding the number of mental health
board employees. Mr. Koester advised of three and a half
positions. He further directed attention to fiscal notes
accompanying the proposed bill and noted that they relate to
coverage for other, above-listed groups. He explained that
the Older Alaskan's Commission would assume responsibility
for senile elderly. The fiscal note from the Dept. of
Administration would fund one full time employee. The
Governor's Council on the Disabled has a staff of three.
[End of shorthand transcription of unrecorded portion of
meeting.]
Start, SFC-94, #84, Side 2
Mr. Koester reiterated that the proposal under CSHB 210
(Finance)am is a comprehensive state mental health program
that has two funding sources:
1. The general fund
2. Mental health trust income
Funding will involve legislative review and appropriation of
general fund expenditures and trust authority review and
expenditure of trust income for funding of all aspects of
the state mental health program. Expenditures for boards
and the trust authority itself will be part of the state's
comprehensive mental health program.
Co-chair Frank inquired concerning how the two fundings
would fit together. Commissioner Noah suggested that the
specifics of how they would fit would evolve over time. The
earnings from the trust account ($6 million was mentioned)
will be a "portion of the money that you're spending now . .
. on mental health programs." Mr. Koester concurred,
advising that it involves projecting out into the future in
a system that has never been tried before. He reiterated
that the model used for the trust authority is that of the
University of Alaska. The University receives revenues from
its land trust and expends those proceeds in a manner
reported to the legislature. The annual report lists
various contracts and grants made with land trust revenues.
Those moneys are not appropriated by the legislature. Co-
chair Frank advised that that approach was being changed in
legislation that has already passed the Senate and is on its
way to the House. Mr. Koester said that once the system is
operational, the legislature will be aware, each year, of
what the trust authority did in the previous year.
Contracts or grants that expend over more than one year will
also be noted. The trust authority will be making
recommendations for the overall package of funding. In
those recommendations, the authority will provide
information concerning how it used its part and how that
will fit with what the authority hopes the legislature will
do. The legislature will be taking into account other
public needs for general funds and may or may not do as the
trust authority requests. Co-chair Frank voiced his
understanding that expenditure of earnings from the mental
health permanent fund account would not come through the
legislative budget process. Mr. Koester concurred that it
would not. Co-chair Frank noted that the authority would
thus have appropriation power over income from the $200
million trust account. Mr. Koester concurred. Co-chair
Frank then asked if that would be constitutional. Mr.
Koester acknowledged, "There are certainly constitutional
questions raised about that." Co-chair Frank voiced his
recollection that "No money can be spent without an
appropriation by the legislature." Mr. Koester concurred
that a number of constitutional issues have been raised and
addressed in a number of opinions by the attorney general.
He then referenced examples such as AIDEA and AHFC which
have the power to use interest earned on revolving loan
funds for expenditure without appropriation by the
legislature. Attorney general opinions have acknowledged a
constitutional question raised by that practice, but because
it is something that has been done in the past, it can be
defended. Constitutional questions have been made known to
plaintiffs. They nonetheless feel that provisions for
authority expenditure of earnings are important. Mr.
Koester stressed that the only means by which the $200
million will flow to the trust account is if plaintiffs
agree to dismiss the lawsuit. Commissioner Noah explained
that by passage of CSHB 201 (Finance)am, the legislature is
essentially laying out an offer of settlement. It will be
up to the mental health community whether or not it accepts
that offer.
Co-chair Frank voiced his understanding that if the
settlement is not accepted, the final decision will have to
be made by the courts per SB 67. Commissioner Noah stressed
that CSHB 201 (Finance)am exactly defines the terms of the
settlement. It gives the case the greatest possible
certainty for dismissal. The Commissioner further stressed
that many others (land owners and resource developers),
aside from the mental health community, are at risk in the
issue. In the absence of the proposed bill, the argument
will be one of value.
[Defective tape. Recording on SFC-94, #84, Side 2 stopped
at this point and would not restart.]
Start, SFC-94, #86, Side 1
Senator Rieger expressed concern over "turning over the
appropriation control which was not part of the original
setup of the trust." He further asked what the end result
of the issue would be. If the lawsuit is dismissed as a
result of passage of the proposed legislation, does
settlement then consist of a statute that is subject to
amendment in the future or will settlement entail a court
order similar to the Cleary settlement? Commissioner Noah
said that because the mental health trust issue has been
very difficult for the state for many years, once an
agreement is reached, if modification is to occur, consensus
must be sought with various groups involved. Mr. Koester
explained that because agreement from all attorneys
representing all mental health groups has not been achieved,
there has been no negotiation of a settlement agreement.
The state has talked with all plaintiffs' lawyers about the
possibility of settlement in order to have an agreement to
present to the judge. The state has expressed its concern
over "getting locked into something like the Cleary
settlement which cannot be fixed." The state does not
believe that is necessary. Once this case is put to rest,
there will be absolutely no interest on anyone's part to
reopen the issue and thus open the door to an argument that
somehow the state is violating the mental health trust by
doing something that would lead to a reinstitution of
litigation. The state is going to cure what the Alaska
Supreme Court said was a breach of the trust in 1985. This
bill does that. The state is not interested in getting into
a situation where there will be perpetual court oversight of
everything the state does in the future. Senator Rieger
voiced concurrence in that approach and suggested that
perhaps the legislation should state "something to the
effect that the original trust obligation remains, but that
this is just a statute that is like any other law; it
doesn't override or otherwise change the original trust
obligation." There would thus be flexibility for the
future. Senator Rieger attested to the rigid effect of
court orders and voiced a preference for avoiding that end.
Senator Kelly advised that his reading of enabling
legislation relating to the mental health trust authority
indicates the authority is covered by the Alaska
Administrative Procedures Act. He then asked if that
provision would be "amended out" in the proposed bill. Mr.
Koester initially responded affirmatively, but subsequently
corrected his comments to advise of one exemption from the
Act. He further advised that authority regulations would
have to be adopted under the Administrative Procedures Act.
He said he would further research the issue and provide a
more definitive answer.
Senator Rieger voiced his intent to offer an amendment
requiring a higher priority for inflation proofing so that
only real income is utilized for annual expenditure by the
trust authority.
Co-chair Pearce noted need to attend the pending Senate
floor session and advised that the meeting would be recessed
at this time and reconvened later in the day for
consideration of appropriations for labor agreements as well
as legislation relating to pension investments.
RECESS
The meeting was recessed, subject to recall by the chair, at
approximately 11:20 a.m.
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