Legislature(1995 - 1996)
02/27/1996 09:10 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
February 27, 1996
9:10 a.m.
TAPES
SFC-96, #30, Side 1 and 2
SFC-96, #30-A, Side 1 (000-080)
CALL TO ORDER
Senator Rick Halford, Co-chairman, convened the meeting at
approximately 9:10 a.m.
PRESENT
In addition to Co-chairmen Halford and Frank, Senators
Phillips, Rieger, and Zharoff were present. Senator Donley
arrived soon after the meeting began. Senator Sharp did not
attend.
ALSO ATTENDING: Jim Nordlund, Director, Division of Public
Assistance, Dept. of Health and Social Services; Curt Lomas,
Welfare Reform Program, Division of Public Assistance, Dept.
of Health and Social Services; Jon Sherwood, Program
Coordinator, Division of Medical Assistance, Dept. of Health
and Social Services; Juanita Hensley, Chief, Driver
Services, Division of Motor Vehicles, Dept. of Public
Safety; Mike Greany, Director, Legislative Finance Division;
and aides to committee members and other members of the
legislature.
SUMMARY INFORMATION
SB 37 - END PERMANENT FUND DIVIDEND HOLD HARMLESS
Discussion was had with Jim Nordlund, Curt Lomas,
and Jon Sherwood. A draft CSSB 37 (Fin) dated 3-
9-95 was adopted with an updated 1996 effective
date. The bill was held in committee pending
department preparation of: (a) fiscal notes
pertinent to the Finance Committee Substitute, (b)
a budgetary breakdown showing use of permanent
fund hold harmless moneys, (c) the statutory basis
for each permanent fund hold harmless expenditure,
(d) information on whether expenditure is
automatically prorated based on funding.
SB 226 - MOTOR VEHICLE REGISTRATION/EMISSIONS
Discussion was had among committee members. The
bill was subsequently held in committee for work
on Senator Phillips' request that it contain
language providing a discount for mail-in
registration and Senator Donley's request that the
legislation limit fees for emission testing.
SB 232 - PFD NOTICES AND ELIGIBILITY
A draft CSSB 232 (Fin) dated 2-27-96 was adopted.
The bill was subsequently held in committee for
further testimony.
SENATE BILL NO. 37
An Act relating to treatment of permanent fund
dividends for purposes of determining eligibility for
certain benefits; and providing for an effective date.
Co-chairman Halford directed that SB 37 be brought on for
discussion and advised that since extensive public hearings
were had last year, additional public testimony would not be
taken at this time. He then directed attention to nine
updated fiscal notes and a draft CSSB 37 which he noted
would require an effective date change.
Senator Randy Phillips, sponsor of the legislation,
explained that it was introduced due to constituent concerns
and support for elimination of hold harmless funding
relating to receipt of permanent fund dividends. He
stressed that the legislation does not impact SSI or APA
recipients. In the past year, $40.36 was taken from
everyone's dividend to fund hold harmless. That totals in
excess of $21 million. Senator Phillips MOVED for adoption
of CSSB 37 (9-LS0449\K, Cook, 3/8/95) with an updated
effective date to July 1, 1996. He added that the only
difference between the present draft and a draft adopted
last year is tightened title language. No objection having
been raised, CSSB 37 (Fin) was ADOPTED with the 1996
effective date.
JIM NORDLUND, Director, Division of Public Assistance, Dept.
of Health and Social Services, and CURT LOMAS, Welfare
Reform Program, Division of Public Assistance, Dept. of
Health and Social Services, came before committee to speak
to fiscal aspects of the bill. Co-chairman Halford asked if
non-permanent fund welfare obligations would increase or
decrease if the proposed legislation were to pass. Mr.
Lomas said he would first speak to the AFDC component since
it is the largest. The FY 97 budget for AFDC is $122.8
million. PFD hold harmless funding contributes "roughly $12
million" to the total. If PFD funding was removed, a
shortfall of 10% would occur. The department expects to
spend approximately $50 million for the food stamp program.
Those funds are not general fund because they flow through a
direct federal program. However, PFD hold harmless money
would be expended to replace FY 97 food stamp benefits of
approximately $3.6 million. Co-chairman Halford voiced his
view that if the proposed bill were to pass and there was no
hold harmless funding, there would be no cost to the state
for the program, but there would be a reduction in available
services. Mr. Lomas concurred, saying that the amount of
benefits available for distribution would be reduced by that
amount. New general fund costs would result from program
administration because a portion of the administration of
all public assistance programs impacted by hold harmless is
funded from PFD hold harmless moneys. The FY 97 budget
anticipates $480.0 of such funding. With passage of the
bill, $360.0 of those costs would require coverage via
general funds.
Mr. Lomas further directed attention to the fiscal note for
increased general relief assistance. He explained that it
reflects the emergency needs of recipients who would lose
eligibility for public assistance two months after receipt
of the dividend. In most instances, assistance would help
meet rent payments.
Passage would also result in a funding shift in the Medicaid
program.
Co-chairman Halford voiced his understanding that Native
corporation dividends are exempt up to $2,000.00, but
amounts over that are included in need evaluations. Mr.
Lomas concurred. The Co-chairman then asked how the
department handles dividends that exceed the exemption. Mr.
Lomas explained that in most instances where the situation
is temporary and that form of income is not expected to be
available in the succeeding month, the department would
suspend benefits for the particular month and reopen the
case the following month. Co-chairman Halford asked if that
procedure would also apply to the permanent fund dividend.
Mr. Lomas responded affirmatively. In most cases,
suspension would last for only a month. Federal policy
requires that dividends be counted as income in the month
received. A redetermination is then made in the month
following receipt as to whether the household qualifies for
assistance. The decision is based on assets. If the
dividend has been used in a manner that results in family
requalification, the family could be eligible after one
month. If the dividend was retained or converted to an
asset that impacts eligibility, the family would be
ineligible until it again passes the eligibility test.
Senator Rieger advised of his understanding that for those
who become ineligible in the month of receipt of a dividend,
there is a waiting period of several months before they
requalify. Mr. Lomas said that under the AFDC program,
certain lump-sum payments that are not recurring are
required by federal policy to be averaged over a period of
time. That results in potentially longer periods of
ineligibility. Recurring sums like the dividend are not
treated that way. The hold harmless program protects people
up to four months if they retain "enough of the dividend . .
. to result in their ineligibility."
Senator Rieger next asked if, on average, the hold harmless
program picks up only one-month worth of individual
benefits. Or, does it pick up two to four months? Mr.
Lomas replied that the most recent report indicates that in
"better than 95% of the cases, the hold harmless program is
only picking up one month." It is relatively rare for
families to hold onto the cash beyond the month in which it
is treated as income.
Senator Zharoff referenced last year's position paper and
asked if the administration's position had changed. Jim
Nordlund advised of no change in the administration's
opposition to the legislation. He added that, during the
interim, the administration worked extensively on a welfare
reform plan. That plan is now before the legislature.
Benefit cuts are part of the plan. The administration
opposes the across-the-board cut in the proposed bill. Cuts
made by the administration are "more surgical" in nature,
provide incentives for individuals to go to work, and
equalize benefits among the eligible population. The 10%
AFDC cut resulting from the proposed bill would be the
largest single cut in the history of the program.
Discussion followed between Senator Zharoff and Mr. Nordlund
regarding changes in federal law. Mr. Nordlund said that
fiscal notes were written for the present program. If
federal reform passes, it would have some impact on the hold
harmless program in that the department would be able to
annualize the effect of the cut over the entire year. It
would not be necessary to move individuals on and off the
program and incur general fund administrative costs.
Passage of the proposed bill would still result in a 10%
benefit cut to recipients.
Senator Zharoff expressed concern regarding the impact of
the legislation on senior citizens and the disabled. He
further emphasized key points on the position paper
indicating the effect on children and other program
recipients.
Senator Phillips pointed to questions raised by constituents
regarding why those who are employed should pay twice for
benefits for welfare recipients: once through federal taxes
and a second time through reduction of their permanent fund
dividend.
Referencing a listing of fiscal notes accompanying the bill,
Co-chairman Halford voiced his understanding that most of
the costs apply to the general fund, and the savings apply
to the dividend hold harmless program. Mr. Lomas concurred.
The Co-chairman then noted that AFDC is 50% state funded and
50% federal. In response to a further question from the Co-
chairman, Mr. Lomas explained that the hold harmless program
covers not only the federal but the state share as well--the
entire cost of one month of benefits lost to an AFDC
recipient. Co-chairman Halford asked if the foregoing means
that "We're using the hold harmless as an excuse to hold the
general fund harmless . . . thereby taking from the dividend
to support the general fund." Mr. Lomas answered that that
has been the mechanism since 1988. Prior to that time, the
PFD hold harmless program covered only federal moneys. Co-
chairman Halford suggested that not only is the foregoing
inequitable, it is used as an excuse to take more out of
individual dividends than would otherwise be deducted.
Co-chairman Frank voiced his understanding that costs shown
on fiscal notes are administrative costs. Mr. Lomas
disagreed, advising that the $1,052.8 in general relief is a
benefit cost based on department projections of increased
need. The maximum payment is $120.00 per person per month.
Payment is made to a vendor, generally a landlord, for those
who are either homeless or facing eviction. In emergency
circumstances, benefits can be used to pay for other needs
such as food or clothing. The department anticipates that
15% may need food because they lose eligibility for food
stamps at the same time they lose eligibility for AFDC or
other benefits.
In response to further discussion of eligibility, Mr. Lomas
explained that if a whole family received the dividend in
October, members would not be eligible for a December
payment. Should the proposed bill pass, the department
would encourage the present caseload to spend dividend money
on "things that would help them get through the month when
they would not be eligible for public assistance--stock up
on food, prepay rent, get their utility bills paid off . . .
." The 15% is an estimate of how many families might not
heed department advice and would "come up against an
emergency situation where they were facing homelessness or
no food . . . ." Individuals in this category would have to
be homeless or facing eviction before they would qualify for
benefits. For those needing food, the department would
require verifying evidence from someone who knows the family
circumstances.
Discussion followed regarding the shift of administrative
costs from hold harmless moneys to general funds. Mr. Lomas
noted that the hold harmless program buys the state some
administrative economies. He then cited agreements with
federal agencies for AFDC accounting.
In response to further questions from Co-chairman Frank, Mr.
Lomas commented that the fiscal note for ($21,738.6)
reflects the total cost of the PFD hold harmless program.
It includes coverage for benefits in AFDC, food stamps, APA,
SSI, Medicaid Programs, and administrative costs of hold
harmless. The foregoing total is broken out in some of the
other fiscal notes as well. The ($1.1) million in Medical
Assistance, ($2.6) million in Adult Public Assistance, and
($12.1) million in AFDC were cited.
Co-chairman Frank stressed that hold harmless funding for
APA and SSI would not be repealed by the Senate Finance
bill. He then voiced need to focus on fiscal notes that
apply to only that version. Co-chairman Halford asked that
department staff cite statutory authorization to replace
federal food stamp benefits which do not "go through the
process at all."
Co-chairman Halford next noted that updated 1996 fiscal
notes apply to neither the current finance committee
substitute nor the finance committee substitute adopted last
year. Department staff acknowledged that the new notes were
written for CSSB 37 (STA). Mr. Nordlund advised of the
administration's policy of not "doing fiscal notes on draft
bills." Although drafts were adopted by committee, they
were not reported out as a formal committee substitute. He
further advised that he had pertinent figures and could
quickly update the notes. Co-chairman Halford stressed need
for new notes when a committee substitute is adopted since
they are needed before the bill is reported out, not
thereafter.
Co-chairman Frank raised questions regarding benefits for
those, other than the elderly and disabled, who remain
covered under the bill.
END: SFC-96, #30, Side 1
BEGIN: SFC-96, #30, Side 2
He then inquired concerning Medicaid coverage. JON
SHERWOOD, Program Coordinator, Division of Medical
Assistance, Dept. of Health and Social Services, came before
committee. He explained that Medicaid budgeting does not
"look back retrospectively at income." It always looks
forward prospectively. Most people are not ineligible for
Medicaid in the month in which the dividend is received.
Only if they retain the earnings and become over-resourced
do they become ineligible. Most of the PFD hold harmless
for Medicaid applies to nursing home recipients. The
department works with nursing homes to ensure that
recipients understand they should spend down. A small
percentage retains earnings.
In response to a question from Co-chairman Frank, Mr.
Sherwood advised that one could apply for Medicaid "up to
three months retroactively." An example of January
application to cover unpaid medical bills from October or
November was cited.
Mr. Sherwood referenced the fiscal note showing a $660.0
increase to the medical assistance budget, advising that
$330.0 of the total represents general funds.
Co-chairman Frank cited the case of a mother and two
children on AFDC and asked if they would lose Medicaid
eligibility. Mr. Sherwood said they could lose eligibility
if they choose to retain the dividend. If it was expended,
they would probably not become ineligible.
Co-chairman Frank then voiced his understanding that the
current finance committee substitute exempts the disabled
and the elderly. Mr. Sherwood said that the draft exempts
recipients of SSI and APA. Those living in institutions are
only eligible for a small personal needs payments of up to
$75.00 a month. Those with that level of income are not
recipients of either of the above programs. They are only
Medicaid recipients. Their room and board is paid by
Medicaid as part of the cost of nursing home care. Nursing
home residents are not eligible for Medicaid if they retain
the dividend. Medicaid eligibility looks at what a resident
has "essentially the first moment of the next month, in
terms of resources." Senator Phillips voiced his
understanding that the majority of such residents do not
retain the dividend. Their benefits will thus be continued.
Mr. Sherwood concurred. He noted, however, that some
residents do not manage their finances closely enough to
ensure that the dividend is disbursed and eligibility is
retained.
Discussion followed regarding income reporting requirements
for Medicaid eligibility. Mr. Sherwood advised that the
department provides nursing homes with information on means
of disbursing the dividend. He cautioned that nursing home
residents have to be careful when giving away resources.
There is a Medicaid penalty for giving away money to remain
eligible for nursing home care. The asset standard is
$2,000.00. The $330.0 in general fund costs assumes that
those who are not now spending down would do so in the
future and would become eligible for Medicaid.
Mr. Lomas referenced earlier comments that the Medicaid
program looks forward rather than back. He explained that
that approach is based on a theory and arrangement with the
federal government, since commencement of the dividend
program. The theory is based on the fact that the
department cannot anticipate when people are going to
receive dividend payments. It is becoming increasingly
difficult to adhere to that philosophy because Dept. of
Revenue processing has become so efficient that most
individuals receive the dividend in October. If Medicaid
determines the dividend is not unanticipated, the scenario
would be different and potentially large numbers of people
would lose eligibility as a result. That is of concern to
the department.
In response to comments by Co-chairman Halford regarding
timing of receipt of the dividend to allow sufficient spend-
down time, Mr. Lomas said that recipients have two months in
which to spend the dividend. The federal government allows
some processing time. A payment received in October is not
viewed as an asset until the first of December. Recipients
are allowed a reporting period, and the department is
allowed processing time.
Co-chairman Frank again referenced the fiscal notes and
asked how the ($21) million savings would be achieved. Mr.
Lomas directed attention to the tabulation set forth on page
2 of the fiscal note for public assistance, PFD hold
harmless (File note no. 5). Co-chairman Frank noted that
amounts for SSI and APA should not be included, and the
Medicaid number should be reviewed.
Discussion followed regarding the $3,624.1 shown for the
food stamp program. Mr. Lomas described the arrangement
with the federal government whereby the state administers
food stamp benefits. State funds "go into the
administration of the program but not into the benefits
themselves." The administrative match is 50/50. The
federal government pays the entire cost of benefits. Co-
chairman Frank voiced his understanding that the negative
($21) million fiscal note shows reductions in hold harmless
funding while the negative ($12) million note evidences an
offsetting reduction in benefits. Mr. Lomas concurred.
In the course of discussion of hold harmless moneys for the
food stamp program, Mr. Lomas advised that department
attempts to negotiate with the federal government to allow
the state to pay for food stamps for those who are held
harmless were not successful. The department thus pays cash
in lieu of food stamps in the month that individuals are
held harmless. The funding source is the PFD fund. The
expenditure to replace food stamps is one of the pieces of
PFD hold harmless budget components. Senator Phillips
voiced his understanding that those held harmless receive
both the dividend and cash in place of food stamps. Mr.
Lomas described the situation whereby recipients receive the
dividend in October, become ineligible for food stamps in
December, and receive a cash payment in lieu of food stamps
in December. There are no restrictions on expenditure of
the cash. Mr. Lomas said that the department explored use
of a voucher system instead of cash, but administrative
costs appeared prohibitive.
Co-chairman Halford directed that the department provide the
following:
1. Updated fiscal notes for the finance committee
substitute.
2. A budget breakdown of complete use of permanent
fund hold harmless moneys. (While funds are
appropriated as one line, the breakdown
should include every category in
eventual expenditure.)
3. The statutory basis for each expenditure in hold
harmless law.
4. Whether or not expenditure is automatically
prorated based on funding.
He said that the legislation would be held in committee for
further discussion.
Mr. Nordlund referenced earlier remarks that removal of APA
recipients from the legislation leaves only able bodied AFDC
recipients to bear the impact. He reminded members that a
number of individuals on AFDC are disabled. They are
disabled heads of households, heads of households caring for
disabled children, and battered women. Federal legislation
anticipates the foregoing and contains a 15 to 20% exemption
of the caseload from the five-year time limit. That
recognizes that there are individuals who "are simply not
going to be able to work." The benefit cut in the proposed
bill impacts the entire population, including the above-
mentioned individuals. He urged that the committee consider
an exemption. Co-chairman Frank asked if the department
would propose amendments that would change the
administration's opposition to the bill. Mr. Nordlund said
the department would review the matter. Senator Phillips
said he would be receptive to review of amendments.
SENATE BILL NO. 226
An Act relating to biennial registration of motor
vehicles; imposing biennial registration fees on motor
vehicles and authorizing a scheduled biennial municipal
tax on motor vehicles; relating to fees for motor
vehicle emissions control programs; and providing for
an effective date.
Co-chairman Halford directed that SB 226 be brought on for
discussion. Co-chairman Frank explained that the bill
represents an attempt to reduce the burden incurred by
annual vehicle registration by requiring biennial
registration. The department was planning to implement
biennial registration in Anchorage and Fairbanks. The Co-
chairman expressed his belief that it makes sense to do so
statewide. The legislation contains a slight price break in
that registration would cost $68.00 for two years rather
than $35.00 annually.
Senator Donley voiced support for the bill. He referenced
last year's passage of legislation providing for biennial
emission testing and noted ongoing discussion of testing
fees. He then asked that Senator Frank consider inclusion
of fee guidelines within SB 226. It appears the cities want
to double fees even though they are "only doing half as much
work." Sen Donley suggested it might be appropriate to place
a cap on fees. Fairbanks has established a $35.00 maximum
for tests while the maximum in Anchorage is $50.00. It
might be appropriate to set a consistent level to prevent
future abuses.
JUANITA HENSLEY, Chief, Driver Services, Division of Motor
Vehicles, Dept. of Public Safety, next came before
committee. She noted that vehicle registration is the
simplest transaction performed by the division. The state
presently contracts with 20 offices which perform vehicle
registration at the same time emission testing is done.
Vehicles may also be registered by mail. Mrs. Hensley
acknowledged that the department hoped to implement biennial
registration by July 1 to allow those who choose to license
for two years to do so. The proposed bill would make
biennial registration a requirement. Mrs. Hensley voiced
department support for the legislation.
Senator Randy Phillips noted that those who choose to
register in person, rather than through the mail, pay an
additional $10.00 fee and suggested that the proposed bill
might provide a remedy for problems associated with the
extra charge. Co-chairman Halford asked if the intent is to
provide a discount for mail renewal rather than a penalty
for registration at a division of motor vehicles' office.
Discussion followed regarding municipal motor vehicle taxes
collected by the division on behalf of municipalities. Mrs.
Hensley explained that municipalities which collect the
personal property tax themselves set the level of taxation.
If the municipality elects to have the division collect the
tax at the time of registration, the tax schedule is set by
statute. The emission test fee is set by the two
communities that require the test. The Dept. of
Environmental Conservation also sets a fee for
administration of the program. Co-chairman Frank asked that
Mrs. Hensley provide information on the state charge as well
as fees levied by Fairbanks and Anchorage municipalities.
Further discussion of certificate and test fees followed.
Co-chairman Frank voiced his understanding that fees were
intended to cover costs rather than to be applied as a tax.
Senator Rieger advised of his recollection that the fee in
Anchorage was intended to cover publicity at the outset of
the program.
Co-chairman Halford suggested that addition of language
relating to a discount for mail registration and a
limitation of emission test fees occur while the bill is in
committee rather than via floor amendment.
Senator Donley voiced concern regarding reductions to
division of motor vehicle offices contained in the
Governor's budget. He acknowledged that the division
generates greater revenue than it is given for operations.
He then reiterated support for the proposed bill, saying
that resulting reductions in revenues would not impact
division funding. He voiced further concern regarding cuts
that would eliminate enforcement of the financial
responsibility act because it directly serves needy Alaskans
who are innocently victimized in accidents. Senator Rieger
remarked that the $40.00 reduction in everyone's PFD
mentioned in discussion of SB 37 is comparable to the
increase that everyone purchasing insurance pays when
uninsured motorist coverage is added to policies because
Alaska still has the one free accident rule. A fix here
would benefit every Alaskan who purchases auto insurance.
END: SFC-96, #30, Side 2
BEGIN: SFC-96, #30-A, Side 1
Co-chairman Halford directed that SB 226 be held in
committee for subsequent discussion.
SENATE BILL NO. 232
An Act relating to permanent fund dividend program
notice requirements, to the ineligibility for dividends
of individuals convicted of felonies or incarcerated
for misdemeanors, and to the determination of the
number and identity of certain ineligible individuals;
and providing for an effective date.
Co-chairman Halford directed that SB 232 be brought back for
discussion. Co-chairman Frank reiterated that the proposed
bill updates legislation vetoed last year. It would make
those convicted of a felony or incarcerated for a third or
subsequent misdemeanor ineligible for permanent fund
dividends. The bill was held from a prior hearing to review
the possibility of including the child support enforcement
division. Legislative attorneys had earlier raised
constitutional questions surrounding inclusion. Co-chairman
Frank advised that staff would brief members on the status
of that concern.
Co-chairman Halford referenced an impending resources
committee meeting and the number of people wishing to
testify on the bill and suggested that time did not permit
further discussion. Co-chairman Frank MOVED for adoption of
a draft CSSB 323 (9-LS1455\F, Cook, 2/27/96) as a working
document and requested unanimous consent. No objection
having been raised, CSSB 232 (Fin) was ADOPTED. Co-chairman
Halford directed that the bill be held for subsequent
hearing.
ADJOURNMENT
The meeting was adjourned at approximately 10:45 a.m.
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