Legislature(1993 - 1994)
03/26/1994 10:05 AM FIN
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
MINUTES SENATE FINANCE COMMITTEE March 26, 1994 10:05 a.m. TAPES SFC-94, #38, Side 2 (000-end) SFC-94, #40, Side 1 (000-end) SFC-94, #40, Side 2 (575-135) CALL TO ORDER Co-chairman Steve Frank convened the meeting at approximately 10:05 a.m. PRESENT In addition to Co-chairs Frank and Pearce, Senators Kerttula and Sharp were present. Senators Jacko, Kelly, and Rieger did not attend. ALSO ATTENDING: Bruce Botelho, Attorney General, Dept. of Law; Richard Burton, Commissioner, Dept. of Public Safety; Jim Baldwin, Assistant Attorney General, Dept. of Law; Dick Pegues, Director, Administrative Services Division, Dept. of Law; C.W. Swackhammer, Deputy Commissioner, Dept. of Public Safety; Janet Clarke, Director, Division of Administrative Services, Dept. of Health and Social Services; Shirley Minnich, Director, Division of Administrative Services, Dept. of Corrections; Kim Elton, Executive Director, Alaska Seafood Marketing Institute, Dept. of Commerce and Economic Development; Nancy Slagle, Director of Budget Review, Office of Management and Budget; Bill Andrews, Finance Officer, Dept. of Natural Resources; Alison Elgee, Budget Review, University of Alaska; Dana Latour, fiscal analyst, Legislative Finance Division; and aides to committee members and other members of the legislature. SUMMARY INFORMATION SB 288 - APPROP: GOVERNOR'S SUPPLEMENTAL Overview was had of Secs. 15 through the end of the bill as well as amendments. Testimony was presented by Nancy Slagle, Janet Clarke, Bill Andrews, Shirley Minnich, C.W. Swackhammer, and Kim Elton. The bill was subsequently HELD in committee for further review. HB 454 - APPROP: COST OF OIL/GAS LITIGATION The committee met in an extended Executive Session with Attorney General Bruce Botelho and Assistant Attorney General Jim Baldwin. Upon reconvening in regular session, CSHB 454 (Fin) was REPORTED OUT of committee with a "do pass" recommendation. SB 288 - APPROP: GOVERNOR'S SUPPLEMENTAL An Act making and amending operating and capital appropriations and ratifying certain state expenditures; and providing for an effective date. HOUSE BILL NO. 455 An Act making and amending operating and capital appropriations and ratifying certain state expenditures; and providing for an effective date. [Cross reference between SB 288 and HB 455. Most of SFC discussion of supplemental funding relates to SB 288. HB 455 was the supplemental bill that ultimately passed the 1994 legislature.] Co-chair Frank directed that SB 288 be brought on for discussion and that sectional review of the bill (begun at the March 24, 1994, meeting) continue. NANCY SLAGLE, Director of Budget Review, Office of Management and Budget, again came before committee to conduct the following review: Sec. 15. Contains a $244.4 appropriation for permanent fund dividend hold harmless funding in direct relation to caseload increases generated by AFDC and other programs. Senator Kerttula noted that the funding derives from the permanent fund and suggested that hold harmless coverage should no longer be provided. Sec 16. Provides a $7,674.5 appropriation to medical assistance for judgments and settlements. JANET CLARKE, Director, Division of Administrative Services, Dept. of Health and Social Services, explained that funding relates to three primary cases, the first two of which are relatively small. The first is a $604.6 (50% federal funds) superior court judgment for Our Lady of Compassion, relating to a rate appeal case. The second involves Alaska Regional Hospital (formerly Humana Hospital) and relates to a $704.9 (50% federally funded) attorney general settlement of a 1986 rate appeal case. The major portion of the request relates to a $5.8 million judgment by the supreme court in a decision relating to the department's Medicaid rate setting system for nursing homes. The superior court ruled, and the supreme court reaffirmed, that the state's Medicaid plan violated procedural requirements of federal law. Federal law requires that state payment rates be reasonably adequate to meet costs of an efficiently and economically operated facility. The court found that the state Medicaid plan had procedural flaws in determining what were "economically operated and efficiently operated facilities." In the major dispute, the state was sued by the Alaska Hospital Nursing Home Association on behalf of nursing homes statewide. Ms. Clarke stressed that 85 to 90% of revenue for nursing homes in Alaska flows from the Medicaid program. The federal government did not participate in the lawsuit. Normally, 50% would be funded by the federal government. The decision not to participate has been appealed by the state for several of the years with approved Medicaid plans. The department is hopeful of a determination by the federal government that will allow for reduction of general funds and replacement with federal moneys. However, it is unlikely the $5.8 million supreme court judgment will be split 50/50. Co-chair Frank asked why the federal government was not sued along with the state. Ms. Clarke deferred to staff from the Dept. of Law. Discussion followed between Co-chair Frank and Ms. Clarke regarding the federal claim process. The department hopes for a decision by the end of March. Sec. 17. Provides a $5,045 million appropriation to medical assistance to cover increased participation and payment of FY 93 bills in FY 94. Co-chair Frank asked how the request relates to department efforts to reduce Medicaid. Janet Clarke explained that last year, based on early projection numbers, the department "gave out $4.5 million out of our Medicaid program." Projections remained on track until April, May, and June, the last three months of the fiscal year, when the department determined that the money should have remained in the Medicaid program. The department thus ended up "pushing" $7.8 million in FY 93 bills into FY 94. In FY 94, the legislature reduced the Medicaid budget by $4.5 million and asked the department to look for cost containment to live within provided funding. The department found $7 million in cost containment, but it was not enough to make up for the cumulative effect of FY 93 bills pushed into FY 94 and the reduction. Discussion followed concerning the number of eligible Medicaid recipients and growth projections. Co-chair Frank voiced concern that increases in the number of recipients appear to be outstripping the population growth. Further comments followed regarding attempts to limit rates and effect cost containment. Responding to a question from Senator Sharp concerning reductions to the statutory list of priority services, Ms. Clarke said that the Governor was reluctant to reduce any of the listed services. The department followed his direction. Ms. Slagle added that the Governor believes there are other means of achieving cost reductions. In the course of further discussion with Co-chair Frank, Ms. Clarke said that one cost containment effort denied rate increases for physicians and dentists. In response to a question from Senator Kerttula, Ms. Clarke explained that 60% of the Medicaid budget is either mandatory or related to difficulties in reducing facility rates. Other states have also been hamstrung by federal law. State efforts in court continue to lose. Sec. 18. Contains a $1,842.5 appropriation for medical assistance. It relates to the disproportionate share reimbursement to private hospitals (Charter North and North Star) for indigent care. Ms. Clarke distributed information (copy appended to these minutes as Attachment A) showing disproportionate share payments. She then read printed text from the document and described the movement of funding as set forth on the accompanying flow chart. The $5.4 million GF/MHT savings results from the fact that more federal dollars are available to replace current general funds in API's budget. However, in order to achieve the savings from API, the department must pay private hospitals more. Rules governing the program do not allow the state to discriminate against private hospitals. Sec. 19. Provides a $3,567.4 appropriation in federal funds for increased Indian health service payments for medical assistance. Janet Clarke explained that the program is all federal funds through Medicaid. Senator Kerttula asked that department staff inquire concerning a proposal to merge the federal program into state health care offerings. Ms. Clarke said that the department is concerned about maintenance of effort requirements for the Medicaid state match in any health care reform activity. Sec. 20. Appropriates $887.5 for general relief medical due to the increased number of participants and includes $246.6 for FY 93 bills carried into FY 94. Janet Clarke explained that the division is looking into the cause of the increase. The general relief medical program has existed since 1953. It primarily serves unemployed and underemployed individuals. The primary caseload is those who are not eligible for other Medicaid services. The population group spans 21 to 64. To qualify, one must have an income of less than $300 per month, resources of less than $500 per month, and no other medical coverage. Co-chair Frank voiced his understanding that because of general relief medical, no one is without coverage. Ms. Clarke concurred. The Co-chair then asked how many people the program covers for the $7 million in funding. Ms. Clarke advised of approximately 700. She further noted that a number of very expensive cases drive the average up. She agreed to provide numbers relating to the cost of individual cases as well as the payees. Sec. 21. Appropriates the $7 million in federal receipts for the disproportionate share program flowing to API. Sec. 22. Transfers funds from the waivers authorization back to community DD grants to cover individuals who were not switched over to the waivers program because of late start up. Janet Clarke noted that Sec. 22 duplicates SB 360. Sec. 23. Appropriates $238.7 for McLaughlin Youth Center. Funding is needed to cover population increases due to youth gang activities. Janet Clarke spoke to an increase, at both McLaughlin and the Johnson Center, of "more violent youth than we have seen in recent times." The McLaughlin detention center capacity is 25. The last census showed a population of 89. For the safety of both staff and other residents of McLaughlin, the department has had to increase overtime and use of non-permanent employees. Senator Kerttula asked if a separate facility is needed. Ms. Clarke explained that the department is exploring capacity and renovation costs at the Fairbanks Youth Facility for "another closed detention unit." Sec. 24. Contains a $41.9 appropriation for the Johnson Youth Center. The situation here is the same as at McLaughlin. In response to a question from Co-chair Frank, Ms. Clarke explained that population increases at the Fairbanks Youth Facility have been covered from other areas of the youth facility budget, particularly from vacancies at the Nome facility. Sec. 25. Shows a $323.7 fund source change to reflect the uncollectability of laboratory fees. It was anticipated that regulations would be in place to commence collections for services. That effort has been delayed. In response to questions from Co-chair Frank, Ms. Clarke explained that tests performed by the state lab are those that are not profitable for the private sector, or they relate to issues for which the state must have information (tuberculosis was cited as an example). Sec. 26. Deleted. Sec. 27. Deleted. Sec. 28. Contains remaining funding for the disproportionate share program. It involves a realignment of funding sources for API and program receipts from increased collections from third-party payors. Responding to a question from Co-chair Frank, Ms. Clarke said that average occupancy at API is approximately 100 per day. There are 1,100 admissions each year. End: SFC-94, #38, Side 2 Begin: SFC-94, #40, Side 1 Discussion followed between the Co-chair and Ms. Clarke concerning negotiations with local hospitals for evaluation and short-term care of mental health patients. API has been downsized in an effort to provide psychiatric care closer to home for many patients. Costs at local hospitals are substantially higher than API because of hospital need to cover the cost of medical infrastructure. Sec. 29. Funds $548.2 for Harborview Development Center to cover increased costs of the steam heat plant and certification deficiencies. Costs relating to the heating plant total $50.0. The remaining $498.2 covers deficiencies. Sec. 30. Contains $37.5 for the Dept. of Military and Veterans Affairs to cover an under-estimation of 50 in the FY 93 death gratuity. The program is no longer functioning in FY 94. Sec. 31. Provides a $4,643.8 appropriation to the Dept. of Natural Resources for fire suppression. Funding will cover shortages in fixed costs, moneys due the federal government, and anticipated fire activity for the rest of the fiscal year. Senator Kerttula stressed need to allow fires in uninhabited areas to simply burn out. In response to a question from Co-chair Frank, Mrs. Slagle advised that the Office of Management and Budget reduced the agency request by $1 million. Co-chair Frank requested a breakdown of fixed costs. BILL ANDREWS, Finance Officer, Dept. of Natural Resources, directed attention to backup material showing detail for aviation contracts, pilots, etc. He further explained that the contract with BLM provides for smoke jumpers. He agreed to provide a further breakdown as well as department policy relating to fires in remote areas. Sec. 32. Relates to ratification of past Dept. of Natural Resource expenditures. There is no impact on the general fund. Sec. 33. Appropriates $20.0 to the Dept. of Fish and Game for additional vendor compensation for increased king salmon tag activity. KEVIN BROOKS, Director, Division of Administration, Dept. of Fish and Game, explained that vendors generally withhold a portion of the cost of licenses for compensation. For the salmon tag, vendors are paid an additional amount after the department completes a tally of sales. This additional compensation is thus handled differently than normal compensation. The fiscal note estimated $120.0. In response to a question from the Co- chair, Mr. Brooks agreed to provide additional information on the reason for special handling of compensation for king salmon tag sales. Sec. 34. Shows a fund source change from federal funds to general fund program receipts. It relates to an error in budgeting of a $60.5 grant derived from the University of Utah rather than the federal government. Co-chair Frank commented that supplemental requests from the Dept. of Fish and Game are relatively small and asked why they were not accommodated within existing funds. He referenced intent language in last year's budget advising that the legislature would not look favorably on supplemental requests that are not large in relation to the department budget. Mr. Brooks explained that the majority of the budget relates to commercial fisheries (70%) and management. Smaller divisions such as subsistence have very tight budgets. The department cannot shift funds between appropriations. Sec. 35. Relates to an additional ratification of expenditures by the Dept. of Fish and Game. There is no dollar impact on the general fund. Sec. 36. Contains a language change, reappropriation, and $10.0 reduction in funding for a Wood River sonar project. Kevin Brooks explained that the $55.0 project for Wood River was reduced to $45.0. Funding is now proposed for the Ugashik River. Work on this legislative add-on from last year has been conducted in conjunction with Representative Moses' office. Sec. 37. Contains a $331.9 appropriation of motor vehicle license fee program receipts to the Dept. of Public Safety, Motor Vehicle Administration, for data processing chargeback costs. Nancy Slagle explained that a portion the fees and taxes collected by the department is used to fund the division of motor vehicles. The remainder accrues to the general fund. Shortfalls in the chargeback have existed since FY 93. The Governor's FY 95 budget contains an additional $375.0 to "take care of this problem." Discussion followed between Mrs. Slagle and Co-chair Frank concerning use of revenues from license fee and taxes. Further comments followed by the Co-chair regarding lack of use of full data processing chargeback funding in other departments that might offset increased need within the Dept. of Public Safety. Sec. 38. Provides an appropriation of $70.4 to contract jails for prisoner transportation. C. W. SWACKHAMMER, Deputy Commissioner, Dept. of Public Safety, came before committee and provided a brief recap of progress made by the task force on contract jails. He noted that municipalities submitted contract jail budgets that exceeded the amount funded by $1.3 million. Standards must be applied to the budget process so that there is equity and some rationale behind the funding mechanism. Mr. Swackhammer advised of two components within contract jails which interact with the Dept. of Corrections for prisoner transportation. An appropriation of $180.7 is used by the Dept. of Corrections' transportation division for airline tickets for transport within institutions. The inmate population within the Dept. of Corrections is above emergency capacity. The department is continually attempting to even it out among the various facilities. A second component of $317.6 provides for charter aircraft to accomplish the same purpose, when there is need for transport of one or more prisoners. The budget for contract jails was shorted $70.4. Costs associated with the Dept. of Corrections have increased. The last 60 days of the fiscal year, funds for transport of prisoners will not be available. Sec. 39. Involves a $1.5 million change in funding source (from general fund program receipts to straight general funds) for the Dept. of Transportation and Public Facilities due to the uncollectability of rural airport landing fees. Senator Sharp attested to intent within the FY 94 budget that the department should not collect the fees but should instead "look to other sources of revenue." The new approach is a tax increase on aviation fuel. Sec. 40. Contains a $34.7 appropriation of international airport revenue funds to the Dept. of Transportation and Public Facilities for a court-stipulated settlement of a discharged employee's retirement costs. Senator Sharp noted need to move $77.0 out of Sec. 9 funding for the Dept. of Law, since that amount reflects attorney fees relating to the $34.7 settlement. Co-chair Frank asked that Mrs. Slagle review legal and technical aspects of proceeding as suggested by Senator Sharp and report back to committee. Sec. 41. Provides $1,631.3 to the Dept. of Corrections for inmate health care for FY 94. Co-chair Frank advised that funding would be further explored in subcommittee review. Sec. 42. Appropriates $85.1 to the Dept. of Corrections for an arbitration award between the state and ASEA relating to reinstatement of an employee. SHIRLEY MINNICH, Director, Division of Administrative Services, Dept. of Corrections, explained that the employee was laid off in FY 93 due to lack of funding. An arbitration settlement required that the department reinstate the individual, however, the department did not receive funds for reinstatement in FY 94. Co-chair Frank requested additional information. Sec. 43. Contains a $39.5 appropriation to the Dept. of Corrections for a court-appointed monitor. Senator Sharp suggested that the request be transferred to the court system budget. Sec. 44. Appropriates $200.0 to the Dept. of Corrections for operating costs of 50 additional beds at Spring Creek. Co-chair Frank asked if the beds are presently occupied. Shirley Minnich said that, due to an emergency cap situation, the facility utilized 15 of the beds for a short period two weeks ago. That was done without additional funding and at risk to both staff and inmates. If the requested supplemental is approved, the department will attempt to immediately utilize the beds. The request corresponds to a budget increment for FY 95. Senator Sharp voiced his understanding that more than just bed costs are involved. Ms. Minnich concurred, citing personnel costs for additional staff as well as costs for food and clothing for the inmates. Sec. 45. Provides a $73.0 appropriation to the Dept. of Corrections for additional legal costs. Shirley Minnich explained that during FY 94, the Office of Management and Budget required that the department pay for the services of an additional attorney within the Dept. of Law to handle "just Dept. of Corrections cases." The department is thus seeking supplemental funding for the position for FY 94. Funding for FY 95 is contained within the budget for the Dept. of Law. Co-chair Frank asked for a comprehensive report on legal costs associated with incarceration. He requested that it deal only with costs following incarceration and involve the Dept. of Corrections, Dept. of Law, Public Defender, Office of Public Advocacy, etc. Sec. 46. Requests extension of a lapse date on an appropriation for community residential center beds in FY 93. The amount involved is $688.0. Sec. 47. Appropriates $36.7 to the Dept. of Environmental Conservation to reimburse EPA for disallowed expenditures. Co-chair Frank suggested that the department should be able to accommodate the request within its total $50 million budget. Mrs. Slagle advised that the Office of Management and Budget turned down several smaller requests, but this one includes disallowed costs dating back to 1988. Sec. 48. Removed and place in a different bill. Sec. 49. Contains a $220.0 appropriation to the University of Alaska for installation of an emergency water well as a result of Benzene contamination at the Fairbanks campus. Moneys from the 470 fund were received last year to deal with the cleanup. In response to a question from Co-chair Frank, ALISON ELGEE, Budget Review, University of Alaska, explained that costs associated with the emergency well exceeded $300.0. The supplemental request reflects the actual cost of drilling a well that serves the entire campus. Sec. 50. Appropriates a total of $337.9 in various amounts to various departments for stale-dated warrants and miscellaneous claims. Co-chair Frank again asked why small requests could not be accommodated within existing budgets. Mrs. Slagle noted need to follow statutory provisions. She further advised that warrants have a statutory life of two years. After that time, they can no longer be cashed by a bank and must be presented to the Dept. of Administration for an appropriation. Further discussion of situations involving stale-dated warrants followed. Co-chair Frank question the policy behind the two-year limitation on the warrants. End: SFC-94, #40, Side 1 Begin: SFC-94, #40, Side 2 Mrs. Slagle noted that provisions within the omnibus bill change the limitation to four years. That is intended to cut down on supplemental funding for miscellaneous claims. New Secs. Mrs. Slagle next directed attention to new sections within the bill and noted the following: DOA - A $35.0 appropriation for ethics complaints grievance awards. And a request for ratification of expenditures. DOTPF - Ratification of prior year expenditures. DE&ED - Extension of receipts from processor taxes from FY 93 into FY 94 for utilization by the Alaska Seafood Marketing Institute. (See below*) DPS - Ratification of expenditures. DOC - Funding of $163.9 for settlement of overtime litigation relating to the canine unit. (See below**) DEC/DF&G/DNR - Extension of the lapse date for Exxon Valdez funding for restoration projects. (See below***) Co-chair Frank asked for a listing of requested ratification of expenditures for all departments. Mrs. Slagle explained that many relate to audit exceptions noted by Legislative Audit in the course of review of accounting records. Actual amounts are identified in the bill or in amendments submitted to committee. *In response to questions raised by Senator Sharp, KIM ELTON, Executive Director, Alaska Seafood Marketing Institute, Dept. of Commerce and Economic Development, explained that the institute is seeking authority to move approximately $608.0 from FY 93 into FY 94. Funding derives from two sources. One involves FY 93 receipts in the amount of $436.0 that the institute did not receive until August of FY 94. The remainder represents unexpended funds from FY 93. The institute does not know the total of processor receipts until April, approximately three-quarters of the way through the fiscal year. That results in a small amount of unexpended funds. **Co-chair Frank requested information concerning canine unit overtime. Mrs. Slagle explained that the Dept. of Corrections, at one time, had a unit which utilized dogs. Concern arose over how the dogs would be cared for, and staff members utilizing the dogs were required to care for them. The employees felt they should receive overtime for those services. The canine units were disbanded in May of last year, after the grievances were filed. The requested $163.9 represents final settlement amounts for four individuals receiving overtime pay. Co-chair Frank requested thorough details. ***Mrs. Slagle referenced the request to extend Exxon Valdez Trustee funding approved by the Legislative Budget and Audit Committee and noted that the original RPL requested approval through next year to accommodate the federal fiscal year. The supplemental request seeks provision of that authority. Co-chair Frank asked for a budgetwide report on lapsing funds for FY 93. He then directed that the meeting be briefly recessed prior to proceeding with the agenda. RECESS - 11:45 A.M. RECONVENE - 12:10 P.M. CS FOR HOUSE BILL NO. 454(FIN) An Act making a supplemental appropriation to the Department of Law to pay costs of certain continuing legal proceedings; and providing for an effective date. Upon reconvening the meeting, Co-chair Frank asked that representatives from the Dept. of Law come forward and speak to the department's supplemental request. ATTORNEY GENERAL BRUCE BOTELHO; JIM BALDWIN, Assistant Attorney General; and DICK PEGUES, Director, Division of Administrative Services, Dept. of Law, came before committee. Co-chair Frank noted ongoing litigation, advised that the supplemental seeks funding for litigation costs, and asked if an executive session would be appropriate for discussion of the issue. The Attorney General concurred in need for an executive session since confidential taxpayer information would be part of the discussion. Senator Kerttula MOVED that the committee meet in EXECUTIVE SESSION for consideration of the Dept. of Law supplemental. No objection having been raised, IT WAS SO ORDERED. EXECUTIVE SESSION - 12:12 p.m. to 1:30 p.m. [Only committee members and staff from the Dept. of Law remained in the committee room during the executive session. No recording was made nor were minutes taken during that time.] Upon reconvening the meeting at 1:30 p.m., Co-chair Frank queried members regarding action on the bill. Senator Kerttula MOVED for passage of CSHB 454 (Fin). No objection having been raised, CSHB 454 (Fin) was REPORTED OUT of committee with a "do pass" recommendation from Co-chairs Pearce and Frank, and Senators Kerttula and Sharp. (Other members had left the meeting and did not sign the report.) ADJOURNMENT The meeting was adjourned at approximately 1:35 p.m.