Legislature(1995 - 1996)
02/27/1996 09:10 AM FIN
* first hearing in first committee of referral
= bill was previously heard/scheduled
= 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.